US-EU Trade Negotiations: A Daunting Mission

US-EU trade negotiations

The Trump administration’s trade team has embarked on the extremely challenging task of negotiating a free trade agreement with the European Union. Five years ago, when the Obama administration and Europe tried to conclude the Transatlantic Trade and Investment Partnership (TTIP), talks failed to resolve differences on agriculture, government procurement, and business services. The administration’s recently released ambitious objectives for the United States–European Union negotiations indicate that the goal of a transatlantic trade deal will now be even harder to achieve.

The United States Trade Representative (USTR) has issued objectives parallel to those announced for the United States–Japan Trade Agreement (USJTA) in December. Indeed, if anything, they are more lopsided. Reasons negotiations will be tougher than five years ago lie with the US Section 232 tariffs on steel and aluminum imports—and threatened on auto imports—from the European Union, new US restrictions on inward foreign direct investment, and a US president who favors managed trade with one-sided concessions. Moreover, since Ambassador Robert Lighthizer (backed up by Senate Finance Chairman Chuck Grassley) insists on including agriculture in the current negotiations, which the European Union rejects outright, and since the United States is demanding EU concessions on related agricultural issues—sanitary and phytosanitary measures and geographical indications—the road ahead looks rough. Speaking for the European Union, Commissioner Cecilia Malmstrom demands that the new agreement be confined to industrial products, suggesting a zero-for-zero tariff deal, a proposal not to the liking of President Trump.

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Most chapters in the US-EU negotiating objectives are identical to those for the USJTA. Features of one-way managed trade are sprinkled throughout the US-EU objectives. These include a reduction in the US bilateral trade deficit with the European Union, duty-free market access for US industrial goods but no mention of US tariff liberalization, and removal of EU barriers on US direct investment. At the same time, the Committee on Foreign Investment in the United States would more closely scrutinize inward direct investment, and the objectives would ensure that US firms could sell their products to EU government agencies yet maintain “Buy America” programs, which exclude EU firms. The European Union will not willingly accept one-way concessions, making it unlikely that any transatlantic deal will resemble the USTR’s negotiating objectives.

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