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Europe Looks to Expand Arsenal to Combat Trade Protectionism

Europe Looks to Expand Arsenal to Combat Trade Protectionism

(Bloomberg) --

As a new European Union leadership team gears up for office, the bloc may be moving to expand its arsenal for fighting protectionism worldwide.

In a sign that the EU may pursue a more aggressive trade policy, a proposal made three years to combat discrimination in foreign public-procurement markets is getting fresh attention as tariffs and other limits on free trade weigh on the global economy.

The European Commission in 2016 asked for the power to investigate cases of unfair treatment of European companies in foreign procurement. By raising the price of bids placed in Europe by competitors based in offending countries, the measure would serve as a warning: treat EU bidders fairly or lose out on our business.

The initiative soon stalled because of resistance by northern EU countries that traditionally have been wary of policies that could be construed as protectionist. But with the global trade order under increasing strain from protectionism outside Europe, the proposal is getting renewed consideration.

A working group composed of member-country trade experts is meeting in Brussels on Wednesday to resume discussions about the draft law, which EU national-government leaders said earlier this year should be given fresh impetus.

Only a quarter of the world’s annual procurement market is open to international competition, according to the commission, which said restrictions abroad affect EU companies in industries such as construction, public transport, medical devices, pharmaceuticals and power generation.

The commission, the EU’s executive arm, is well aware of the political sensitivity in EU national capitals of its initiative; the 2016 draft legislation is a watered-down version of a 2012 proposal that got killed by northern EU governments. The months ahead should signal whether the commission will be more successful the second time around.

Charting the Trade War

Europe Looks to Expand Arsenal to Combat Trade Protectionism

Growth in Sweden almost ground to a halt in the first half of 2019 and the weakness is here to stay. Exports of goods and services make up almost half of the Nordic region’s biggest economy and this makes it highly sensitive to a slowdown in the rest of the world. Bloomberg Economics expect GDP growth among Sweden’s top-five trading partners to fall to 1.4% in 2020 from 2.7% in 2017, largely because of Germany.

Today’s Must Reads

  • Cruise control | The Trump administration wants to dictate how and where global auto companies make cars and parts to secure duty-free treatment under the new Nafta — in its most direct intervention yet to manage trade and production.
  • Jeopardized Asia pact | India keeps making last-minute requests after it agreed to terms for the world’s largest regional trade agreement, potentially preventing Asian leaders from announcing a breakthrough next week on the 16-nation pact.
  • Wine worries | Battling a trade war, an economic slowdown and months of protests in Hong Kong, China is turning to fine Australian wine. Meanwhile, new tariffs mean Americans will have to pay up for French wines.
  • Origin fraud | Vietnamese customs discovered and seized about $4.3 billion of Chinese aluminum falsely labeled “Made-in-Vietnam” before being shipped mostly to the U.S.
  • Let it flow | In the first half of 2019, global foreign-direct investment flows decreased by 20% compared with the second half of 2018, with a sharp drop in the second quarter.

Economic Analysis

  • China support | With growth slowing, Bloomberg Economics expect further increases in spending on public works in the fourth quarter to buttress the Chinese economy.
  • German Brexit worry | Germany has a huge incentive to back tariff-free access to the U.K.’s auto market after Brexit, given about 1 million vehicles will be exported to Britain in 2019.

Coming Up

  • Nov. 1: South Korea trade balance

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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