Coercion not the right approach to settling differences

The European Union's trade policy toward China is acquiring an increasingly familiar look: raise the stakes, set a deadline and hope that Beijing is the one to blink first. Brussels now wants Beijing to accept quotas on selected Chinese exports, including so-called "voluntary export restraints" on electric vehicles, while threatening tougher measures if the October talks fail to produce "tangible" results. EU Trade Commissioner Maros Sefcovic is due in Beijing on Oct 8-9, after three months of intensive consultations.

There seems nothing irrational about some in Europe worrying about industrial competitiveness or the "trade imbalance". But the mistake is assuming that unilateral pressure is a substitute for consultations. It is not. Trade deficits are economic facts, not diplomatic insults; nor can they be wished away by drawing administrative lines around imports.

The proposed "voluntary" export restraints are particularly awkward. Under Article 11 of the World Trade Organization Agreement on Safeguards, members are prohibited from seeking, taking or maintaining voluntary export restraints and similar arrangements. The WTO itself describes such arrangements as "gray-area" measures that the multilateral trading system was designed to eliminate.

A quota dressed up as a "voluntary" gesture remains a restriction on trade. Worse, linking Beijing's acceptance of such restraints to Brussels withholding other restrictive measures risks turning negotiations into arm-twisting by another name. That is a poor foundation for the "rules-based" trading order that Brussels says it wants to defend.

The European Commission is also considering a new instrument under which tariffs could be triggered when Chinese supplies of certain strategic goods cross a specified threshold. Reports suggest sectors such as semiconductors, chemicals, pharmaceuticals, automobiles and critical raw materials could be affected. Other proposals would make it easier for the EU to activate measures through reverse qualified-majority voting. Such instruments are still proposals, not settled EU law, but their simultaneous emergence is significant: Brussels is constructing a larger toolbox while telling Beijing that October is the deadline.

This may look like strength. It also looks like a negotiating party that thinks its arguments are weak.

Europe's economic predicament deserves attention, but China should not be asked to accept responsibility for it. The European Commission says the bloc lost 250,000 industrial jobs last year, particularly in energy-intensive industries and automotive supply chains. Its goods deficit with China has exceeded 1 billion euros ($1.13 billion) a day, according to EU officials. But China did not invent Europe's energy costs, productivity problems, regulatory burdens or industrial-policy dilemmas. Nor can tariffs manufacture European competitiveness.

There is a simpler question Brussels should ask: why does the EU want to sell more to China while restricting some of the high-tech products China wants to buy? Also European companies would plainly benefit from greater access to the Chinese market. Yet Europe has also tightened scrutiny of Chinese investment and restricted access in strategically sensitive areas. The resulting asymmetry is hardly an advertisement for reciprocity.

Chinese manufacturers have not reached global markets through a single magic ingredient called "subsidies". Scale, fierce domestic competition, technological upgrading and investment all matter. Treating every successful Chinese export as proof of subsidy is an easy way to avoid examining the true reasons for the EU's lack of competitiveness.

Washington and Beijing have now gone through eight rounds of negotiations without imposing a hard deadline as the basic framework of the talks. Europe's economic relationship with China is hardly less complicated. It therefore seems odd for Brussels to imitate the theatrical elements of US negotiating style while ignoring the prosaic truth that complicated bargains require time.

The October meeting should consequently be treated as another stage, not a final exam. China has said that any solution should balance interests, comply with WTO rules and the respective domestic laws of both sides, and take account of businesses on both sides. That is not an unreasonable negotiating position.

The EU needs the Chinese market and stable supply chain cooperation; China needs European goods, services and investment, and is open to technology cooperation on the basis of mutual respect. The relationship is not a zero-sum contest between two major economies. If Brussels keeps adding threats to the table, it risks discovering that pressure is much easier to increase than trust.

The real test of European negotiating strength is not how intimidating it is when approaching the negotiation table. It is whether it creates enough room at the table for a deal. The economic and trade issues between China and the EU are long-standing. Can the EU realistically expect to resolve them within a few months of establishing a consultation mechanism?

In trade negotiations, it is the party that upholds principled positions and remains steadfast amid changing circumstances that demonstrates greater confidence, self-assurance and strength.