Trumps and Juncker’s pact has many drawbacks
The US and EU have come surprisingly close in the trade dispute. Nevertheless, the meeting between Trump and Juncker leaves crucial questions unanswered.
Washington with this surprising turnaround in the commercial dispute, nobody expected. As White House staff set up two lecterns and flags in the Rose Garden on Wednesday afternoon, there were irritated looks. Had not it just been said that no special events were to be expected? Had not EU Commission President Jean-Claude Juncker and US President Donald Trump lowered expectations before their meeting?
It was different then. Within the last hour of the mini-summit, Trump suddenly changed his mind in the transatlantic trade conflict, sources in the EU Commission said.
The US president changed his approach, accepting real talks with a clear framework at the negotiating table rather than stubbornly pulling up the next trade barrier, as in the past few months. Evidently, Trump did not want to leave the meeting with completely empty hands. And Juncker had an offer in the luggage, which provided a basis for further discussions.
However, the memorandum of understanding agreed in Washington has little in common with what Trump and Juncker conjured in the Rose Garden: nothing less than a “new phase in the transatlantic relationship.”
The explanation reads nice but is kept very vague in detail. In addition, the planned plans pose new challenges for the EU and the discussions are likely to be complicated.
Why Juncker’s visit to the White House is still no reason to breathe easy: the overview.
1. The result is an approximation, not a deal
Juncker said in Washington: “Today I had the intention to make a deal. And we made a deal today. “That’s not true. The result of the meeting is a letter of intent, not an agreement. Juncker and EU Trade Commissioner Cecilia Malmström, who traveled to Washington, gave the EU first and foremost time. A high-profile, American-European working group (according to Trump “very intelligent people”) will now sit down at the negotiating table. It should talk about the areas in which transatlantic trade barriers can be reduced.
We remember: something similar was already considered, in the context of the ruptured free trade agreement TTIP. The upcoming talks should be limited to industrial goods, as well as the possible alignment of norms and standards. The tariff rates for car imports diverging on both sides of the Atlantic are excluded from the negotiations, even areas such as agriculture or culture are not included. In the best case, the result is a kind of “TTIP Light”. A timetable for these discussions does not exist so far. “There is no deadline,” said Juncker following his appearance in the rose garden. There is still no “deal” to read, sign or appeal to.
2. The punitive tariffs remain in force for the time being
The US punitive tariffs on steel and aluminum, which also attack the EU, remain for the time being. In June, the US imposed tariffs of 25 percent (steel) and 10 percent (aluminum). The EU responded with retaliatory tariffs against US products such as Harley motorcycles, bourbon or jeans. These tariffs will not be lifted for the time being.
The transatlantic trade war is not over. Both sides just pressed the pause key. After all, there is the mutual commitment to clear the current punitive tariffs. “We also want to solve tariffs and retaliatory tariffs for steel and aluminum,” the statement said. But when? And under what conditions? That is unclear.
3. Auto duties are suspended, not off the table
The biggest success for Juncker is the commitment of the US, for the time being, to introduce no new punitive tariffs. This readiness scares away for the moment the specter of car tariffs, about which, in particular, German automakers should be very relieved. In the coming weeks, Trump’s Trade Minister Wilbur Ross wanted to produce a report that would have made the introduction of import duties on cars very likely. The pressure is now defused, the option postponed indefinitely.
However, Trump would have time until February 2019 to introduce such tariffs, then the deadline for the process of introducing new trade barriers ends. Until then, much can happen, Trump could renew his threat at any time if the course of negotiations with the EU does not fit into the junk.
4. Soybeans and liquefied gas to solve the conflict? Hardly likely.
Juncker has promised Trump in Washington that the EU will decrease more US products in the future. Specifically, LPG LNG should be exported to the EU in higher quantities. “The European Union wants to import more liquefied natural gas (LNG) from the US to diversify its energy supply,” the statement said.
Juncker said in Washington: The EU will build new LNG terminals. But do individual EU states even have any interest in this expensive major project? Will the EU speak with one voice on this issue? And what does the opening of the energy market to the USA mean for gas supplies from Russia, especially for the construction of the controversial Nordstream 2 pipeline? All open questions that could lead to conflicts in the negotiations.
Even ships full of soybeans promise no quick fix. Juncker emphasized that “the EU can import more soybeans from the US and that will happen”. Trump triumphed: “The EU will almost immediately begin to buy a lot of soybeans, especially from our midwestern farmers.” But in the explanation, the intent sounds much more subdued. “We will also work to increase the trade in services, chemicals, medicines, medical products and soybeans,” it says. So you still have to agree on quantities and periods, and there is a threat of a new EU debate on Gensoja.
5. Trump still has the upper hand
The US president can sell the summit to his followers as proof that his principle of one-sided pressure is working. After all, the EU has made some concrete concessions, while the US government has only frozen further punitive tariffs. But Juncker has achieved a lot. He has de-escalated the situation in Washington, which is remarkable given the tense relationship for months.
At the Oval Office, he told Trump, “Do not talk about us, talk to us.” A clear swat against Trump, his Twitter tirades against European exports, and his confrontational punitive tariffs. After all, they talked to each other, and Juncker and Trump sat together for more than two hours. The decisive factor, in the end, was probably the EU’s promise in the area of soybeans.
US farmers are very worried about the consequences of the tariff spiral and feared for their existence. Trump, who wants to counter even with billion-dollar emergency aid, wants to calm his followers in rural areas. But the US President’s impulsive reaction once again means that he can always renounce all intentions.