New EU Trade Chief Tries to Avert Trade War With U.S.

Date : 01/14/2020 @ 9:14PM
Source : Dow Jones News

New EU Trade Chief Tries to Avert Trade War With U.S.

By Emre Peker in Brussels and Joshua Zumbrun in Washington 

The European Union's top trade official is trying to head off a trans-Atlantic trade war with offers of cooperation, as the White House weighs whether to impose new tariffs.

Hanging over Phil Hogan's first U.S. visit since taking office last month is a widening European trade surplus and threats from President Trump, who says the EU is "taking advantage" of the U.S. and is worse than China on trade issues. Mr. Hogan hasn't signaled any new approach from his predecessor to resolve the impasse, despite resurgent commercial tensions.

"We have a challenging relationship with the U.S.," Mr. Hogan said ahead of his visit, who met with U.S. Trade Rep. Robert Lighthizer on Tuesday and will also talk with Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and members of Congress.

Washington is threatening to slap levies on $2.4 billion of French goods over a digital tax that Paris adopted and the Trump administration says unfairly targets U.S. firms. The U.S. has cleared its procedural hurdles to act as soon as Wednesday but has signaled it will hold off as Paris and Washington try to resolve the issue by next week when they meet on the sidelines of the World Economic Forum in Davos.

A previous deal between Mr. Trump and French President Emmanuel Macron unraveled. The EU has vowed to react and other members of the bloc, including Italy, are following France's lead on taxing large tech companies.

The USTR is separately considering expanding tariffs -- first imposed in October -- on $7.5 billion worth of annual imports from the EU. After clearing a procedural step on Monday, the U.S. can take action at any point. The initial action followed a WTO decision permitting the U.S. to impose duties to recoup losses from the EU subsidies of airplane maker Airbus SE. A countervailing European case at the WTO, expected to conclude this year, would let the EU impose similar tariffs on the U.S. for American subsidies to Boeing Co.

The White House has also not ruled out imposing duties on some $60 billion worth of annual European car and auto-parts exports after Mr. Trump let lapse a deadline to do so. The EU has vowed again to retaliate -- which would amount to levies on about $100 billion of commerce, or roughly 10% of annual trans-Atlantic goods trade.

The administration is focused on EU exports. "You can't get the global trade deficit down without getting the trade deficit down with Europe," Mr. Lighthizer told Fox Business in December.

Rather than directly address the issues stoking U.S. anger, Mr. Hogan is focusing on how the two economies can together tackle Beijing's market-distorting trade policies. But Mr. Trump's administration has largely opted to tackle China alone, with plans Wednesday to sign a first-phase trade deal with Beijing.

Efforts to boost trans-Atlantic trade have fallen short since a July 2018 White House deal to deepen economic links, roll back Mr. Trump's steel and aluminum tariffs, and remove EU retaliation. Talks to bolster the World Trade Organization and counter Chinese subsidies have yet to deliver concrete results, while bilateral trade conflicts have multiplied.

"The relationship has been rough for the last few years," said Marjorie Chorlins, senior vice president for European affairs at the U.S. Chamber of Commerce. "I think both sides want to make an effort to get things back on track, but there's certainly a risk it gets tougher before it gets better."

The EU is seeking to reset U.S. ties by leveraging a leadership change following the 2019 European elections. The new European Commission, the EU's executive, took office Dec. 1.

"We expect this engagement to be a steppingstone in an effort to refresh and invigorate a positive trans-Atlantic trade relationship," a Commission spokesman said of Mr. Hogan's trip.

The trade chief joined Mr. Lighthizer and Japanese Trade Minister Hiroshi Kajiyama in agreeing on Tuesday to ban four types of subsidies under WTO rules. Their proposal follows more than two years of talks and covers unlimited guarantees, subsidies to ailing businesses, support to zombie firms in sectors with excess capacity, and debt write-offs.

Updating WTO rules, however, needs broad support from the organization's members, including China -- one of the biggest global providers of subsidies targeted by the revamp.

"The situation in WTO at the moment makes it very unlikely that we'll get to a multilateral outcome soon," an EU official said Tuesday.

Amid slow progress on addressing shared global challenges, such as checking China's state-capitalism and removing trade barriers, European and U.S. trade negotiators have struggled to find common ground for rebuilding bilateral relations.

Talks for an EU-U.S. trade deal never started due to disagreements over agriculture, which Washington wants to include in talks and Brussels refuses to discuss. Pacts on industrial regulations advanced but recently bogged down. And nascent efforts to resolve the long-running WTO aircraft dispute through negotiations remain far from success.

"No low-hanging fruit, I would say, to be expected," said Sabine Weyand, a top EU trade official, after meeting her U.S. counterparts in December.

The lack of quick wins, which both sides had targeted, is stoking concern among some EU officials as Mr. Trump inks his initial trade deal with China. Beijing's commitments to boost imports from the U.S. is bad news for Europe, an EU diplomat said.

European officials say Brussels needs to convince the Trump administration that the EU is a valuable partner. That is a hard task as the president pursues unilateral actions aimed at reducing U.S. trade imbalances. The U.S. trade deficit with the EU has been deteriorating for a decade and widened to another record last year.

"Even if you change the people, the assignment is the same. The situation hasn't changed," the EU diplomat said. "On underlying issues we still have divergent views and quite a lot of distance to cover."

Write to Emre Peker at emre.peker@wsj.com

 

(END) Dow Jones Newswires

January 14, 2020 15:59 ET (20:59 GMT)

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