ESADEgeo Daily Digest, 07/06/2019

Euractiv / EU cobbles workaround to avoid US block on WTO judges

  • The European Union is set to propose creating a shadow system to get around a US block on appeals in disputes at the World Trade Organization (WTO), according to a draft proposal circulated to national lawmakers.
  • US President Donald Trump is blocking appointments to the WTO’s Appellate Body, saying its judges have overstepped their mandate. Unless the block is lifted, the court will have only one of its seven members left by December, leaving it unable to hear appeals in international trade disputes.
  • The EU’s proposal would be an “interim solution”, which would allow the EU and any other WTO member with which it had a dispute to use the WTO’s arbitration rules to set up a new judicial procedure. The disputants would effectively copy and paste the existing system to create an ad hoc process overseen by former WTO appeals judges.
  • The proposal can be a solution for WTO members willing to voluntarily sign on, but only a “partial fix” as it is unlikely to get Washington to once again commit itself to an enforceable, rules-based trading system, said Chad P. Bown of the Peterson Institute for International Economics.

Politico – Hans Von Der Burchard / Brazil: EU and Mercosur ‘on the verge of signing’ trade deal

  • The EU and the South American trade bloc Mercosur are very close to finalizing their bilateral trade agreement, the presidents of Brazil and Argentina said. “We are all going to win with this,” said Brazil’s Jair Bolsonaro.
  • Officials from the EU and Mercosur have raised hopes that the deal could be closed during high-level talks in the last week of June, just before a summit of the G20 group of leading economies in Osaka on June 28-29.
  • Paraguayan Foreign Minister Luis Castiglioni told Spanish news agency EFE on Wednesday that he would go to Brussels on June 27 and 28 with “every intention” of striking a deal.

The New York Times – Steven Erlanger / Europe vows to spend more on defense, but US still isn’t happy

  • Yesterday, the US and its European allies commemorated the 75th anniversary of D-Day. But at the same time, the two sides are squabbling over the future of European defense. Now that the EU is responding to the call for doing more for its own defense, the US is criticizing how it’s being done.
  • European diplomats say the issue recently boiled over at a private meeting in Washington. A senior American diplomat, Michael J. Murphy, lectured EU ambassadors about the US’ unhappiness with proposed restrictions on third-country participation in EU defense projects. The current draft regulations, Murphy said, “would only help our adversaries and create a new irritant in trans-Atlantic relations.”
  • France and Spain have been particularly firm in trying to restrict third-country participation, with strict regulations to ban the transfer of intellectual property developed in European defense projects, including to American companies that have European subsidiaries.
  • The Europeans maintain that the American military-industrial complex is so dominant, and the sums in the European defense fund so modest, that Washington should not be so concerned.
  • “If the US rightly wants the Europeans to spend more for defense, the end must be more European capability to contribute to common security,’’ said Stefano Stefanini, a former Italian ambassador to NATO.

The Economist / America is deploying a new economic arsenal to assert its power

  • Trump’s method has turned out to be a wholesale weaponization of economic tools. The world can now see the force that a superpower can project when it is unconstrained by rules or allies. This brinkmanship could spark a crisis, and it is eroding America’s most valuable asset—its legitimacy.
  • The US is exploiting its role as the central node in the network that underpins globalization. America controls or hosts over 50% of the world’s cross-border bandwidth, venture capital, phone-operating systems, top universities and fund-management assets. Some 88% of currency trades use dollars.
  • In the long run, the American-led network is under threat. There are hints of mutiny—of America’s 35 European and Asian military allies, only three have so far agreed to ban Huawei. Efforts to build a rival global infrastructure will accelerate.
  • The damage to America’s economy so far has been deceptively small, and Trump’s poll ratings at home have held up. The US president is right that America’s network gives it vast power. It will take decades, and cost a fortune, to replace it. But if you abuse it, ultimately you will lose it.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. The summaries above may include word-for-word excerpts from their respective pieces.

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