EU – US partnership: Refreshing Transatlantic Trade Relations

The EU, the US and Canada share the values of democracy, human rights, and economic and political freedom, and have overlapping foreign policy and security concerns. The EU-Canada Comprehensive Economic and Trade Agreement and Strategic Partnership Agreement entered into force provisionally in 2017. Negotiations on an EU-US Transatlantic Trade and Investment Partnership were halted in 2017. The Council adopted negotiating directives to eliminate industrial tariffs on 15 April 2019.

The Transatlantic Trade and Investment Partnership (TTIP) is a proposed trade agreement between the European Union and the United States, with the aim of promoting trade and multilateral economic growth. According to Karel de Gucht, European Commissioner for Trade between 2010 and 2014, the TTIP is the largest bilateral trade initiative ever negotiated, not only because it involves the two largest economies in the world but also “because of its potential global reach in setting an example for future partners and agreements“.

Negotiations were halted by President Donald Trump, who then initiated a trade conflict with the EU. Trump and the EU declared a truce of sorts in July 2018, resuming talks that appeared similar to TTIP. On 15 April 2019, the negotiations have been declared “obsolete and no longer relevant” by the European Commission.

EU-US foreign policy relations

While the EU and the US do not speak in unison on certain foreign policy issues, they remain each other’s most important and reliable ally. Their foreign policy bonds have endured over many decades, despite shifting political configurations and geostrategic changes on both sides. The two partners have cooperated closely over the years, consulting each other on their international priorities and often working to advance their overlapping interests in multilateral forums.

Transatlantic Trade Battle

However, following the US presidential election of 8 November 2016, many questions and concerns have arisen as regards EU-US foreign policy relations. The EU and the US still cooperate on a number of issues and in several geographical contexts; nevertheless, there has been a change in the US’s attitude towards the EU and the transatlantic alliance since President Donald Trump took office.

This shift can be seen in the strongly divergent views expressed by the US and the EU on key issues (such as climate change, multilateralism and fake news) and by the US administration’s decisions to withdraw from the Joint Comprehensive Plan of Action (JCPOA), block the appointment of WTO Appellate Body judges and impose tariffs on steel and aluminium imports, which will have an impact on the EU.

North Atlantic Treaty Organisation (NATO)

Despite these changes in its relationship with the EU, the US continues to be a reliable security partner for a number of EU Member States, as demonstrated by the cooperation among the North Atlantic Treaty Organisation (NATO) allies. President Trump has focused strongly on the NATO budget, demanding that all allies fulfil their commitment to devote 2% of their GDP towards it.

NEWS update: US and China sign deal to ease trade war

“win-win” deal

EU-US political relations within the Transatlantic Legislators’ Dialogue (TLD) process

Relations between Parliament and the US Congress date back to 1972. In 1999, their relationship was upgraded and institutionalised with the establishment of the Transatlantic Legislators’ Dialogue (TLD). The TLD brings together Members of the European Parliament and members of the US House of Representatives at twice-yearly interparliamentary meetings (IPMs) that alternate between the US and Europe. The 83rd IPM was held in Washington DC in February 2019. A Joint Statement was agreed at the end of the meeting, highlighting the determination of both sides to enhance cooperation in the face of common challenges. Legislators attending these biannual meetings exchange views on key political issues of mutual concern.

While transatlantic views converge in a number of areas, the legislators’ exchanges have also exposed divergences on key political issues. The importance of this transatlantic political dialogue should not be underestimated, particularly given the power wielded by the US Congress, for example in authorising US intervention in global crises and shaping US participation in global governance institutions.

EU-US economic relations

Until 2017, EU-US trade relations were dominated by the negotiation of a Transatlantic Trade and Investment Partnership (TTIP). In comparison to its predecessors, the Trump administration has taken a fundamentally different approach to EU-US trade relations. It has prioritised national interests and sought to rebalance trade deficits with other countries, putting pressure on partners by imposing high tariffs on certain products in order to protect its own industries and gain more market access in partner countries.

The US administration imposed steel and aluminium tariffs on the EU on 1 June 2018 and has threatened to impose tariffs on cars. At the same time, the US is turning away from a multilateral approach within the framework of the World Trade Organisation (WTO). This new attitude has strained US trade relations with the EU and other partners. The EU has filed a complaint with the WTO against the tariffs on steel and aluminium and in return imposed tariffs on US products to rebalance overall EU-US trade.

