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Friday, May 18, 2018

Between French rotundity and German caution

Por Nina

Europe hurries the last attempt to avoid a commercial war with the United States. Two weeks after the truce that President Donald Trump granted to steel and aluminum from the European Union, the European heads of state and government declare their willingness to improve exchanges if Washington buries forever the threat of tariffs. Brussels agrees to negotiate four chapters, including an improvement in the access of American cars to the European market. In return, it demands that the companies of the community club be eligible for public procurement in the United States. The EU has found a middle ground that attracts the adhesion of all its members.

Europe considers that the commercial relationship between the two blocs, the most intense in the world, can be improved and is willing to talk about specific aspects. There is only one inexorable precondition: the withdrawal of the threat of tariffs. "If the United States wants to treat Europe as an ally, we are willing to talk about several things; if not, the EU will defend its interests ", has summarized the French president, Emmanuel Macron, at the end of the summit of the community club with the partners of the Balkans held in Sofia.

The European Commission, with exclusive competences on commercial policy in the EU, presented at the leaders’ dinner last Wednesday four elements to discuss. The most attractive - also the most difficult to agree - is to give the United States some advantages in exporting industrial goods (including automobiles, on which Trump has focused its demands). Washington asks to reduce the tariff that the EU applies to American cars from the current 10% to 2.5%. In this way, the penalty would be comparable to that borne by European vehicles - very competitive - that are sold on the other side of the Atlantic. Brussels would be willing to grant it, in exchange for an opening of the Trump Administration in the most attractive section for Europe: that their companies can overcome US protectionism and go there to some public tenders.

It is more than doubtful that Washington will accede to a condition that could not be achieved in the negotiation of the ambitious trade treaty that Brussels tested with the Administration of Barack Obama, the so-called TTIP. But getting into this process can at least remove the immediate threat of tariffs for Europe. With more prudence than Macron - an eventual trade war would hurt Germany more than France - Chancellor Angela Merkel stressed: "We have a common position. We want a permanent exemption from tariffs and then we will be willing to talk about how to reduce trade barriers reciprocally."

Beyond the industrial section, the EU proposes to increase the volume of liquefied natural gas that the United States exports for a few years, thanks to the development of fracking. These transactions, now very limited by technical barriers, would also allow the EU to reduce the dependence on suppliers such as Russia, which provides almost 40% of the gas that the community club imports. Finally, Brussels offers to agree on improvements in the rules of operation of the World Trade Organization, which displease the United States, and try a regulatory convergence (for example, in the safety of automobiles) that restrains trade barriers.

The big question lies in whether these perspectives will be sufficient for Trump to renounce the commercial war with Europe. The president of the Commission, Jean-Claude Juncker, did not dare to venture. "We will see the reaction of the United States," he simply said. The setbacks since the Republican leader came to power - the last, the nuclear agreement with Iran - are not encouraging. Community sources point out that in this case the interest of the American industry is greater and that this can appease the belligerence of the North American leader. It also helps that the framework proposed on this occasion is less ambitious than that of the TTIP. Even so, the EU risks to suffer a new rudeness on the part of a partner who has stopped behaving as such. "We must make ourselves respected," cried the Belgian prime minister, Charles Michel, one of the most belligerent rulers with the American swings.

The European Trade Commissioner, Cecilia Malmström, addressed these issues with the US Secretary of that portfolio, Wilbur Ross, last Tuesday. And they will probably do it again before the June 1 ultimatum expires. The interests at stake are huge. The United States is the main destination for European exports (16.9% of the total) and the second country that sells the most to the EU (13.8%), according to data from 2017. But ultimately, leaders are aware that the final decision only depends on Trump. "This is today the main problem of transatlantic relations: they are unpredictable", concluded the President of the European Council, Donald Tusk.