“If tariffs are imposed, there are no winners”: Expert Radek Špicar discusses current state of Czech economy and trade
At a ceremony at the Ministry of Foreign Affairs on June 3rd, Radek Špicar was among the honourees awarded the Medal for Merit in Diplomacy.
Radek is a well-known face in the worlds of Czech business, finance and industry; he currently holds the position of Vice President of the Confederation of Industry and Transport, and previously served as Deputy Prime Minister for Economy, as a member of the top management of Škoda Auto, and as Executive Director of the Prague branch of the Aspen Institute think tank.
His experience, combined with his academic knowledge and warm personality, make Radek Špicar an ideal person to learn about the state of the Czech economy from, as Danny Bate did after the ceremony.
At the moment, how would you evaluate the Czech Republic’s and the EU's response to the developments in the United States?
“What's going on in the United States is of concern to us, because not only is the Czech Republic an open economy, but the European Union in general is an open economy too. We need global, open economies, we need free trade, and whenever somebody is threatening to use tariffs, it's very negative news to us. Now it's not only China or other states, it's the United States, our biggest trading partner, which makes us extremely nervous.
“But I have to say that so far, we are of the opinion that the European Union is acting very wisely, meaning that the EU is not trying to retaliate, provoke, or make things even worse through some kind of a tough response. It really seems to us at the moment that it is the United States which is not willing to make a compromise that would be mutually acceptable.
“But we still hope that it will change and that we will be able to avoid tariffs, because if tariffs are imposed, there are no winners. That situation would have only losers on both sides of the Atlantic, and I hope that the Americans will realise it.”
And would you say, or would you predict at least, that the initial shock of the tariffs and the developments from Mr. Trump has passed, and things have settled? Or do you expect further changes and disruptions?
“We definitely expect further changes, because changes are coming almost on a daily basis, and it's very difficult to predict anything. This is very unfortunate, because there are two things that business needs the most: predictability and stability. Because of what's going on in global trade, we have neither.
“But as I said, we expect changes. There will be turbulent times ahead of us, that's for sure. But I hope that at the end, there will be no tariffs, and there will rather be an agreement which will enable both sides to lower tariffs and engage in a free trade between the two continents, because there are others, third parties, that would only benefit if we fought with each other.”
Thinking of those third parties, there are other players on the global stage beyond the USA; I have China in mind. Trade between China and the EU has increased recently. How do you view this relationship, and how do you think the Czech Republic should respond to this developing relationship with China?
“Our trade relationship with China and its nature and intensity will be decided on the European level. It's not up to the Czech Republic to decide what the relationship with China looks like, not only the political one, but the economic one. We'll see how the new commission will act, and I think that it will be affected for sure by the development of the USA-EU relations.”
But a really important factor for this country is the motor vehicle industry. What would you like to see in the relationship between the EU and China in this particular regard? Does China threaten the Czech Republic in terms of car manufacturing?
“Absolutely, and I'm sure that if it's more difficult for the Chinese manufacturers to sell their cars in the United States, because of tariffs, the huge overproduction from China will have to end up somewhere. I'm afraid that it's going to be the European Union. So yes, this will be a big challenge for EU carmakers in the future, that's for sure.”
This year in the Czech Republic is an election year. What are some things that you would like to see from whoever is in government after the autumn elections?
“We are already meeting with the heads of the major political parties to learn what they are about to put into their political programmes and to tell them what the economy needs.
“We basically say that we have to lower energy prices. It's impossible to do business in Europe if electricity and gas are four times more expensive than in the United States. So we have to do something about energy prices.
“Secondly, we have to further liberalise the internal market, because it's not liberal at the moment. There are many non-tariff barriers that complicate trade among states. That's very unfortunate. It would also make sense to create one capital market. We can only dream about catching up with the United States, with its Tesla and SpaceX-like companies, when there is no pan-European common capital market that these companies, start-ups and technological companies, could go to for money.”
What are some of the non-tariff barriers that you mentioned there?
“There are a lot. They come in the form of specific certificates that you have to have, membership in various organisations if you want to provide services elsewhere within the European Union, etc. Unfortunately nation states are very creative when it comes to creation of non-tariff barriers that complicate pan-European trade. That's a big obstacle.
“Mario Draghi [Italian politician and economist] is very right when he says that if we were able to get rid of these non-tariff barriers, we wouldn't have to worry about Donald Trump and his tariffs. It’s us who hurt ourselves much more than the US tariffs do.”
