Playing Chicken

This week’s metaphor is the lowly chicken, source of many jokes and riddles, not to mention recipes. In the case of China, we see chickens coming home to roost as the Trump administration seems finally beginning to understand that it is not going to get everything it wants out of the Chinese and that it might be time to start thinking about how to get out of the corner they have painted themselves into. Many people have seen this coming and warned them about it, but as the collateral damage mounts and Chinese unwillingness to move becomes clear, the warnings finally seem to be getting through. That does not mean, however, that an end is in sight. It may well be in the president's political interest to drag this out until shortly before the election so that people won't know it's a bad deal until after they have voted. That is not good news for our farmers, but so far, those chickens do not appear willing to cross the road.

With China temporarily in stasis and the one-year anniversaries of Trump's negotiation-launching agreements with European Commission president Juncker (this week) and Japanese prime minister Abe (September) coming up, attention is turning to Japan and the European Union.

Japan seems farther along, and the pace will pick up now that the Diet's upper house election is concluding. Gossip predicts Japanese concessions on agriculture matching what they agreed to in the Transpacific Partnership (TPP) and U.S. concessions on auto tariffs that they made in the TPP talks. No doubt that outcome would make the Japanese happy since they would be agreeing only to what they had previously conceded, but it is hard to believe that will be good enough for our president, who is still holding out the threat of car tariffs. I am still expecting U.S. demands for either limits on car imports or changes in the auto rules of origin intended to force more production to move to the United States. Any of these outcomes will also face a World Trade Organization (WTO) hurdle because they will not cover “substantially all trade” as the organization’s rules for free trade agreements require, although the Japanese are more likely to be worried about that than the United States.

The EU negotiations remain stalled, and the chicken symbolizes the two key problems. (There is also the issue of the impending change in the Commission as of November 1, which will make agreement on anything significant before then unlikely.) The first problem is the European Union’s insistence on excluding agriculture from the talks. It seems pretty clear that Trump erred in not insisting on including it a year ago, but the administration is convinced it cannot get an agreement through Congress without it, and there is no shortage of people on the Hill affirming that. I don’t agree, but I’m definitely in the minority.

The second problem personified by the chicken is our 40-year inability to reconcile our different standards and regulatory systems. The European Union has consistently rejected our use of a chlorine wash for our chickens, despite the absence of any evidence that it poses any danger and despite the obvious fact that we don't have thousands of Americans dying each year from diseased chickens. Sadly, this is only one of hundreds, if not thousands, of standards and regulations where we differ even though the goals in each case are the same. Part of the current negotiations is an effort to at least accomplish some mutual recognition of testing procedures or common approval forms—chicken feed, but at least they will save companies on both sides of the Atlantic a lot of money.

There are multiple reasons for regulatory gridlock—Europeans’ stubborn insistence on the precautionary principle in contrast to the United States’ (and the WTO’s) reliance on sound science, regulators who can’t see the forest for the trees, and negotiators more interested in scoring points against the other side than actually solving the problems. But the biggest problem is the widespread view in Europe, amongst the public and civil society organizations, that European standards are superior to U.S. standards across the board and that a trade agreement, therefore, would be a giant regulatory downgrade for Europe leading inevitably to a lower quality of life. This is not true, but it is hard to find a politician brave enough to say so. (Politicians that are chicken are a problem on both sides of the Atlantic.)

The real tragedy here is the missed opportunity—on both sides. The way to meet the China challenge is through joint efforts by market-based, rule-of-law countries. We need common rules and standards that reflect market principles to which the Chinese will have to adhere if they want to access our markets. We cannot create that without Europe. President Trump’s mistake is his failure to build coalitions and to try to solve multilateral problems by himself. The European Commission’s mistake is its inability to agree to anything that might force it to change the way it does things and thereby to miss the bigger picture of what we need to do together to stave off a challenge to both of us that is far greater than the challenge we pose to each other.

So, to complete the metaphor in a way guaranteed to produce groans, it appears the United States and the European Union are engaged in a long-term game of chicken, the end result of which will be laying an egg.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

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