EU makes trade deal with U.S. contingent on lifting of steel, aluminum tariffs

EU makes trade deal with U.S. contingent on lifting of steel, aluminum tariffs

In a draft negotiating mandate published on Friday, the European Union said a trade deal on industrial goods could not be struck with the U.S. until Section 232 tariffs on steel and aluminum were lifted and Washington agreed not to impose such tariffs on autos and auto parts, or levy Section 301 tariffs on the EU.

The Commission sent draft negotiating mandates to the EU member states on Friday for a trade deal on industrial goods and conformity assessments, EU Trade Commissioner Cecilia Malmström told reporters in Brussels. Member states must approve the mandates before formal negotiations can begin. The U.S. published its objectives for a trade deal with the EU last week. The 2015 Trade Promotion Authority law stipulates that the U.S. can enter into formal talks 30 days after objectives are submitted to Congress.

If the U.S., during negotiations, imposed tariffs on the EU under either Section 232 or Section 301, the EU would immediately suspend negotiations, the mandate states. Additionally, the EU is seeking a clause that would allow it to suspend concessions made in a trade deal if the U.S. imposed Section 232 or 301 tariffs after the agreement was implemented.

The Commerce Department’s Section 232 report on its investigation into the national security implications of auto and parts imports is due to the White House by Feb. 17. A recent draft of the report outlined three options for the president to consider, one of which would include a tariff ranging from 20 percent to 25 percent on all auto and auto parts imports. Malmström has repeatedly said she does not expect the EU to be hit with auto tariffs.

If the U.S. does decide to slap auto tariffs on the EU, Malmström said Brussels was preparing a rebalancing list of U.S. goods to hit with tariffs. “Should that happen, however, we are very advanced in our internal preparations on a list on rebalancing measures in the same way we did before, but of course this would be bigger,” she said.

The U.S. objectives and the draft EU mandates differ greatly. The U.S. included a comprehensive list of issue areas typically covered in U.S. free trade deals, including agriculture, procurement, intellectual property and others. The EU mandate, however, is limited to industrial goods because Brussels does not want to rehash the Transatlantic Trade and Investment Partnership issues on which negotiators were unable to agree.

“And why did we do this? Because we think this is a focused trade agenda that can be achieved quickly, that can make two-way trade across the Atlantic easier,” Malmström said of the limited scope of the mandate. “We would help to avoid an escalation of our trade tensions. So we are not -- and I want to be very clear about that -- we are not proposing to restart a broad FTA negotiation with the U.S.”

Brussels has repeatedly pointed to a joint statement issued last July by President Trump and Commission President Jean-Claude Juncker as the basis for a narrow agreement on industrial goods because the statement does not include agriculture.

The Trump-Juncker statement also said the U.S. and EU would work toward an agreement on “non-auto” industrial goods. However, the EU's draft mandate includes autos.

“The proposal today covers all industrial sectors, including fisheries and including vehicles. This is because we believe that a balanced and mutually beneficial agreement with the U.S. can be reached,” Malmström said. “We also saw that the U.S. did not exclude cars from their negotiating directives. We are prepared to put our vehicles tariffs on the negotiating tables as part of a broader agreement if the U.S. agreed to work together toward zero tariffs for all industrial goods. If there are sensitive individual products here like pickups, I’m sure that negotiators here can find a solution.”

Trump has repeatedly criticized the EU’s auto tariffs because Brussels’ passenger car tariff is 10 percent, compared to the U.S. tariff of 2.5 percent. However, the U.S. has a 25 percent tariff on pickup trucks, which is politically sensitive.

U.S. officials and lawmakers have called for the trans-Atlantic talks to include agriculture, despite the EU’s resistance. Senate Finance Committee Chairman Chuck Grassley (R-IA) has said he believes agriculture must be included in a deal to ensure its passage in Congress because farm groups are typically one of the most prominent lobbying groups behind trade deals.

Malmström was asked what the EU’s strategy was in the face of U.S. demands to include agriculture. “Our strategy is to be very faithful to what our presidents tasked us to do,” she replied.

Asked why the Commission was willing to include autos, but not agriculture, in its mandate, spokesman Daniel Rosario said the draft mandate was fully in line with the July 2018 joint statement. “What’s in the mandate today should not come as a surprise because this was also addressed by the commissioner when in Washington last week,” he told reporters at a press briefing on Friday. “What she said and what the mandate reflects -- fully in line with the July joint statement -- is that the European Union is willing to negotiate on all industrial goods, including on autos, should [the] United States be willing to do so. Should the U.S. have sensitivities for any particular automotive products in the automotive sector, we believe that negotiators would be able to take them into account in the negotiations in order to find appropriate solutions. And, if you check the actual text of the mandate, it explicitly includes the flexibility to take these sensitivities into account.”

The draft mandate says, “Account may be taken of the particular sensitivities of certain products. In this connection, the EU is ready to take into account potential U.S. sensitivities for certain automotive products.”
The Commission also sent member states a draft mandate seeking the authority to negotiate an international agreement on conformity assessments. A mandate is needed to allow institutions not based in the EU to certify that products comply with relevant EU legislation, Malmström said. “Negotiators would look at streamlining processes to reduce costs, simplifying trade, while upholding high levels of protection,” she said.

Standard-setting rules were a divisive issue in the TTIP negotiations. EU law recognizes three standard-setting groups: CEN, CENELEC and the European Telecommunications Standards Institute. CEN and CENELEC pushed back against a framework that would allow for the mutual recognition of standards in part because the groups feared it would undermine the current system of crafting a “single standard,” leading to a fragmentation of the single market, according to a paper the groups published in June 2015.

Malmström also said the U.S. and EU were working on voluntary regulatory cooperation in a number of areas including medical devices, pharmaceuticals and cybersecurity. -- Brett Fortnam (bfortnam@iwpnews.com)

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