EUROPEUM Institute for European Policy

In another series of unfortunate tweets, D. Trump stated that ‘trade wars are good and easy to win’. The latter came after global actors, including the EU, condemned the US decision to put tariffs on imports of steel and aluminum and promptly responded in kind, therefore possibly triggering a WTO dispute. The US tariffs were justified as necessary to protect domestic steel and aluminum sectors from further declining, sectors which earlier in the year were alleged to be impacting national security. Essentially, the tariffs aim to reduce reliance on imports by reviving these sectors domestically.

Commerce Secretary Ross expressed that the EU is part of the influx in the US and the global overcapacity problem, specifically in steel and aluminum. This and the ‘national security’ justification of the tariffs did not sit well with the European side of the Transatlantic Security Community, and rightly so.

 

During these developments, discussions have been ongoing on what actions the EU could take to influence the US decision on tariffs. A ‘trade war’ is not the optimal solution, especially when comparing the situation with the events of 2002 when G. W. Bush imposed a safeguard tariff on imports of steel and the EU reacted with their own import tariffs. To respond to Trump’s tariffs the European Union came up with an elaborate list of American products that it will potentially target. Part B of the list can only be targeted after three years; however, part A, which adds up to €2.8 billion in American products imported to the EU, can be pushed through at any moment, in compliance with the WTO rules. The list showed the EU’s multitasking abilities by giving a political hit to Trump, as products in the list originate from influential electoral states.

 

The US granted the EU, along with Australia, Argentina, Brazil and South Korea, an exemption from the tariffs, which will only last until 1 May. This exemption primarily serves as a deterrent to further EU retaliation. However, as the Commission’s President Juncker said, it is nigh impossible to cover all the needed issues from now to 1 May. Consequently, conclusions of the European Council on 22 March 2018 included a paragraph regarding the US tariffs that started with criticizing their justification on national security reasons and the US shift to protectionism. Justification of the tariffs on national security has been considered implausible for trade experts as well as longtime allies. The Council called for the temporary exemption to be permanent and confirmed their right to respond according to the WTO rules. The conclusion ended with the reassertion of the EU’s commitment to the Transatlantic Relationship as a cornerstone for security and prosperity and supporting dialogue on trade.

 

Despite the commitment to dialogue, is it undisputed that further action in the trade domain will have significant influence on the transatlantic relationship. This opinion was shared by EU trade chief Malmström, who said that the measures will negatively impact the transatlantic relations as well as global markets.

Actors on both sides of the Atlantic have disagreed on a plethora of other issues before, which is normal seeing as they cooperate in a multitude of cultural, political, economic and security dimensions. Regardless of disparities of opinions on other issues, they have been historically interdependent on the economic area. This is exemplified with them being each other’s biggest trading partners as well as the world’s largest economies. Nevertheless, with TTIP negotiations being prolonged and the more recent possibility of a trade war on tariffs, the main strong link of the transatlantic relations may be unreliable. Divergences on trade can become structural factors and bring long time consequences to cooperation. Moreover, in a time where issue linkage is more progressively used in International Relations, trade problems may facilitate a negative spillover effect on the bigger picture of transatlantic cooperation.

Laura Skana

Author :
Print

Leave a Reply