EU and U.S. at Davos: talk of a trade deal amid tariff tensions
The Commission, President Ursula Von der Leyen, left the 50th World Economic Forum in Davos, Switzerland, confident that after she discussed trade on Wednesday with U.S. President Donald Trump, that she was “expecting in a few weeks to have an agreement that we can sign together”. President Trump was less optimistic, hoping to have negotiated a trade deal before the U.S. election in November. Purposefully, President von der Leyen confirmed, “our experts are now getting together, looking at the facts, exchanging figures and asking the question of fairness on both sides”.
In his address to the WEF, President Trump omitted any intention to strike a trade-deal with Europe. Instead he was focused on ‘Making America Great Again’ by ensuring that “every decision we make on trade, tax, regulation, energy, immigration, education and more are focused on improving the lives of everyday American”.
This was in stark contrast to the keynote speech of President von der Leyen. Her ‘geopolitical Commission’ intends to cooperate with neighbours to sign agreements that are “not just about trade: they are platforms to shape and harness globalisation. And they are drivers to build common solutions to challenges such as climate change or digitalisation”. The EU, as a matter of course, will try to export these non-trade objectives in all of its ‘comprehensive’ trade agreements. This may prove challenging with the U.S. as President Trump has rejected the UN Paris Climate Agreement.
During the discussions on a potential future agreement, the phrase “comprehensive free trade agreement” was not mentioned. Instead talks will primarily focus on resolving the ongoing tariff dispute between the EU and U.S. When speaking to CNBC on Wednesday, President Trump said, “if we don’t get something, I’m going to have to take action and the action will be a very high tariffs on their cars and other things that come into our country”.
To recall the nature of the trade dispute, in 2018 tensions between the EU and U.S. escalated when America imposed tariffs on 25% and 10% of steel and aluminium imported from the EU as retribution for the U.S. being “taken advantage of for many decades on trade”, Trump said. Jean-Claude Juncker, the Commission President at the time, came to an agreement with Trump, the terms of which included a commitment by the EU to import more liquefied natural gas from the U.S. to diversify its energy supply. However, disagreement persisted as the U.S. wanted to abolish tariffs on industrial and agricultural goods. The EU sought to limit the agreement to industrial products. In October 2019, the U.S. placed tariffs on $7.5 billion worth of EU goods.
President Trump summed up the current state of play when he said at Davos that, “[The EU] have trade barriers where you cannot trade, they have tariffs all over the place. They make it impossible. They are frankly more difficult to do business with than China”. It remains to be seen whether the ‘by American’ approach of her successor will be adopted by President von der Leyen.
It was confirmed yesterday by the EU Commissioner for Trade, Phil Hogan that in an effort to reduce those trade barriers, a ‘mini-agreement’ is being sought covering trade, technology and energy. Currently, the EU and the U.S. are still locked in negotiations which would focus on the removal of tariffs on industrial goods, and exclude agricultural products; and on an agreement on conformity assessment, that would help address the objective of removing non-tariff barriers.
Commissioner Hogan was hopeful of reaching an agreement to eliminate the barriers to trade with the U.S within the coming months, not weeks, thereby offering President Trump the opportunity to secure a deal before the U.S. elections in November. It remains to be seen whether the EU and U.S. could strike a comprehensive trade deal with their competitive visions of “Make America Great Again” and the “Geopolitical Commission”. Such a deal would have to also respect the two trading blocs’ divergent perspectives on the response to the climate crisis, a key pillar of the workstream and a means of measuring the von der Leyen Commission.