Working paper

EU trade policy amid the China-US clash: caught in the crossfire?

What risks face the EU with regard to China’s strategic aims in trade policy and how can the EU respond? The US effort to isolate China poses particul

Publishing date
17 September 2019

The authors prepared the text of this Working Paper in their personal capacities as a study under a contract with the Greens/EFA Group in the European Parliament.

China’s rapid rise and unique economic system, and the United States’ increasingly disruptive trade policy, threaten the global rules-based trade and economic system. The European Union has so far been comparatively spared from the US-China trade war, but must nevertheless safeguard its critical interests by adopting an independent, proactive stance. The EU does not currently have to make a general choice between China or the US, and like many other jurisdictions around the world it should aim to defend its continuing ability to not make such a general choice, even as this stance will generate tensions with both. The April 2019 China-EU summit illustrated the credibility of this approach, and the objectives stated in the summit conclusions should be delivered.

The EU, even more than the US or China, has a strategic interest in preserving the global rules-based order embodied by the World Trade Organisation. It must steer WTO reform, working closely with aligned third countries such as Japan. The EU should expand its outreach beyond its immediate negotiating counterparts in both the US and China, and work in particular to ensure its (EU- and member-state level) leading officials better understand China. While strengthening its instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the EU must also resist the temptations of protectionism and economic nationalism.

In support of these objectives, the EU should prepare for difficult decisions, which might involve revising some of its red lines in international trade negotiations. Conversely, the EU should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies.

About the authors

  • Nicolas Véron

    Nicolas Véron is a senior fellow at Bruegel and at the Peterson Institute for International Economics in Washington, DC. His research is mostly about financial systems and financial reform around the world, including global financial regulatory initiatives and current developments in the European Union. He was a cofounder of Bruegel starting in 2002, initially focusing on Bruegel’s design, operational start-up and development, then on policy research since 2006-07. He joined the Peterson Institute in 2009 and divides his time between the US and Europe.

    Véron has authored or co-authored numerous policy papers that include banking supervision and crisis management, financial reporting, the Eurozone policy framework, and economic nationalism. He has testified repeatedly in front of committees of the European Parliament, national parliaments in several EU member states, and US Congress. His publications also include Smoke & Mirrors, Inc.: Accounting for Capitalism, a book on accounting standards and practices (Cornell University Press, 2006), and several books in French.

    His prior experience includes working for Saint-Gobain in Berlin and Rothschilds in Paris in the early 1990s; economic aide to the Prefect in Lille (1995-97); corporate adviser to France’s Labour Minister (1997-2000); and chief financial officer of MultiMania / Lycos France, a publicly-listed online media company (2000-2002). From 2002 to 2009 he also operated an independent Paris-based financial consultancy.

    Véron is a board member of the derivatives arm (Global Trade Repository) of the Depositary Trust and Clearing Corporation (DTCC), a financial infrastructure company that operates globally on a not-for-profit basis. A French citizen born in 1971, he has a quantitative background as a graduate from Ecole Polytechnique (1992) and Ecole Nationale Supérieure des Mines de Paris (1995). He is trilingual in English, French and Spanish, and has fluent understanding of German and Italian.

    In September 2012, Bloomberg Markets included Véron in its second annual 50 Most Influential list with reference to his early advocacy of European banking union.


  • Anabel González

    Anabel González is a Non-resident senior fellow at Peterson Institute for International Economics and host of the virtual event series Trade Winds.

    Anabel is former: Senior Director of the World Bank´s Global Practice on Trade & Competitiveness (2014-2018), Minister of Trade of Costa Rica (2010-2014), and Director of the World Trade Organization Agriculture Division (2006-2009), among others. She is a member of the World Economic Forum Global Future Council on Trade and Investment and has presented on these topics in over 60 countries around the world.

Related content