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Piece by piece

Piece by piece

 

Solving the challenges hindering EU–US trade talks

 

Source: Security & Defence Agenda | Flickr

 

The EU–US trade negotiations could be revitalised “within some weeks”, according to the EU Commissioner for Trade Cecilia Malmström. The Council is expected to approve the negotiating mandates during its currently on-going Summit in Brussels. The prospects of any transatlantic trade talks have faced numerous challenges since the Transatlantic Trade and Investment Partnership (TTIP) negotiations stalled, but the two sides sound ready to return to the table.

 

As is often the case in trade talks conducted by the EU, however, the agriculture sector has constituted a significant problem moving forward. In the specific case of revitalising the EU–US trade negotiations, there have been significant disagreements on whether to include agriculture products within the scope of the agreement. Despite the joint declaration made by Presidents Juncker and Trump in the White House Rose Garden in July 2018 to reduce trade barriers and strengthen strategic cooperation, trust between the transatlantic partners has only eroded further. From the EU’s perspective, President Trump’s zero-sum perception of trade negotiations, steel tariffs, and threats to impose measures against European car imports have reinforced the view that his administration is not willing to follow the rules on which the transatlantic relationship has traditionally been based.

 

“Agriculture is out! That is crystal clear.” Speaking at a European Liberal Forum global trade event on Thursday (21 March), Trade Commissioner Malmström was more than certain that the Council would never grant her a mandate to negotiate trade with the United States that would include agriculture products. She stated that there is no appetite on the EU side to open negotiations for a full 30-chapter free trade agreement. Instead, the bloc would be looking to conclude a smaller agreement, as President Juncker already indicated during his July 2018 visit to the White House. According to the Commission’s draft mandates released this January, the EU would be open to negotiating a trade agreement strictly focused on removing tariffs on industrial goods (such as steel) and another agreement on regulatory conformity intended to remove non-tariff barriers.

 

Speaking also on the topic of trade on Thursday, the US Ambassador to the EU Gordon Sondland told an American Chamber of Commerce to the EU (AmChamEU) transatlantic conference that “the mandate that is being circulated falls far short of what even President Juncker and President Trump discussed in July”. He continued that the talks will need to include “all aspects of our relationship” and repeated the US administration’s demand that agriculture is included in the deal. Last week, US Trade Representative Robert Lighthizer told Congress that the EU-U.S. Executive Working Group had reached a “complete stalemate” as a result of the disagreements over agriculture.

 

The situation is not this simple, of course. Washington has also consistently refused the EU’s demands to include public procurement and geographical indications in the negotiations, as Commissioner Malmström explained on Thursday. In addition, car tariffs have been another point of contention, as Brussels has insisted that vehicles should be included in the negotiations. This is obviously in the EU’s interest in order to avoid higher import tariffs on European cars to the US as per President Trump’s threats to do so. However, the 2018 joint declaration – on which the current efforts to establish a dialogue are based – explicitly refers to “non-auto industrial goods” in its wording.

 

What is there to be done then? First of all, both Commissioner Malmström and Ambassador Sondland agreed in their speeches that the EU and US could build up agreements, moving through the issues one by one. Dealing with each issue on its separate track would allow addressing problems at their own pace. Successfully concluding a smaller trade deal could also be used as a platform to build trust between the transatlantic partners and to pave the way for more comprehensive talks in the future. According to Malmström, seeking a positive platform for these talks could start, for example, from the work already done on some regulatory cooperation and standard alignment matters during the TTIP negotiations. From the EU’s perspective, focusing also on aligning car safety regulations could possibly strengthen its hand in arguing that the US cannot impose tariffs on the basis of national security.

 

Furthermore, the EU and US should use the talks to set a common agenda on their shared concerns on global trade, namely reforming the WTO rulebook and challenging China on its unfair practices.

 

There are also risks that the transatlantic negotiation would backfire, eroding the already strained relationship even further. The EU might, for example, fail to enter the talks as one voice. The European Parliament’s recent vote failing to issue recommendations on the US trade negotiations highlights the existing divisions between European policy-makers on the topic. President Trump’s own ‘tough guy’ act and the possibility that his administration would impose punitive tariffs before the talks have been concluded – in which case the EU would most likely suspend the negotiations – also pose risks to re-building the partnership. For example, carefully avoiding any reconciliatory tones in a speech to the US governors this February, Donald Trump called the EU “in certain ways, tougher than China” on trade and said that he would “tariff the hell out of [the EU]” if the bloc would not agree to include agriculture products in the trade negotiations.

 

Yet, perhaps the future opportunity to use the EU–US trade negotiations as an example of President Trump’s deal-making skills ahead of the 2020 US presidential race will eventually be enough to convince Washington of the benefits of a smaller trade agreement. Commissioner Malmström, at least, expects the talks to be concluded by the end of the current Commission’s mandate on 31 October.

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