Trade

EUs tough new trade boss seeks reset with Trump

New European Union Trade Commissioner Phil Hogan arrives in Washington this week on what could be an impossible mission — resetting the worlds largest investment and trade relationship after three years of President Donald Trumps trade-rattling tariffs.

The challenge could be the 6-foot-5-inch Irishmans most daunting to date, following tough but successful negotiations on an EU beef deal with the U.S. and a broader trade deal with Japan that took effect last year.

The visit comes as Trump and U.S. Trade Representative Robert Lighthizer are feeling flush from a successful NAFTA renegotiation and a preliminary trade deal with China that will be signed on Wednesday.

Trump sees both agreements as vindication of his get-tough approach to trade negotiations, which included threatening to withdraw from NAFTA and slapping duties on literally hundreds of billions of dollars of Chinese goods.

Now, disputes over Frances new digital services tax and European support for Boeings chief rival, Airbus, give Trump another chance to fire his tariff cannon. And with an impeachment trial looming, new duties on Europe would allow Trump to show the world his presidency is alive, if not completely well.

Against that fraught background, Hogan hopes to persuade Lighthizer to delay any new action that would further disrupt the U.S.-EU relationship.

“Phil Hogan is a serious man, who I think takes his job very seriously and his belief and feeling in the EU is strong,” said former U.S. Agriculture Secretary Tom Vilsack, who sparred with Hogan during unsuccessful talks on the proposed Transatlantic Trade and Investment Partnership pursued by the Obama administration. “He is a tough negotiator, but fair.”

Hogan has said publicly he wants “to reset the relationship between the EU and the U.S., and I think thats the message that he would obviously be conveying privately to Robert Lighthizer,” an EU official said.

But theres considerable frustration in both the administration and Congress over the EUs refusal to negotiate with the U.S. on agriculture. EU farmers enjoy a $10 billion trade surplus with the United States, partly because of the EUs barriers to many U.S. farm products.

The U.S. business community, for its part, is weary of Trumps tariff actions, but eager to work with the EU both on bilateral irritants and common challenges posed by China.

This weeks visit is Hogans “chance to meet with Cabinet members like Bob Lighthizer and Secretary Wilbur Ross, and I think to take the temperature of whats possible,” said Myron Brilliant, executive vice president and head of international affairs at U.S. Chamber of Commerce.

It could also set the stage for an even more consequential introductory meeting between new European Commission President Ursula von der Leyen and Trump on the sidelines of the World Economic Forum in Davos, Switzerland.

Von der Leyen, a former German defense minister, also would like quiet on the U.S. trade front as the EU wrestles with the difficult challenge of negotiating a new trade relationship with a major departing member, the United Kingdom.

“Stabilizing the European economy, and Britains role in that, is probably something that has to come first,” Peter Rashish, director of the Geoeconomics Program at Johns Hopkins Universitys American Institute for Contemporary German Studies, said.

Thats important “both strategically and also in the sense that until we know what the U.K.-EU trade relationship is going to look like, its going to be very tough for both the U.K. and the EU to negotiate with us,” Rashish said.

For the EU, the stakes are high. Its historical transatlantic partner has caused more than one headache with Brussels eurocrats. The EU capital would now like a little less drama on the Western front so it can focus on its future relationship with the U.K., its planned investment deal with China and other trade negotiations with Australia and New Zealand.

But Hogans visit comes amid troubled transatlantic times, as the Trump administration is considering slapping 100 percent duties on up to $2.4 billion worth of French champagne, cheeses, handbags and other goods in a dispute over that countrys new digital services tax, which U.S. officials believe is unfairly aimed at American internet giants Google, Amazon, Facebook and Apple.

Lighthizer has also threatened to launch investigations that could lead to additional tariff threats against other EU countries, such as Italy and Austria, that have also imposed a digital services tax, as well others like Spain, Poland and the Czech Republic, which are considering one.

For its part, the EU has threatened to punch back with unilateral duties. That same tactic may have persuaded Trump not to impose tariffs on EU auto imports, as he has often threatened to do. But Trump has kept national security tariffs in place on EU steel and aluminum, despite EU retaliation on U.S. farm and other goods.

