Not to hike tariffs

Anti-Trump trade alliance eyes pledge not to hike tariffs

An Asia-Pacific trade bloc is discussing a commitment with the European Union to avoid protectionist duties.

By Graham Lanktree and Caroline Hug

The European Union and a 12-nation Asia-Pacific trade bloc are drafting commitments not to raise tariffs on one another as Donald Trump continues to impose duties around the world, New Zealand’s trade minister told POLITICO.

“One of the things we are talking about is no escalation,” trade and investment minister Todd McClay said in an interview. “That’s more around tariff rates, that neither side will escalate tariffs against each other, in the way the U.S. has been against many of us.”

Amid the onslaught of Trump’s “Liberation Day” tariffs last year, the EU and middle powers in the CPTPP bloc — which includes Australia, Britain, Canada, Japan, Vietnam and Malaysia — resolved to resist trade-war coercion by joining forces last November.

Canadian Prime Minister Mark Carney’s landmark Davos speech in January planted the flag of the new coalition, which represents nearly a third of the global economy. The alliance then took its first steps on the sidelines of a World Trade Organization meeting in Cameroon in March by launching talks on a digital agreement.

The nascent digital pact between the EU and members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will “look at common areas and where rules can be similar,” said McClay. 

“We think we have enough in common to start shaping that amongst ourselves,” he added, pointing to mutual trade rules like banning countries from imposing tariffs on digital downloads, streaming content and software.

Both blocs, which represent nearly 40 nations on opposite sides of the globe, are also exploring a set of non-binding commitments, where members would pledge to honor trading rules, avoid introducing new barriers, and refrain from escalating tariffs where possible, McClay said.

While an agreement “doesn’t take the ability away” for nations to put up tariffs, he said, “it’s a commitment that you would make amongst the CPTPP with the European Union.”

Talks between the blocs come as the Trump administration moves to reimpose a 10 percent tariff on top trading partners including the European Union, Britain and Canada, while hitting others with a higher rate, citing concerns about forced labor.

After the World Trade Organization failed to secure agreement on reforms to the global trading system in March, the EU and CPTPP vowed to forge a new path to save rules-based trade. 

“World economies face a number of challenges at the moment. Most significant comes from uncertainty. If there are rules in place, those will be honored,” McClay said. “We take commitments elsewhere bilaterally that are harder to reach agreement in the WTO, and then those rules would generally start to find their way into the WTO rulebook.”

Singapore’s Trade Minister Grace Fu was also in London this week alongside New Zealand’s McClay for meetings with British Trade Secretary Peter Kyle about the bloc and its future.

“We have opportunities to talk and advance this in the bilateral meetings, as opposed to sitting there formally,” McClay said, noting that a majority of CPTPP members and EU Trade Commissioner Maroš Šefčovič will also be in Paris this week for a meeting of the OECD.

Vietnam is chairing CPTPP this year and the next formal ministerial meeting with the EU is scheduled there later this year. “What you’ll see when we next meet at ministerial level with the European Union [is] a clearer definition of some of the things we would like to achieve,” McClay said.

“I think we will see a clear desire … for more than just talk,” he said.