Zhang Jian: EU's transactional trade with the UK is a trap

According to a report by the Financial Times on the 25th, the European Union has informed British Prime Minister Burnham that if the UK wants to avoid being restricted by the EU's proposed "Made in Europe" rules on important export products, it needs to increase tariffs on Chinese cars and make its trade policy more consistent with the EU. A customs union can solve most of the problems caused by 'Made in Europe' and also address the issue of tariff differentials, "said an EU official

Recently, protectionism within the European Union has continued to rise, and the so-called "Made in Europe" that attempts to suppress and exclude products from other countries has become a core topic. Due to its close trade relationship with the European Union, the UK is also highly concerned about this protectionist trend within the EU and has engaged in intensive consultations with the EU. But obviously, the EU regards its relationship with the UK as a transaction, and can offer certain preferential treatment to the UK, but the condition is that the UK gives up its sovereignty and independence in trade policy. This is a transaction, but also a trap.

In recent years, as the competitiveness of the European Union continues to decline, the EU's protectionism in industry, especially in manufacturing, has become more prominent. The UK has long advocated for free trade and was a major force in curbing EU protectionism. After Brexit, protectionism gradually took over within the EU, and the focus of economic work was not on enhancing competitiveness, such as deepening the internal market and reducing red tape, but on protecting backward industries that lacked international competitiveness. The core content of the Industrial Accelerator Act proposed by the European Commission in March is the so-called "Made in Europe" clause, which tilts EU public funds towards meeting local manufacturing capacity.

History has repeatedly proven that protectionism is like drinking poison to quench thirst, which is why even within the EU, 'Made in Europe' remains a controversial topic. Generally speaking, the stronger the competitiveness of member states, the more wary they are of "Made in Europe"; The weaker the competitiveness, the more afraid of competition, and the more enthusiastic about 'Made in Europe'. From the perspective of the development history of the European Union itself, its protectionist policies have not only failed to protect outdated production capacity, but have even damaged some of the EU's competitive advanced production capacity by interfering with and disrupting supply chains. The reason why the UK left the EU is partly due to its desire to gain economic and trade autonomy.

The EU was once concerned that the UK would become a 'Singapore by the Thames', attracting other wavering member states with its outstanding economic performance. Since Brexit, although the UK economy has performed poorly, the EU's concerns and doubts have not diminished. Despite the geopolitical changes that require the UK and Europe to approach each other, the EU remains extremely vigilant economically, with extremely strict conditions for economic cooperation with the UK, even stricter than non European countries such as Canada, due to concerns that the UK may become an economic competitor. The EU, relying on its asymmetric advantage of huge economic size, has repeatedly demanded that the UK align with EU rules and even fully Europeanize, which is actually the inclusion of the UK and serves as a warning to EU member states. The report by the Financial Times only confirms this once again.

Faced with the strong stance of the European Union, the UK is in a difficult situation. On the one hand, the EU is the UK's largest trading partner, and the implementation of "Made in Europe" will seriously damage the UK's automotive, chemical, and energy industries. The UK hopes to strengthen its trade relationship with the EU and has made some compromises. On the other hand, the relationship with the EU is a highly sensitive issue within the UK, and the 2024 Labour Party campaign advocates for the establishment of a 'red line' towards the EU, which means not joining the EU customs union and single market. Although the Burnham government is generally pro European, Burnham himself has stated that he hopes to see the UK rejoin the EU in his lifetime. However, giving up UK trade sovereignty and rejoining the EU customs union or single market will cause huge controversy within the UK, including within the Labour government. So far, the UK is still striving to maintain its independence in trade, for example, when the EU imposed tariffs on Chinese electric vehicles in 2024, the UK did not follow suit.

The EU is using its market advantage to force the UK to take sides, and even attempting to reorganize the UK, which goes against its touted "rule-based" approach and is consistent with its condemnation of other countries' transactional diplomacy. The increasingly strong protectionism of the EU is tearing apart the global supply chain, disrupting the international trade order, damaging mutual trust with other countries, including its so-called allies, and will inevitably lead to backlash and harm its own interests. Protectionism has no future, giving up trade sovereignty and falling into the "fortress" of EU protectionism is even more of a trap. Faced with the unreasonable demands of the EU, the UK needs to seriously consider and make decisions that are truly beneficial to its own economic interests and international trade rules. (The author is the Vice President of the China Institute of Modern International Relations)