Odds of settling U.S.-EU trade rifts? Hope may outrun progress

WASHINGTON —
U.S. President Joe Biden has vowed to mend America’s trade relations with its European allies, which were stretched to the breaking point by President Donald Trump’s mercurial behaviour, combative policies and aversion to multinational alliances.

Yet when he meets Tuesday with European Union leaders in Brussels, Biden may find that making up is hard to do. The prospect of forging an accord to resolve their differences — and perhaps form a united front against an increasingly confrontational China — may be stymied by European skepticism.

Sounding a sour note about Biden’s intentions, Valdis Dombrovskis, a Latvian political leader who serves as the European Union’s trade chief, said in speech last week that the time had come “for the U.S. to walk the talk.”

Dombrovskis was referring in part to Trump’s 2018 decision to impose import taxes on foreign steel and aluminum — a decision that left European leaders furious and triggered retaliatory steps against the United States. Biden has been slow to take up the possibility of dropping the tariffs, which Trump had imposed on the basis of “national security.”

Asked about the tariffs during a news conference Sunday as he wrapped up his time at the Group of Seven summit in the U.K., Biden pleaded for patience with his young administration, saying, “A hundred and twenty days. Give me a break. Need time.”

And with trade tensions still shading the trans-Atlantic relationship, the EU may also prove reluctant to join a U.S.-led effort to confront China over its provocative trade policies.

Then there’s a longstanding dispute over how much of a government subsidy each side unfairly provides for its aircraft manufacturing giant — Boeing in the United States and Airbus in the EU.

“This has been going on for 17 years,” says Cecilia Malmstrom, a veteran of trans-Atlantic battles as the European trade commissioner from 2014 to 2019.

All that said, U.S.-EU relations are still certain to be much friendlier than they were under Trump, who regularly accused the Europeans of shirking their responsibility to pay for their own defence through NATO and of exploiting what he called unfair trade deals to sell far more products to the United States than they buy.

In a goodwill gesture in March, the Biden administration and the EU did agree to suspend the tariffs they had imposed on each other in the Airbus-Boeing battle. Several news outlets have reported that U.S. and EU diplomats are working on a draft communique that would call for the Boeing-Airbus dispute to be resolved by July 11 and for the U.S. steel and aluminum tariffs — and the EU’s retaliatory sanctions — to be lifted by Dec. 1.

The Biden administration also announced Friday that Commerce Secretary Gina Raimondo would be joining the U.S. delegation; her department administers the steel and aluminum tariffs.

Kelly Ann Shaw, a former Trump administration trade official who is now a partner at the law firm Hogan Lovells, suggested that the EU and U.S. are eager to move past their tariff battles “so they can move on and tackle some 21st century challenges, not the least of which is China.”

Last week, though, Biden’s national security advisor, Jake Sullivan, sounded noncommittal in speaking with reporters on Air Force One.

“There has been good progress in those negotiations,” Sullivan said of the Boeing-Airbus dispute. “But I’m making no promises about what might happen.”

Regarding the U.S. steel and aluminum tariffs, Sullivan noted that the EU agreed last month to suspend plans to escalate retaliatory tariffs on U.S. products — a concession meant to ease tensions and encourage further negotiations. But he added: “That’s going to take some time to work out.”

Asked specifically whether the United States would be rolling back the metals tariffs, Sullivan shook his head.

The steel and aluminum dispute is an especially sensitive one. In moving to tax imported metals, Trump dusted off a little-used weapon in U.S. trade policy to justify the tariffs: He declared the foreign metals to be a threat to U.S. national security — a decision that startled and outraged Europeans and other longstanding American allies.

“Almost all the EU members were NATO members,” said Malmstrom, now a senior fellow at the Peterson Institute for International Economics. “How could we be a national security threat? It was offensive.”

Malmstrom said she was surprised that Biden hasn’t already dropped the tariffs and hopes he will do so at the summit Tuesday.

“Maybe he’s saving this as a gift,” she said.

Complicating the political calculus for Biden is that U.S. labor unions and steel and aluminum producers — some of them concentrated in states important to Democratic election prospects — want to maintain the tariffs on the imported metals to help keep prices up. A key reason is that China, which churns out more than half the world’s steel, has contributed to an oversupply that has otherwise kept global prices down.

Demonstrating a united U.S.-EU challenge to China’s aggressive policies could strengthen the trans-Atlantic negotiating leverage. But Malmstrom said she is skeptical about whether the EU is eager to join the United States to face up to China and force a reckoning over its trade practices.

The Trump administration’s imposition of tariffs on $360 billion of Chinese goods came against the backdrop of a roiling conflict over the predatory tactics that China is widely accused of deploying to try to supplant America’s global technological dominance. Many trade experts say Beijing has coerced American companies to hand over trade secrets as the price of access to its market, forced U.S. businesses to license technology in China on unfavorable terms, used state funds to buy up American technology and committed outright theft.

Critics, including Biden, had lambasted Trump for alienating would-be allies like the EU instead of enlisting them to help challenge Beijing. For now, though, Biden hasn’t called off Trump’s trade war against China.

Malmstrom noted that among the EU’s 27 member countries, “there is no full unanimity on how to deal with China.” She suggested that the EU might go along with the United States on specific measures — perhaps cracking down on Beijing’s subsidies to its own companies, for example — but still stop short of joining the United States in any wide-ranging confrontation with China.

“The EU will not just sign up to a U.S. agenda on the bottom line,” she said. “The EU is not in trade war mode against anyone.”

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Associated Press writer Aamer Madhani in Carbis Bay, England, contributed to this report