The 28-member European Union (EU) and the 10-member Association of Southeast Asian Nations (ASEAN) announced last March 2 that they were going to push for a free trade deal in a move to show unity in supporting open markets. The announcement came one day after United States President Donald J. Trump declared his administration’s plans to introduce tariffs on steel and aluminium.
Concerned about the increasing protectionist policies imposed by Trump, the EU and ASEAN countries have decided to come together and support global free trade. According to EU trade chief, Cecilia Malmstrom, the agreement with ASEAN would “send a strong signal to the world”. Trump’s disclosure was met by outcry from the trading partners of many America companies particularly those in Europe.
Trump’s basis for introducing tariffs on steel and aluminium was increased competition from foreign producers particularly China. The situation has driven down prices which have hurt American producers and have led the Commerce Department to label unfair competition as a threat to national security.
The U.S. President took to Twitter to justify his decision for imposing tariffs:
“U.S. industries including steel and aluminium have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!”
Trump’s statement to sign off on the tariffs sent equities markets crashing to a tailspin.
The decision to impose tariffs will most likely heighten tensions with China. Some analysts fear that other countries may retaliate by imposing similar trade policies of their own.
The EU and ASEAN nations have been discussing a free trade agreement since 2007. The two organizations agreed to re-open negotiations for the deal in 2017 and have been ironing out their respective positions.
For the meantime, the EU has entered a free trade agreement with ASEAN member-nation Singapore. It has also approached other countries for the possibility of engaging in bilateral trade pacts.
Malmstrom believes the agreement is necessary to ensure the continuation of free trade in the world:
“These agreements are important in their own right but they are also part of a bigger picture. We see them as building blocks on the way to a broader integration. A regional agreement between us will send a strong signal to the world; a signal that the EU and ASEAN will stand shoulder- to- shoulder in support of open trade.