Future of US–EU Talks Unclear

Major issue between Washington and Brussels is centered on agriculture, expert says
November 26, 2018 Updated: November 26, 2018

WASHINGTON—The United States and the European Union are “still continuing with negotiations on all levels,” but there is a lack of clarity surrounding the future of a U.S.–EU trade deal.

The United States and the EU declared a “new phase” in relations in July and agreed “to work together towards zero tariffs, zero nontariff barriers, and zero subsidies on non-auto industrial goods.”

Despite a temporary ceasefire on trade, there is a lack of clarity on the specifics of U.S.–EU trade talks. And it isn’t known whether Trump will hold a bilateral meeting with European Commission President Jean-Claude Juncker during the Group of 20 (G-20) summit in Argentina this week.

Talks between Washington and Brussels have been sidelined in the past few months because of the U.S.–Mexico–Canada Agreement (USMCA).

“It’s been very clear the administration has spent enormous amounts of energy on USMCA, with probably less energy on the U.S.–EU conversations,” said Heather Conley, senior vice president and director of the Europe program at the Center for Strategic International Studies.

“U.S. tariffs are still in place against the European Union. European Union countermeasures are still in place against the United States,” she said, adding that it’s unclear what the negotiation between both sides would cover.

Speaking at a conference in Berlin on Nov. 12, Juncker said the EU was “continuing with negotiations on all levels” to avoid a new trade war with the United States.

The EU officials reject any potential auto tariffs that may arise from the U.S. Commerce Department’s “Section 232” national security probe. New recommendations by the Commerce Department have been submitted to the White House and are being reviewed by various federal agencies.

The Section 232 investigation could allow the Trump administration to impose nearly 25 percent tariffs on auto and auto part imports.

The Scope of Trade Talks

U.S. Trade Representative Robert Lighthizer met with European Trade Commissioner Cecilia Malmstrom on Nov. 14. Both sides discussed regulatory cooperation issues and the parameters of future negotiations. After the meeting, Malmstrom told reporters that they didn’t talk about auto tariffs but instead focused on enabling EU countries to buy more U.S. soybeans and liquefied natural gas (LNG).

Malmstrom also said that Brussels wants to do a limited trade deal on industrial goods, including autos, to reduce tariff rates to zero for both sides.

However, the scope of these talks can’t be determined until early 2019, when the U.S. Trade Representative (USTR) completes its consultation process with the U.S. Congress. In addition, EU needs to receive a negotiating mandate from EU member states to launch formal talks with Washington.

According to Conley, Washington’s objectives in trade talks will be revealed in mid-December when the administration presents them to Congress. However, a major issue between Washington and Brussels is centered on agriculture, she said. Washington wants to include agriculture in the future agreement but the European Union has no mandate to do that, she said.

“Certainly there are very strong voices—French government voices, in particular—that do not want that to happen.”

The relationship between President Donald Trump and French President Emmanuel Macron has turned sour recently.

On Nov. 13, Trump criticized Macron over tariffs in a tweet, saying: “On Trade, France makes excellent wine, but so does the U.S. The problem is that France makes it very hard for the U.S. to sell its wines into France, and charges big Tariffs, whereas the U.S. makes it easy for French wines, and charges very small Tariffs. Not fair, must change!”

The interaction between Trump and Macron during the G-20 summit is going to be a very hot topic, Conley said.

Ceasefire on Trade

In July, the United States and the EU declared a “new phase” in relations, reaching a trade deal. Trump and Juncker agreed to work together to remove tariffs and other trade barriers on all industrial goods other than cars. Both leaders also agreed to cooperate against unfair trade practices and to reform the World Trade Organization (WTO).

As part of the agreement, the Trump administration agreed to put on hold any new tariffs, while the EU pledged to increase imports of soybeans and LNG.

Both leaders also agreed to establish a dialogue on standards to ease the non-tariff barriers and to lower costs.

After the announcement, U.S. Commerce Secretary Wilbur Ross told reporters that steel and aluminum tariffs would remain in place during the negotiations. Ross also said the investigation into auto tariffs would continue.

Starting June 1, the United States had imposed a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum from its trading partners, including the EU, under Section 232 of the Trade Expansion Act. In response, the EU had begun charging import duties of 25 percent on a range of U.S. products.

Trade and investment flowing between the United States and the EU create the world’s biggest economic relationship. The economies have a nearly $1.2 trillion bilateral trade relationship and account together for about half of the world’s gross domestic product.

The transatlantic relationship also affects the health of the global economy, as either the EU or the United States is the largest trade and investment partner for almost all other countries in the global economy.

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