On 28 March 2019, the WTO Appellate Body published its ruling on Boeing, vindicating the EU’s long-held position that the US has taken no steps to comply with WTO rules as far as support to the company is concerned. On 8 April 2019, the Trump administration intensified pressure on the European Union to end what it termed ‘harmful subsidies’ for the aircraft manufacturer Airbus. It released a list of European goods worth USD 11 billion that could be hit with punitive tariffs in this long-running dispute, creating a negative spiral that would jeopardise a possible bilateral EU-US agreement on mutual tariff reductions. On the EU side, on 15 April 2019 the Council reached an ‘agreement in principle’ on negotiating directives that will authorise the Commission to start tariff negotiations with the US. At its March 2019 part-session, Parliament did not pass a resolution in support of starting trade negotiations.

In spite of the rhetoric, the combined economies of the EU and the US still account for almost 50% of global gross domestic product (GDP) and one third of world trade. In 2017, the EU maintained its position as the US’s largest merchandise trade partner — ahead of China and of Canada, the US’s North American Free Trade Agreement (NAFTA) partner.

The US was the EU’s primary export destination in 2018, absorbing 20.8% of total EU goods exports (compared with China’s 10.7%). The US ranked second among the EU’s import partners, and still supplied 13.5% of the EU’s imported goods. In this respect, the US lagged behind China, which supplied 19.9% of the EU’s total imports, but was ahead of Russia and Switzerland, which supplied 8.5% and 5.5% respectively.

WTO

EU, U.S. and Japan agree on new ways to strengthen global rules on industrial subsidies

In a Joint Statement, representatives of the European Union, the United States and Japan announced their agreement to strengthen existing rules on industrial subsidies and condemned forced technology transfers practices.

Transatlantic Trade Debate

In a meeting held in Washington D.C., the EU, the U.S. and Japan agreed that the current list of subsidies prohibited under the World Trade Organization’s (WTO) rules is insufficient to tackle market and trade distorting subsidisation existing in certain jurisdictions. They concluded therefore that new types of unconditionally prohibited subsidies have to be added to the WTO Agreement on Subsidies and Countervailing Measures. A structural reform of the WTO and levelling the playing field in global trade is a key priority for the EU and the von der Leyen Commission.

This Joint Statement is an important step toward addressing some of the fundamental issues distorting global trade.

Phil Hogan Commissioner for Trade 

The EU, U.S. and Japan also agreed that for particularly harmful types of subsidies, such as excessively large subsidies, the burden of proof should be reversed: the subsidising WTO member must demonstrate that there are no serious negative trade or capacity effects and that there is effective transparency about the subsidy in question. The signatories of the statement also reaffirmed the importance of technology transfers for global trade and investment and discussed possible core rules to be introduced to prevent forced technology transfer practices of third countries.

The Joint Statement also confirmed continued cooperation on a number of key items such as:

• The importance of market oriented conditions
• Reform of the WTO, to include increasing compliance with existing WTO notification obligations
• Pressing advanced WTO members claiming developing country status to undertake full commitments in ongoing and future WTO negotiations
• International rule making and trade related aspects of electronic commerce at the WTO; and
• International forums such as the Global Forum of Steel Excess Capacity and the Governments/Authorities’ Meeting on Semiconductors.
• The Joint Statement is an important step toward resolving some key issues in the lead up to the 12th WTO Ministerial Conference in June 2020 in Nur-Sultan.

Refreshing Transatlantic Trade Relations

The CSIS Scholl Chair is honored to be hosting Mr. Phil Hogan, European Commissioner for Trade, on his first official visit to Washington, DC in his new role. In her Mission Letter to him, European Commission President Ursula von der Leyen tasked Mr. Hogan with creating a level playing field for all, strengthening Europe’s global trade leadership, building sustainable trade in light of climate change, and making trade more transparent.

Join the Scholl Chair debate with Mr. Hogan, refreshing the Transatlantic trading relationship with the new European Commission, and looking to 2020 and beyond in the world of trade. Commissioner for Trade since December 2019, Mr. Hogan of Ireland was previously European Commissioner for Agriculture and Rural Development from 2014-2019.

Center for Strategic and International Studies (CSIS)

Founded in 1962 by David M. Abshire and Admiral Arleigh Burke, CSIS is one of the world’s preeminent international policy institutions focused on defense and security; regional study; and transnational challenges ranging from energy and trade to global development and economic integration. For the past eight years consecutively, CSIS has been named the world’s number one think tank for defense and national security by the University of Pennsylvania’s “Go To Think Tank Index.”

The Center’s over 240 full-time staff and large network of affiliated scholars conduct research and analysis and develop policy initiatives that look to the future and anticipate change. CSIS is regularly called upon by Congress, the executive branch, the media, and others to explain the day’s events and offer recommendations to improve U.S. strategy.

Join the EU-US partnership debate!