Has the trade dispute between the EU and the U.S. been averted?
Juncker’s meeting with Trump postponed the escalation of the trade dispute between the EU and the U.S. After the imposition of duties on steel and aluminium imported to the U.S., followed by the EU’s retaliatory duties, the U.S. president threatened to introduce a 20-25% duty car imports. The declaration to initiate negotiations on the liberalisation of mutual trade and the promise not to introduce new tariffs on cars from the EU while the negotiations proceed should be considered a success of the talks. The duties imposed so far remain in force but action to abolish them has been announced.
Why did Trump agree to postpone the duties?
Trump was able to present the joint declaration as a success: the EU agreed to work on increasing imports of U.S. soybeans and natural gas. In the ongoing trade dispute with China, retaliatory tariffs have affected U.S. agricultural producers, which would probably diminish support for the Republican Party before the Congressional elections in November.
The EU has a moderate impact on the implementation of these announcements. Soy imports are not limited by any customs barriers the Commission can abolish. European companies are already importing natural gas from the U.S. and a rapid increase in volume is unlikely primarily because U.S. export capabilities are limited.
What will be negotiated?
The most important talks will focus on terminating tariffs, non-tariff barriers, and zero subsidies for non-auto industrial goods. Both sides will seek a reduction in barriers to trade in services as well as chemical, pharmaceutical, medical, and soy products. The agreement also included launching a dialogue on standards (trade and probably products) and joint efforts to reform the World Trade Organisation (EU Member State leaders agreed to this in the European Council’s conclusions of 28 June). The negotiations are to be conducted by a working group of the closest advisors of Trump and Juncker.
Does it mean a return to the Transatlantic Trade and Investment Partnership (TTIP)?
The announced negotiations of a trade agreement are to focus on industrial goods, therefore it wil have narrower scope than TTIP. Limiting its scale will probably allow the negotiators to omit controversial aspects of the TTIP (e.g., food standards and investment protection).
Regardless of the process launched, the U.S. Department of Commerce continues to investigate what it calls the excessive import of cars. In a similar situation, NAFTA renegotiation did not prevent Canada and Mexico from imposing tariffs on steel and aluminium exported to the U.S.
Therefore, the results of the meeting should be assessed as temporary. The termination of punitive and retaliatory barriers and the exclusion of the EU from car tariffs represent the real de-escalation.
