Trump’s trade policy stays rough
The talks about trade between the EU and the US are stuck. Now that as midterms are over, we are back to where we are. How EU should proceed with Trump? That question was on Friday in Brussels during the lunch of EU ministers for foreign trade, including Sigrid Kaag (D66). But Kaag left before the coffee and the dessert. Meaningfully. The talks about trade between the EU and the US are stuck. Kaag:
The starting point of the EU is to keep the dialogue open. Looking for negotiation space.
Because of the US midterm elections, the trade dispute between the EU and the US went into hibernation. But Trump’s pistol – threatening with tariff increases and scrapping the rules of the World Trade Organization – is still loaded.
Following the US taxes announced earlier this year by steel (25 percent), aluminum (10 percent) and cars and car parts (possibly to 25 percent), European Commission President Jean-Claude Juncker traveled to Washington in July to get out of the cold to get the air. Juncker and Trump drafted a joint statement on free trade and Juncker promised more European purchasing of LNG gas and soybeans from America. A promise without much political power, because where and at what price is purchased determines the market. The meeting between Juncker and Trump was therefore mainly meant to buy time, according to Brussels trade experts.
But now that the midterms are over, we are back to where we are, says a worried Winand Quaed fly, head of the Brussels office of employers’ organization VNO-NCW. “Trump’s threats are still hanging above the market. His protectionist trade policy remains as muscular: he only closes deals out of self-interest and that is no reason for fruitful negotiations. ”
Now that the American House of Representatives has come into the hands of the Democrats, there is some hope for rapprochement at the European Commission in Brussels. The Democrats are at least as protectionist as the Republicans, but attach more value to good relations with the EU. According to Quaedvlieg, that hope is vain. “On the whole line, the political climate in the US is bad to talk about the liberalization of world trade.”
As a sign on the wall, he mentions the new trade agreement between the US and Mexico and Canada, the renegotiated NAFTA, whereby Mexico and Canada have been deprived of sovereignty. According to the agreement, the countries are not allowed to enter into treaties with ‘non-market economies’ such as China. Quaedvlieg: “This is the first trade agreement I know that trade de-liberalizes. It’s about limitations, to attract the reins. ”
“At the conclusion of new trade agreements, Trump puts the rules to his will,” says Marietje Schaake, who, as D66 MEP, closely monitors EU-US trade relations. “The steel and aluminum levies for European companies are not out of the question. Totally unacceptable. “
Significant economic damage
Trump is expected to speak out in February next year about its previously announced increase in import tariffs on cars. That is, say diplomats, the biggest concern for the EU.
For European countries with a large car industry, such as Germany and France, the potential means considerable economic damage. The challenge for the EU is now to stand up as a trade bloc against Trump’s tariffs. But France fears that Germany might bow to Trump. The German automakers will “whisper their concerns to the European Commission”, expects D66-er Schaake. The MEP anticipates that after the outcome of the midterms, Trump still has plenty of room to actually use the car tariffs, now a threat. “That is why it is very important not to let us disintegrate as an EU. If Trump smells distribution, it only encourages him to exert more pressure, to get more concessions, and this creates a downward spiral. ”
Minister Kaag and her European colleagues commissioned Euro commissioner Cecilia Malmström (trade) to negotiate further with the Americans next week.
“Stay in conversation, continue to make proposals,” says Kaag about the Malmström mission. “Trump wants to return to a world in which the economies of today no longer function.”
Ministers also discussed Trump’s attack on the appeal committee, the appellate body, of the World Trade Organization. In that committee, with originally seven judges, international trade disputes are settled. By retirement, there are only three judges left. But for more than a year Trump has stopped the appointment of new judges. According to the European Commission, the WTO is “the deepest crisis ever”. By undermining the survival of the appeals committee, the ‘global referee’ may fall away. Trump kicks against “the Achilles heel”, as Minister Kaag calls the Appeals Committee.
The US defends their blockade of judge appointments on the grounds that the WTO is no longer of this time. The EU thus partially agrees: competition regulation and e-commerce do not suffice. But Trump does not show any willingness in this dossier to modernize the WTO together, according to Schaake. “Where Trump blocks the appointment of judges and even threatens to withdraw the US from the WTO, the EU has made concrete proposals to jointly improve the WTO.”
Trump is particularly opposed to how the WTO makes it difficult for him to levy charges against Chinese dumping of products on the American market. In addition, the interpretations of the US and the WTO conflict about what a Chinese state-owned company is and when it makes improper use of state subsidies.
But with this legal battle, according to WTO observers, Trump wants to divert attention from its real goal: to disable the WTO as an arbitrator. In October, the EU submitted a request to the WTO to investigate whether Trump’s charges are illegal. Trump uses ‘national security’ as an argument for imposing these rates. Is his argument sustainable?
A WTO Appeals Committee that makes the US wrong on that point is therefore a difficult obstacle for Trump. Quaedvlieg, of VNO-NCW, fears the next retirement of a WTO judge that will not be replaced by the American blockade. “Then the WTO, the cornerstone of our multilateral trading system, will die.”