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As is the case elsewhere on the European continent, parties away from the political center are expected to perform quite well in the European parliamentary elections in the Netherlands on May 23. With twenty-six seats in the European Parliament allocated to the Netherlands, polls in recent weeks have suggested that around five will be won by the far-right populist, Eurosceptic Forum voor Democratie (Forum for Democracy or FvD), a party that did not contend in the last European elections in 2014. This is not unusual. Fringe parties tend to perform better in European elections than in the national elections, as seen in the 2012 general elections and subsequent European elections in 2014. A similar cycle could take place this time, as the European elections follow the general elections of 2017.

On May 10, the United States raised tariffs from 10 percent to 25 percent on $200 billion of imports from China, affecting about 5,700 categories of goods and covering almost one-third of capital and consumer goods. The new 25 percent tariff rate won’t apply to goods in transit—those that left China before May 10 and arriving in the United States before June 1. This delays the economic impact of the measure by a few weeks which can be helpful given the US deadline of one month before imposing a 25 percent tariff on the remaining $300 billion of Chinese imports.

In response to the US tariffs, China has raised tariffs to up to 25 percent on $60 billion of imports from the United States. These tariffs will come into effect on June 1. In addition, China can use non-tariff means to further reduce US imports, including by directing state-owned enterprises (SOEs) not to buy US goods and making it harder for US companies to operate in China. For example, US exports of soybeans and grains to China have collapsed since September 2018 as China retaliated against US tariffs. But increasing non-tariff barriers will make the process much more opaque and its impact difficult to estimate and reverse.

When Chinese negotiators reportedly walked back some of their commitments to structural changes within the framework of a US-China trade deal late last week, US President Donald J. Trump threatened to increase tariffs on Chinese imports from 10 percent to 25 percent despite ongoing negotiations — a threat that became a reality at midnight on May 10. China announced retaliatory tariffs and Trump said he would impose tariffs of 25 percent on $325 billion in Chinese imports to the United States that are not currently taxed if there is no trade deal within the next few weeks. Trump’s focus could next shift to a different front: a May 18 deadline to decide on how to react to a US Commerce Department report — a decision that could result in tariffs on imported cars and car parts. How might this week’s developments impact his decision? And what does this mean for the prospect of commencing formal US-European Union (EU) trade negotiations?

A landmark decision by the World Trade Organization (WTO) affirming it has jurisdiction to review trade measures taken by a member claiming national security exceptions to WTO rules has put the body in a bind as the United States argues that the WTO does not have this authority.

In a case brought by Ukraine against Russia in 2016, the WTO’s Dispute Settlement Panel ruled on April 5 that Russia had the right to invoke national security concerns to restrict the transit of Ukrainian goods. The WTO's Dispute Settlement Body then re-affirmed this decision on April 26. 

Undecided voters hold the key

Spaniards will vote on April 28 to renew parliament for the third time in four years. Spanish Prime Minister Pedro Sánchez’s center-left Socialist Workers' Party (PSOE) leads in the polls, but with just 30 percent of support. The latest surveys show only a grand coalition of both left and right parties, or a left bloc supported by some regional parties that support Catalan independence, can reach the majority needed to form a government, but much will depend on the 40 percent of still undecided voters.

The elections follow eleven months of Sánchez’s PSOE minority government, which came to power after Mariano Rajoy’s center-right People’s Party government lost a vote of no confidence on June 1, 2018. Rajoy’s government had been supported by Ciudadanos, a center-right party founded in 2006 with a focus on addressing corruption, market liberalization, and a robust anti-secessionist stance.

Heads of state and top government ministers will be listening to the Chinese sales pitch with much more skepticism than in previous years at the second Belt and Road Forum for International Cooperation, a three-day conference that got underway in Beijing on April 25.

Established in 2013, the Belt and Road Initiative (BRI) seeks to improve international trade connections, infrastructure, and development throughout Asia, Europe, and Africa, with specific focus on connecting China to these international markets. According to the Chinese government, the program has already resulted in an investment of $80 billion in partner countries and Beijing has signed agreements with 122 nations and twenty-one international organizations.

Our current age of “automation anxiety” is nothing new. Writing in 1930, John Maynard Keynes was concerned with the onset of “technological unemployment” and the “temporary phase of maladjustment” which would ensue. In 1964, US President Lyndon Baines Johnson commissioned a study on “technology, automation, and economic progress” which outlined recourse for the government to act as “employer of last resort (EOLR).” More than half a century later, economists, executives, and policy makers are consumed with “brilliant technologies” and the impact on employment in the “second machine age.”

It is the pace of change happening now—the onset of artificial intelligence (AI), machine learning, and robotics—unfolding contemporaneously with large social undercurrents of inequality, populist movements, and an increase of protectionism that has induced an almost pervasive sense of distress in advanced economies today.

The Trump administration’s decision not to grant any more sanctions waivers to countries that import oil from Iran is part of a maximum pressure strategy intended to cut off a critical source of revenue and force Iran to the negotiating table. But it will likely result in an increase in oil prices, resistance from countries that continue to buy Iranian oil, and a backlash from Tehran, according to Atlantic Council analysts.


“The Trump administration’s announcement is certain to face pushback from major importers of Iranian oil, raise prices for consumers, and further erode the utility of sanctions as a non-military tool of US foreign policy,” said Barbara Slavin, director of the Atlantic Council’s Future of Iran Initiative.

US Trade Representative Robert Lighthizer and Japanese Economic Revitalization Minister Toshimitsu Motegi kicked off long-awaited trade negotiations between the United States and Japan in Washington this week. While both sides have agreed to accelerate the talks, their scope is unclear.


Japan wants to focus on tariffs on industrial and agricultural goods, referring to the possible outcome as a Trade Agreement on Goods (TAG), but the United States insists on a comprehensive free trade agreement (FTA) negotiation—encompassing goods, services, investment, and anti-currency manipulation.

Beyond these differences in scope, there are important divergences on substantive matters, not the least of which is Japan’s preference for a free trade framework as opposed to the United States’ managed-trade approach. As a consequence, the talks could make speedy progress if narrowly focused, but could drag on if Washington insists on a comprehensive agenda.

By agreeing to extend the deadline for the United Kingdom’s withdrawal from the European Union (EU) to October 31, EU leaders and British Prime Minister Theresa May “managed to avoid the most disruptive [potential] scenario, which would have been no-deal Brexit,” top European Commission official Valdis Dombrovskis said at the Atlantic Council in Washington on April 12.

The extension, which would first be reviewed by the EU on June 30 but could last as long as October 31, would give the UK Parliament time to “reflect and work on what is really their preferred scenario,” Dombrovskis said.



    

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