MNI INTERVIEW: US-China, US-UK Deals Diminish EU Leverage

The European Commission will be more pessimistic about the outcome of trade talks with the U.S. following the conclusion of U.S.-UK and U.S.-China trade agreements, an advisor to the Spanish government and the EC told MNI.

"I am sure the Commission has not viewed that very positively," economist Alicia Garcia Herrero said, "I get the sense that the European institutions are worried about their shrinking leverage.”

EC negotiations with the administration of Donald Trump only have to go "slightly poorly" for the EU to end up at a tariff level much closer to that imposed on China than on the UK, she said. 

"Given China's overcapacity in many sectors that is not good news for the EU. The EU has less to offer than China in terms of purchases of goods, given it's a market economy." (See MNI: China Won't Make Japan's Mistake With FX Deal- Advisors)

The U.S.-UK deal will also negatively affect the EU's leverage in its own "reset" negotiations with the UK. The EU and UK will hold a summit meeting on May 19 in an effort to strengthen their trade and defence relationship.  

The Commission told reporters Monday that it was "closely analysing" the terms of the U.S. trade deal with the UK while noting that the weekend’s China agreement would be a relief for global supply chains. 

Garcia-Herrero is also a senior resident fellow at Brussels think tank Bruegel and chief economist for Asia-Pacific at Natixis in Hong Kong