BERLIN (Reuters) - Europe is not blameless in the trade tensions casting a pall over the global economy, German Chancellor Angela Merkel said, mentioning the lengthening Brexit negotiations as a source of uncertainty to stand beside the United States-China trade war.
Speaking after a meeting with leaders of multilateral financial institutions on Tuesday, Merkel declined to lay the blame for the slowing global economy solely on U.S. President Donald Trump’s hard-line stance on trade with China.
“We have nothing to be smug about,” she said. “We’ve been negotiating an orderly British exit for three years. And that brings us great uncertainty when you consider that that exit should happen on October 31. And people still don’t know how supply chains will look.”
Officials across Europe are growing increasingly concerned at the lack of progress Prime Minister Boris Johnson is making on a new deal to regulate Britain’s departure from the European Union after parliament three times rejected one negotiated by his predecessor, Theresa May.
An unregulated exit would bring tariff and regulatory barriers down around Britain’s borders, disrupting industrial supply chains that have grown deeply entwined over the half-century of Britain’s membership.
“That’s a significant source of uncertainty since Britain isn’t a small European country but a large global player,” Merkel added.
The World Trade Organisation’s head also warned that proposals for an EU-wide carbon border tax to protect Europe’s economy from being undercut by regions with lower emissions standards - an idea floated by incoming European Commission head Ursula von der Leyen - could be construed as protectionist.
“It is easy to somehow introduce less legitimate, protectionist concerns on initiatives like that,” Roberto Azevedo said. “They can be very complex and very costly for businesses as well. I’m not saying it’s impossible. I’m just saying let’s go carefully.”
Other top international officials struck a gloomy note on the prospects for the global economy if the shadows cast by trade disputes continued to lengthen, with the risk of recession seemingly uppermost in some minds.
“Unless trade tensions are defused it’s very hard to see mainstream macroeconomic tools countering the impact,” said David Lipton, deputy director of the International Monetary Fund.
“The other question is how much the world economy can go even further down,” said Angel Gurria, head of the Organisation for Economic Cooperation and Development. “I don’t want to mention the ‘R’ word (but) if we continue the escalation...”
Reporting by Thomas Escritt and Andreas Rinke; Editing by Sandra Maler