Trump’s next trade fight could be with Europe

Ana Swanson and Jack Ewing, The New York Times

Posted at Jan 17 2020 08:51 AM

US President Donald Trump speaks during an event to announce new guidance on constitutional prayer in public schools inside the Oval Office at the White House in Washington, US, Jan. 16, 2020. Tom Brenner, Reuters

WASHINGTON — European officials arrived in Washington this week touting a new mantra for the trans-Atlantic trading relationship: reset, refresh, recalibrate.

But when it comes to dealing with the Trump administration, it appears that the new European Union government, even more than its predecessor, may be gearing up for a fight.

In remarks in Washington on Thursday morning, Phil Hogan, the new European trade commissioner, gave a frank assessment of an important trading relationship that had grown troubled on many fronts.

Hogan vowed to “robustly defend” European interests as he justified the European position on trade spats with the United States over airplane subsidies, digital taxes and the World Trade Organization. He criticized US officials for inaccurately claiming that trade between the United States and European countries was unbalanced, and said that the administration’s aggressive use of tariffs against trading partners was “hardly a sensible approach.”

In a discussion with reporters Thursday afternoon, Hogan struck a more positive tone. He said that his conversations with US officials had explored the possibility of an agreement that could lower some tariffs and potentially pare back some of the health and sanitary standards that block agricultural products from each others’ markets.

The remarks, coming a day after President Donald Trump officially paused his trade war with China, could presage the next big battle between the United States and a key trading partner.

On Wednesday, Trump signed a trade deal with China, and Thursday his revised trade pact with Canada and Mexico passed the Senate, clearing the final hurdle before Trump can sign it into law.

But with Europe, the trade fight is far from resolved. Hogan, an Irishman and former farmer known for his blunt speech and imposing stature, arrived for his first official visit in Washington with a long list of complaints about US policies.

Officials in Brussels are angry that the Trump administration continues to threaten punishing tariffs on European cars on top of levies on steel and aluminum that have been in place for nearly two years.

They are enraged that the United States has effectively paralyzed the World Trade Organization by refusing to sign off on new appointees to a crucial appeals panel. Without the panel, there is no way to enforce international trade rules and officially resolve disputes between members.

The two governments also remain at odds over plans by France, a European Union member, to tax US technology companies, and what each side believes are unfair subsidies that the other offers to an aircraft manufacturer, Airbus in Europe and Boeing in the United States.

“I can assure you we will be no shrinking violets,” Hogan said Thursday.

Hogan’s four-day visit got off to a promising start Tuesday after he joined Robert Lighthizer, the US trade representative, and their Japanese counterpart in signing an agreement to try to rein in what they said were unfair trade practices by China.

But his comments Thursday morning, at an event hosted by the Center for Strategic and International Studies, a Washington think tank, suggested that deep tensions remained. Hogan, who became the European Union’s trade commissioner in December, appeared to be delivering on expectations that he would deploy his trademark bluntness to meet the Trump administration on its own terms.

“No other market is as free and open for US businesses as the EU. Where else are you as welcome?” Hogan said. “I might add I am coming under pressure to defend this level of openness given that our European businesses can be hit with unjustified tariffs and restrictions at a moment’s notice.”

He also quipped that Trump was guilty of “gloating” and accused him of reneging on an agreement that the United States and the European Union reached in July 2018 to negotiate a trade deal that excluded agriculture. Trump administration officials subsequently realized that a deal that did not address farm goods would meet opposition in Congress, and refused to proceed on those terms.

Hogan told reporters that he had been discussing various situations to overcome that impasse and suggested that the Americans and Europeans might consider the kind of “mini package” that the US had negotiated with Japan and other countries. Instead of more broadly opening up agricultural markets, such a deal might focus on specific standards that U.S. farmers often complain block their goods from European markets.

Such an outcome would be a positive step forward for a strained relationship. Trump has accused Europe of unfair trade practices, at times saying they are “worse” than China’s. Administration officials privately accuse their European counterparts of being out-of-touch bureaucrats who would meddle in US sovereignty and impede Trump’s ability to keep his promises to his voters on trade.

And they say that the WTO, an outgrowth of Europe’s zealous faith in multilateralism, has failed to confront the world’s biggest economic challenges, like competition from China that has cost US factory jobs.

One big area of contention for Trump and his advisers is the fact that Europe ships more goods to the United States than it purchases in return — $169 billion more in 2018, according to the Office of the United States Trade Representative. They see trade deficits as a sign of failure in trading relationships, though most economists disagree.

In an interview with the Fox Business Network in December, Lighthizer said the United States had a “very unbalanced” relationship with the European Union on trade, and that reducing the trade deficit with Europe was “something the president cares about.”

Hogan dismissed that argument in his remarks Wednesday. He pointed out that the US economy was mostly powered by services, like health care, finance and technology, rather than goods, and that the United States ran a surplus with Europe in services, supporting jobs and wealth.

Hogan also said Europe may bring a case to the WTO about the new deal between the United States and China if it determines that it violates global trading rules.

He did not limit his barbs to the United States. He also dismissed the claims by Boris Johnson, the British prime minister, that the United Kingdom, which is in the process of separating from the European Union, would reach a comprehensive trade deal with Europe this year. Such an outcome, he said, was “just not possible.”

The speech followed a series of meetings Tuesday and Wednesday with Trump administration officials and lawmakers on Capitol Hill, including Rep. Richard E. Neal, D-Mass., who leads the House Ways and Means Committee.

Hogan called the meetings “productive,” and said Europe stood ready to discuss lowering barriers to trade, and intensifying its cooperation with the United States on technology, telecom network security and investment screening.

“The choice above all, is this: We either cooperate and shape the response to these challenges together, or these challenges will shape, divide and diminish us,” he said.

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