Since You Asked

The States at Play: EU and U.S. Trade Negotiations

In April’s EU-U.S. Trade Relations meeting, U.S. Ambassador to the EU Gordon Sondland joked that he approached an official in the European Commission and asked, “What time is it?” The official promptly responded, “No.” With relations stalling on no(t yet), what can we look forward to seeing in upcoming EU-U.S. trade negotiations?

Following the end of the TTIP negotiations in 2016, the U.S. and EU have both achieved mandates to begin negotiations for a bilateral trade deal. With consideration to the overachieving aims of TTIP and concern with public perception, these negotiations are due to be more transparent and with a marked shift in trade strategy. This time, both parties aim to negotiate two complimentary deals that separate out regulatory cooperation with mutual recognition. The EU has mandated that deals will be limited to industrial goods and product conformity. This will allow for greater room to manoeuvre through each parties’ red lines and find common accord. As there are already 16 million jobs on both sides of the Atlantic tied to transatlantic trade and 55 per cent of U.S. global investment goes to Europe, stakeholders can expect an increase in jobs growth and investment opportunities from successful negotiations. Cooperation will also solidify the common front presented by U.S.-EU partnership in view of threats to the global market from China (although the EU has recently shown more willingness to cooperate with China in the wake of the new U.S. American trade policy).

Economic connections between US, EU, China, Russia and India.

The EU is concerned by the “confrontational approach” taken by the U.S. administration, as demonstrated by U.S. tariffs on EU steel (25 per cent) and aluminium (10 per cent), alongside a threat of tariffs on EU imports of cars and car parts. The EU was pleased Commission President Juncker was successful in halting car tariffs during his Rose Garden truce with President Trump in Washington, D.C. in July 2018. The EU has agreed to seek a less comprehensive trade deal than TTIP, with points of contention likely to occur with negotiations on the withdrawal of steel and aluminium tariffs and the red line the EU has drawn on the inclusion of agriculture. Regarding the latter, tropes of chlorinated chicken still remain a rallying cry, and the EU seeks to protect quality over quantity of agricultural goods.

The U.S., on the other hand, is careful to protect its steel and aluminium industries as a matter of national security. It is seeking a robust trade deal with the inclusion of agriculture, as well as increased access to the Single Market. This would provide an opportunity to greatly enhance transatlantic relations, research and development, investment, and trade of goods and services. The U.S. is keen to expand further into European markets, while still insuring internal jobs growth and support for its manufacturing sector.

As things stand today, the news is there is no news.  U.S. Commerce Secretary Wilbur Ross was quoted last month as saying, “for the moment, it’s complicated to negotiate with the European Union.” With the first sitting of the ninth European Parliament and a turnover in EU “top jobs” this month, his assessment is fair on four main accounts.

Firstly, the Commission is undergoing a major upheaval as it sets out to receive a new President and Commissioners, the leaders of all major policy portfolios. The new Director General for Trade, Sabine Weyand, was announced on June 1, but the incoming President and Trade Commissioner are still unknown. Until there is a successive negotiating team in place, it is difficult to commence negotiations.

Secondly, this year’s European elections brought in a more fragmented Parliament. The trade-positive coalition between centre and centre-right parties – EPP, ALDE, and ECR – has lost strength in numbers, where parties more protectionist – ENF, GUE/NGL, and Greens – have gained. Negotiators will have to carefully approach less sought out political support in the S&D, as well as treading more carefully with Renew Europe’s French faction, who are certain to hold a strong line on agriculture.

Thirdly, and in line with an increased support in Green parties, there is political pressure for the EU to only negotiate deals with signatories to the Paris Agreement. After blocking the Special Report on Global Warming of 1.5 °C, the U.S. government has solidified its ambivalence towards environmental protections, which may create a stumbling block when seeking support from the European left.

Finally, and ever present, Brexit. With the commitment of the UK government to leaving the EU by October 31st, the EU will loose one of its more powerful advocates for a robust transatlantic trade deal. Likewise, as the UK commits its energy to Brexit preparations and seeks out its own trade deals, its commitment to facilitating an EU-U.S. trade deal has already begun to diminish.

So, the ball is in the EU’s court waiting to be served as we await its changeover in players. The U.S. is prepared to lobby over frank and bullish terms. How the EU responds will lead to interesting developments in the months to come.

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