Expert: ‘We’re Never Quite Sure Exactly’ What Trump Means in Trade Statements

© AP Photo / Jim Lo Scalzo/Pool ImagePresident Donald Trump addresses a joint session of Congress on Capitol Hill in Washington, Tuesday, Feb. 28, 2017, as Vice President Mike Pence and House Speaker Paul Ryan of Wis., listen
President Donald Trump addresses a joint session of Congress on Capitol Hill in Washington, Tuesday, Feb. 28, 2017, as Vice President Mike Pence and House Speaker Paul Ryan of Wis., listen - Sputnik International
US President Donald Trump blasted the EU over unfair trade practices last week. Margaritis Schinas, the official representative of the European Commission, responded to the president’s words by saying that the bloc will react promptly and appropriately if its exports are affected by restrictive US measures.

Speaking in an interview on Sunday, Trump said that he will pursue full enforcement of international trade rules and did not rule out the further use of custom tariffs and regulatory action against dumping practices.

Radio Sputnik discussed this issue with David Collins, professor of International Economic Law at The City Law School of City, University of London.

Sputnik: Trump slammed the EU for its alleged unfair trade practices in relation to the US. What do you think he was referring to and do you think it's a fair accusation or assessment of situation?

Professor David Collins: That's a very good question, [Trump] wasn't very clear, was he? And this seems to be President Trump's style: he makes statements and we are never quite sure exactly what he means. What he could mean is, with respect to potential subsidization of various industries — and I think he might be alluding to something like Airbus — we know that there is a long-standing trade conflict regarding Boeing and Airbus. He could be talking about subsidization of various industries; he could be talking about dumping of various products — manufactured goods. He could just be talking about a simple fact — and it is a reality — that the Customs Union of Europe does impose tariffs that affect members outside of the EU, so, obviously, trade within Europe is subject to no tariffs, unlike trade from the US. So he might be saying something along the lines of "why does France allow Italy, for example, to trade with it at zero tariffs and it does not allow us to trade with it at zero tariffs." It could be that kind of thing.

That could more that he is referring to. So it could be any range of issues. I can't think of a particular industry, to be perfectly honest.

Sputnik: What is the reality of trade balance and imbalance between the EU and the US?

A man walks near US and European Union flags at the EU headquarters on May 15, 2017 in Brussels - Sputnik International
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Professor David Collins: We know that the EU is US' number one trading partner. And I think it's like $700 billion worth of trade per year or something like that, so they're obviously a very key trading partner. I couldn't tell you with respect to deficit or surplus, but an economist will tell you: looking at a deficit or surplus is not the right thing to do. Just because you have deficit — meaning that you're importing more than you're exporting — does it mean that's a bad thing? It's amazing for American consumers. If there is a trade deficit with Europe, it means that American consumers are getting all these goods from Europe, which is a wonderful thing for consumers. So he's shown an unusual preoccupation with the deficit/surplus indices. He has done the same with Canada and Mexico, famously.

I think that is a bit misleading, I would say that there isn't really a problem. But he's absolutely right, if the European Union is engaging in unfair trade practices, they need to be called out on it, so he's right to say that.

Sputnik: Recently, we've heard about huge US corporations like Google and Starbucks not paying their fair share of European taxes. Does that have anything to do with this?

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Professor David Collins: I think that you are kind of drifting from trade issue to a more broad economic policy. There's no suggestion that these companies are doing anything illegal; what they're doing is they're structuring their tax regime to take advantage of whatever we call a loophole that exists in the EU or UK or whatever tax regime. That's the question of EU and UK and French and whatnot tax policy to crack down on that kind of thing. To the extent that these companies are doing that, that would more likely affect their investment position, [their] foreign direct investment flows rather than their trade flows. Because, obviously, with foreign direct investment, this is when you locate the company in another jurisdiction, whereas with trade it is the commodities themselves [that] pass across borders.

So I don't think it's so much of a tax issue. However, you're right because he did allude to tax. I think he said just something like: "they enter our country with no tax or very little tax," and I suspect — I don't want to put words into the president's mouth — but I suspect what he probably meant there was tariffs, or excise taxes. I don't think he meant income taxes, but I could be wrong.

Sputnik: Trump also did not rule out the further use of customs tariffs and regulatory actions. What is that going to do to affect trade with EU?

President Donald Trump listens as he is introduced to deliver a speech to the World Economic Forum, Friday, Jan. 26, 2018, in Davos - Sputnik International
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Professor David Collins: Well, tariffs are not good. Tariffs are going to be destructive. He might think that they are helping the US manufacturers, for example, and in short term maybe they are. But in the long term it's not a good thing. It is bad for consumers and ultimately consumption will go down and the suppliers will end up losing out in the long term. I hope that that is not going to happen. But in the same breath that I say that, if he's imposing tariffs in response to genuinely unfair trade practices — let's say, for example, that the EU is imposing tariffs in violation of its WTO [World Trade Organization] commitments, then the WTO itself would, in theory, sanction a response like tariffs — but the better way of dealing with this, rather than imposing tariffs unilaterally, is to bring a complaint to the World Trade Organization. If President Trump or the US Trade Administration feel that the EU is breaching WTO rules, bring the complaint to the system, don't go unilaterally. That's the right response.

Sputnik: How much competition is there when it comes to free trade deals between the US and the EU or different countries?

Professor David Collins: Now that's an interesting phrase: "competition between free trade deals." It almost sounds a bit paradoxical, but I see what you mean: the reality is, of course, that negotiating free trade agreements takes a lot of energy, takes a lot of human resources and time; it's very difficult to negotiate trade agreements on multiple fronts so you do have to prioritize. And I would suggest — most negotiators and policy analysts would agree with this — you have to focus on the achievable gains and the big ones. So, for the UK, for example, when entering its Brexit stage, would probably want to look at larger regional agreements if it could get in on one. Or, something like a free trade agreement with the US would be an immediate gain because of the size of the US economy. We know that the Trans-Pacific Partnership is going to have 11 countries — the UK suggested possibly joining that. NAFTA is being re-negotiated in North America — there were some hints that the UK might try to get into on that. But it is going to take massive resources and I can tell you in this country, the UK, the government has hired a lot of negotiators. The Department of International Trade is massive now, compared to where it was a few years ago. So it might work.

The opinions expressed are those of speaker alone and do not necessarily reflect the position of Sputnik News.

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