As Europe braces for the outcome of the United States elections, the future of EU-US trade relations hangs in the balance. Pragmatism was the battle cry at Euractiv’s policy discussion with expert speakers, including the European Commission’s Matthias Jorgensen and the European Parliament’s Brend Lange.
Supported by VDMA, the Machinery and Equipment Manufacturers Association, the discussion brought together key stakeholders to discuss the evolving dynamics of this crucial transatlantic relationship.
Shifting Political Landscape
Brian Maguire, moderating the programme from Washington, noted that with elections on both sides of the Atlantic in 2024, there are risks of a substantially altered transatlantic dynamic.
The Trade and Technology Council (TTC), launched in 2021, for example, which aims to revitalise transatlantic cooperation through coordinated approaches to key global trade, economic, and technology issues, may not survive a new Trump administration, he said.
Economic stakes, strategic interests
Matthias Jorgensen, Head of Unit USA and Canada, DG TRADE, European Commission, underscored the importance of the EU-US trade relationship, describing it as “the most important in the world,” with a bilateral investment relationship exceeding €5 trillion. He stressed the need to manage potential conflicts and build on the achievements of the TTC to meet new challenges.
Tiffany Smith, Vice President for Global Trade Policy at the National Foreign Trade Council, echoed this sentiment, highlighting the bipartisan consensus in the US on trade priorities, particularly regarding competition with China. “Trade policy is going to be driven by a focus on competition with China and the greater use of industrial policy to boost domestic production, which means at least some degree of continued and potentially expanded tariffs,” she stated.
Domestic demands
Bernd Lange, Chair of the European Parliament’s Committee on International Trade (INTA), provided a comprehensive analysis of the current and future dynamics between the two economic giants.
Lange emphasised the shift in US trade policy, noting that in “the United States, both parties, have left the Washington Consensus.” He highlighted the irony that Washington itself has moved away from the very principles it once championed, focusing more on domestic policies, which he termed as the “homeland economy.”
Lange acknowledged the moderate approach of the Biden-Harris administration but expressed concerns about ongoing conflicts, particularly in areas like steel tariffs.
He warned that a potential return of Donald Trump to the presidency could exacerbate these issues, citing Trump’s recent comments about imposing additional tariffs on European products. Lange stated, “We expect to have serious conflicts in the future regarding our trade and economic relations.”
The discussion also touched on the broader implications of these trade policies, including the role of China. Lange pointed out that while the US aims to protect its market from Chinese products, the EU seeks an open market under fair conditions. He stressed the importance of a level playing field, supported by the EU’s robust toolbox of anti-dumping and anti-subsidy regulations.
Renata Zilli, a researcher at the European Centre for International Political Economy (ECIPE), expressed hope for future potential cooperation, not least in services. Services, she said, are often less visible and not “so politically salient, but there’s a lot of regulation that also needs to be harmonised.”
Industry concerns
Bertram Kawlath, President of VDMA, provided a critical industry perspective, noting the significant role of the US as a market for German machinery and equipment.
“Our export volume to the US reached almost €28 billion in 2023, representing 13.5% of our total export volume,” he reported. Kawlath expressed concerns about the trend towards protectionism in US trade policy, which could pose risks to this vital economic relationship.
Kawlath added: “(…) the United States is also our largest foreign investment location and continues to attract new investment (…) VDMA estimates that our sector is responsible for at least 100,000 well-paid jobs on US soil. And that about one-quarter of our members operated subsidiary companies there, as does my own company.”
Renata Zilli emphasised the potential economic impacts of proposed trade measures by the US. She addressed the need for a differentiated approach to international trade, considering the shifting macroeconomic, policy, and political dimensions.
Panellists discussed the potential for trade conflicts, particularly in light of differing approaches to China. Jorgensen highlighted the EU’s preference for an open market under fair conditions, contrasting with the US’s more protectionist stance. “We have a huge toolbox, the anti-dumping, anti-subsidies regulation… the clear target is to have a level playing field,” he explained.
Smith noted the challenges posed by the Biden-Harris Inflation Reduction Act (IRA) and its discriminatory elements, which have strained transatlantic trade relations. However, she also pointed out opportunities for collaboration, particularly in areas like climate change and technology.
SMEs and innovation
Bernd Lange also addressed the need for innovation and stability within the EU to maintain competitiveness. He argued that the focus should be on creating an environment conducive to innovation rather than merely responding to US policies. This includes improving coherence in legislation and ensuring necessary resources for processes like customs.
In the context of innovation, financing and Europe’s capacity to scale up businesses, a significant portion of the discussion focused on the impact of trade policies on small and medium-sized enterprises (SMEs).
Kawlath highlighted the challenges SMEs face due to regulatory burdens and the need for mutual recognition of standards to facilitate trade. “Mutual agreement on standards would be so much easier… everything I say for European companies goes for SMEs in the United States as well,” he argued.
The panellists each emphasised the importance of innovation and competitiveness. Jorgensen pointed to the need for the EU to improve its internal market and capital union to engage effectively with global trade partners. “Competitiveness homework is really key,” he said.
Reiterating the importance of maintaining strong EU-US trade relations amidst ongoing political uncertainties. Smith summed up the sentiment, stating, “The US and the EU aligned and working together in this competition are going to be much more successful than if we’re scuffling back and forth with one another.”
As the world watches the electoral college seats add up, Europe will hold its breath as democratic ballast is cast off or fortified. As a new America emerges, the new administration will bring with it not just new policies but new personalities.
The panel consensus was that the Biden-Harris working relationship with Europe was amiable, if not always agreeable. A Trump administration will not differ drastically from the Democrats on every issue, but a change of personnel will likely bring a more demanding and less conciliatory negotiation style.
[By Brian Maguire | Euractiv’s Advocacy Lab ]