The latest trade negotiations between the EU and Mercosur are facing threats from Paraguay’s president who has demanded that environmental and public procurement issues be addressed. The talks are seen as a test of whether agreements can still be made between rich-world trading powers and middle-income countries. One issue of concern is the leaking of rich-world subsidies to Chinese businesses in the European market. While consumer subsidies for green products are typically seen as non-distorting, the politics of these subsidies being used by Chinese companies are challenging. One idea proposed is the creation of a “subsidy club” where rich democracies restrict subsidies to companies from countries that adhere to agreed environmental and labour standards. However, this may face opposition from countries like the US, where Congress may not want to give up control over its subsidies. Global goods trade has seen a significant fall due to the slow world economy and industrial production. However, this is seen as a cyclical trend and not a cause for serious concern. Finally, Germany has admitted its over-reliance on Russian gas, increasing imports even after the annexation of Crimea in 2014.
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