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MNI POLICY: EU's Hogan Says US-China Deal May Skirt WTO Rules

--Hogan Says EU May Challenge Phase One After Reviewing Text
By Brooke Migdon
     WASHINGTON (MNI) - EU Trade Commissioner Phil Hogan said the U.S.-China
agreement may violate WTO rules and President Donald Trump's preference for
bilateral deals makes it harder to settle disputes with his region.
     "It will be interesting to see if the deal is WTO compatible," he said
Thursday in Washington, where he was due to meet his U.S. counterpart Robert
Lighthizer. "But the WTO appellate body is frozen, so maybe that was part of the
tactic."
     WTO rules prohibit numeric restrictions on imported or exported goods, and
the Phase One deal Trump signed Wednesday sets quotas like a $40-50 billion
increase in China's purchases of American agricultural goods. China has not said
how it will meet that goal without cutting back on imports from other nations.
     "We haven't analyzed the document in detail, but we will. And if there is a
WTO compliance issue, of course well will take a case," Hogan said. "We have to
stand up for our own economic interests."
     The prospect of a new trade fight between the EU and the U.S. could hurt
the world economy again after last year was defined by the China dispute that
forced central banks around the world to cut rates. Trump appeared to be easing
tensions with the EU last year when he called off auto tariffs and won a major
case at the WTO over EU aircraft subsidies. The EU is also competing with the
U.S. to become a major exporter to China of food and factory products. 
     Hogan said the U.S. has not taken a "global view" regarding trading with
China. "The U.S. has struck out on its own because it wants the benefits of
whatever they can get from China for themselves."
     The China deal's enforcement mechanism, which eliminates the ability to
challenge an action in the WTO, could have significant global ramifications
should either side have complaints in the future, Hogan said. 
     The WTO's primary dispute settlement arm was paralyzed in December when the
terms of two of the three remaining judges expired. Trump's administration
refuses to appoint new members to the appellate body, alleging biased decisions.
     "I don't understand how the United States is reluctant to have a global
referee on these issues," Hogan said.
     Reforming the WTO is high on Hogan's agenda in his new role as EU trade
chief. The U.S., EU and Japan released a joint statement Tuesday promising to
work together on revamping the 25-year-old trading system. But Trump has long
criticized the WTO and other international trade agreements for cheating
American workers.
     Hogan said U.S. administration officials are beginning to realize the WTO's
value as they struggle to reach a compromise with France over its tax on digital
services. The U.S. alleges that tax discriminates against American companies.
     "If we exploit the full potential of this dialogue that's going on in the
WTO on e-commerce and reach an agreement this year and take into account the
trilateral process that we've launched this week, we can do an enormous amount
together to set the rules and disciplines for the future," he said.
     France has said it will scrap its own tax if a global solution is reached
in the Organization for Economic Cooperation and Development. Other countries
like the UK and Canada are also considering their own digital service taxes.
     Hogan said he plans to return to Washington in February and March to
fast-track "concrete" action on both sides and avoid the possibility of
years-long negotiations.
--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com
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