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ROME – Europe is not enthusiastic about the terms of the ceasefire Saturday trade truce with the US, but EU officials have finally acknowledged that it is worth accepting Washington’s terms to focus on a common enemy: China.
The deal aims to end the bitter trade war launched by former US President Donald Trump in 2018 by imposing high tariffs on steel and aluminum in the EU on the grounds that they threaten U.S. national security. While Saturday’s deal eliminates those tariffs, Brussels remains angry because the legal basis for Trump’s duties – an alleged threat to European security to America – still remains in place and is being used to restrict exports of metals from the EU.
The clash on metals has been one of the darkest clouds leaning over transatlantic relations in recent years, and one of the main reasons for its end was the growing desire of European and US officials to work together to combat what they see as huge overcapacity in Chinese steel mills. , encouraged by government generosity.
Saturday’s deal will establish a “global deal on sustainable steel and aluminum” that includes “like-minded” nations. It is a diplomatic code for maneuvering against Beijing’s overcapacity. Brussels and Washington have also pledged to work together to produce steel in a more environmentally friendly way.
U.S. President Joe Biden stressed that the steel truce coincides with his vision of a global front against Beijing. He described the agreement as part of moves to “prove to the world that democracies – democracies – tackle difficult problems and provide good solutions. The EU and the US will continue to be closest friends and partners.”
“These arrangements will … restrict access to our markets for dirty steel from countries like China and counterpart countries that dump steel into our markets,” Biden added.
Similarly, European Trade Commissioner Valdis Dombrovskis said the plan focuses on “how to restrict market access for non-participants who do not meet … market-orientation conditions or who do not meet low-carbon standards.” Beijing knows very well who it is talking about.
Bitter tablet
However, there is a lot left in the deal bitter taste in European mouths.
The EU originally hoped that Biden would simply remove tariffs from the Trump era and withdraw from Trump’s legal basis for action against Europe: section 232 of the Trade Proliferation Act 1962. The reference to section 232 identifies Europe as a threat to America’s national security.
Biden, however, has found himself in distress over his own need to retain central voters for steel production, and his deal with Europe is not the perfect return that Europeans wanted.
The agreement is that the EU will be able to export in exchange for the abolition of customs duties annual quota 4.4 million tonnes not subject to national security duties. About 1.1 million tonnes of this total amount comes from a clause that will only be valid for the next two years. Exports of more than 4.4 million tonnes will be subject to the existing 25% duty 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 succumbed to this level. Data from Eurofer, the European steel lobby, showed that EU exports to the US peaked in 2014 at 4.1 million tonnes. (Of course, Europeans will pay high tariffs again if EU exports exceed the quota limit in a post-pandemic recovery.)
The European Commission is bitter because it has to accept any form of quota that it considers illegal because it is still based on the hated heading 232.
“It simply came to our notice then [the deal] it does not represent a final destination, “Dombrovskis said on Sunday.” The destination should be the complete abolition of 232 tariffs, “he added.
This position was also reiterated by the US Chamber of Commerce, which said in a statement that Washington should drop “unfounded allegations that imports of metals from the UK, Japan, Korea and other close allies pose a threat to our national security.”
Makeup on a pig
In essence, the EU’s objection is legitimate, as both sides are opposed to the compatibility of the steel contract with WTO rules. The US has failed to get the EU to fully withdraw its complaint against the legality of customs duties, but Brussels has agreed to “stop” the case. The EU also issued a separate statement to stress that US action is incompatible with global rules.
One EU official noted that a Commission representative last week described the forthcoming deal to diplomats as “a pig that needs all the lipstick in the world”. Another Western diplomat, however, expressed a more pragmatic note, saying, “It’s a pig, but it’s better than continuing a disruptive fight. At 232, the EU agreed to quotas they hate, but… they negotiated a large quota that also allows for growth.
Looking ahead, however, a two-year period adds uncertainty to at least part of the deal. New negotiations will have to take place just before the next US presidential election and the change of leadership of the European Commission. Both events will take place in 2024.
Barbara Moens contributed to the reporting.
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