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EU threatens to drag US, China to WTO in case of trade distortions

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European Union warned US and China, who signed a phase-one trade deal on Wednesday, of taking the matter to World Trade Organisation (WTO)

European Union warned the US and China, who signed a phase-one trade deal on Wednesday, of taking the matter to the World Trade Organisation (WTO) in case their deal affected European businesses. On Friday, EU envoy to Beijing Nicolas Chapuis told reporters that the 28-nation bloc would closely observe the impact of the ‘phase one’ trade deal signed between US President Donald Trump and Chinese Vice Premier Liu He.

Chapuis said, “In our opinion, quantitative targets are not WTO-compatible if they lead to trade distortions. If it were to be the case, we will go to the WTO to settle this matter.”

Chapuis added that Chinese foreign ministry gave EU member-nations “formal assurances that in absolutely no way would European businesses be affected by the US-China deal”.

EU fears that the deal, which eased the ongoing trade war between two of the world’s biggest economies, could be biased in nature. If so, then the EU would be within its right to contest the deal as it is against the principle of the WTO. The WTO prohibits nations from providing a few with favored-nation treatment among its trading partners.

As per the deal, China put its guards down against the US agricultural goods and agreed to import an additional US products worth $200 billion over the period of two years, including an additional $32 billion of agricultural goods. Beijing said that it would import above the levels purchased in 2017 and also committed to provide better protection to US intellectual property rights. In exchange, the US agreed to reduce the tariff to half (of 15 percent), which is imposed on Chinese imports worth $120 billion in September.

The phase one agreement did not touch upon the punitive border taxes as it is still applicable over two-thirds of Chinese imports, which amounts to over $500 billion.

On Thursday Kerstin Braun, president of Stenn Group said: “With a weakened WTO and the general trend away from multilateral trade agreements, we’re only going to see more trade squabbles.”

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