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ROME — Europe is unenthusiastic about the terms of Saturday’s trade truce with the US, but EU officials eventually admitted it was worth accepting Washington’s terms to shift focus to the common enemy: China.
The ceasefire is intended to end the bitter trade war that former US President Donald Trump ignited in 2018 by imposing high tariffs on EU steel and aluminum because they posed a threat to the US national economy. safety. While Saturday’s deal lifts those tariffs, Brussels is still angry that the legal basis for Trump’s duties — the alleged European security threat to America — is still in place and used to impose restrictions on EU metal exports.
The clash over metals was one of the darkest clouds to loom over transatlantic relations in recent years and one of the main reasons for bringing it to an end has been a growing desire among European and US officials to work together to combat of what they see as massive overcapacity in China’s steel mills fueled by government generosity.
Saturday’s deal will set up a “global sustainable steel and aluminum scheme” involving “like-minded” countries. That is diplomatic code to maneuver against Beijing’s overcapacity. Brussels and Washington also pledged to work together to produce steel in a more environmentally friendly way.
US President Joe Biden emphasized that the steel truce fits his vision of a global front against Beijing. He labeled the deal as part of steps to “prove to the world that democracies — democracies — tackle tough problems and provide solid solutions. The EU and the US will remain the best of friends and partners.”
“These arrangements will … restrict access to our markets for dirty steel from countries like China and curb countries dumping steel into our markets,” Biden added.
In a similar vein, EU Trade Commissioner Valdis Dombrovskis said the plan was to focus on “how to limit market access for non-participants who do not meet … the conditions for market orientation, or who do not meet the standards for low carbon intensity.” Beijing knows very well who he is talking about.
However, there is much in the deal that will leave a bitter taste in European mouths.
The EU had originally hoped that Biden would simply abolish Trump-era tariffs and withdraw from Trump’s legal basis for action against Europe: Section 232 of the Trade Expansion Act of 1962. Referring to Section 232, Europe is considered a threat to US national security.
Biden, however, found himself paralyzed by his own need to sideline major steelmakers, and his deal with Europe is not the full-blown squabble Europeans would have liked.
The deal is that – in exchange for removing tariffs – the EU can export an annual quota of 4.4 million tons that is not subject to national security obligations. About 1.1 million tons of this total comes from a clause that is only valid for the next two years. Exports above 4.4 million tons fall under the existing 25 percent tax from the Trump era.
In practice, this is an immediate relief for the European steel industry. In the years before the trade war and the coronavirus pandemic, EU exports generally remained below this level. Data from Eurofer, the European steel lobby, showed that EU exports to the US peaked at 4.1 million tonnes in 2014. (Of course, Europeans will eventually pay high tariffs again if EU exports exceed quota limit in the post-pandemic recovery.)
The European Commission is bitter that it has to accept any kind of quota, which it considers illegal because it is still based on the hated Section 232.
“For us this is [the deal] does not constitute the final destination,” Dombrovskis said on Sunday. “Indeed, the destination should be the complete abolition of the 232 tariffs,” he added.
This view was shared by the US Chamber of Commerce, which said in a statement that Washington should drop the “baseless charge that metal imports from the UK, Japan, Korea and other close allies pose a threat to our national security”.
Lipstick on the pig
In essence, the EU’s objection is legitimate, as the two sides disagree on the compatibility of the Steel Agreement with WTO rules. The US failed to get the EU to completely withdraw its case against the legality of the tariffs, but Brussels agreed to “suspend” the case. The EU also issued a separate statement to reinforce its point that US measures are incompatible with global rules.
An EU official noted that a Commission representative last week described the impending diplomatic deal as a “pig that needs all the lipstick in the world”. Another Western diplomat, however, took a more pragmatic note, saying, “It’s a pig, but it’s better than a constant distraction fight. On 232, the EU agreed to quotas that they hate, but … they negotiated a large quota that also allows for growth.”
Looking ahead, however, the two-year period for at least part of the deal adds uncertainty. New negotiations will have to take place close to the next US presidential election and the change of leadership of the European Commission. Both events will take place in 2024.
Barbara Moens contributed reporting.
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