Lighthizer also has proposed raising tariffs to 100 percent on $7.5 billion worth of goods from a broader array of European countries in a separate dispute over European government support for aerospace giant Airbus. Unlike the tax case, that potential U.S. action is sanctioned by the WTO.

The Trump administration previously imposed a 10 percent duty on large civilian aircraft and a 25 percent duty on wine, cheeses and other goods in the dispute. The EU has its own WTO case against U.S. support for Boeing. But a decision on final damage award is still months away, and U.S. officials feel confident it will be less than they were awarded.

The transatlantic powers are also on separate sides of a crisis threatening the future of the WTO.

With the U.S. blocking the appointment of judges to the WTOs highest dispute-resolution body, there is no longer a world trade referee. The EU has been working on alternatives to preserve the idea of a rule-based multilateral trading system. At the same time, it wants to find a more permanent solution with the United States.

On that front, the EUs new trade chief wants to shift the conversation from the dispute resolution to a broader WTO reform.

“Hogan wants to work together more broadly on WTO issues because, as is often the case, the issues that unite the European Union and the U.S. are often much more significant than those who divide us,” said the EU official. “There are more fundamental reforms needed for the WTO and the idea is to look for common ground between our respective positions which can be the basis for future work.”

All those disputes have the potential to get U.S.-EU trade relations off to a messy start with the new European leadership.

But Rashish said he was hopeful that the United States would refrain from tough action to give more time for negotiations in the Organization for Economic Cooperation and Development in the case of the digital services tax and bilaterally in the Airbus dispute.

“There is precedent for the administration sometimes stepping back,” he said.

That happened 18 months ago,when then-European Commission President Jean-Claude Juncker headed off Trumps threat to impose tariffs on European autos by agreeing to bilateral trade talks. But that effort never flowered into a full negotiation largely because of the EUs refusal to address U.S. demands to lower its agricultural trade barriers.

“I think thats the fundamental challenge these two gentlemen will face,” Vilsack said. “If they are truly interested in a full scale deal, then agriculture has to be on the table and the EU has to change its position.”

Vilsack, who now heads the U.S. Dairy Export Council, was USDA secretary during the first two years that Hogan was EU agricultural commissioner. He sees a similarity between Hogan, who was raised on a family farm in Ireland, and Lighthizer, a son of the Rust Belt.

Another former U.S. government official, who asked not to be identified to speak frankly, saw an opportunity for Hogan and Lighthizer to work well together, even when the EU is unwilling or unable to meet U.S. demands.

“[Hogans] a person of great personal charm — hes Irish after all — but also pretty blunt. … I think Bob appreciates people who are well-prepared and professional. He is business-oriented and not always big on small talk. Well see if Hogan measures up,” the former official said.

But unlike Rashish, he was pessimistic about U.S.-EU trade relations in the near term, given Trumps demonstrated fondness for imposing tariffs. “The EU doesnt show signs of wanting to buckle to U.S. demands. Im not optimistic about the near term future,” the former official said.

Hogan will also meet privately with U.S. industry officials during his Washington, and is likely to find a sympathetic ear to his “reset” message.

After two years of wrangling over autos and agriculture, the two sides need to move away from a focus on sector-specific issues and develop “a broader framework” for discussion, Brilliant said.

“We need to work with the EU to strengthen the global trading system through the World Trade Organization and other means. We need to build consensus around some of the new technology issues, standards and regulation and we need to work on third party issues, whether its China or elsewhere,” he added.

Hogan has a reputation as a strong enforcer of EU trading rights. During his time as agriculture commissioner, he was sometimes seen as undermining proposed EU agreements with the United States and countries in South America, which he identified as a threat to core European farming interests.

During the previous European Commission, Hogan regularly was seen as the “bad cop” in contrast with the more diplomatic and consensus-driven Swedish commissioner Cecilia Malmström, who was the EU trade chief before Hogan. During discussions with the U.S. over a later shelved transatlantic trade deal, he notoriously countered what he saw as a risible American offer by saying: “Were not f—ing Burundi!”

On the other hand, Hogans long experience in agriculture can also be an asset in any talks with the United States on a broader trade agreement, although Vilsack said he was skeptical much could be accomplished to reduce EU agricultural trade barriers in the coming year.

“The problem is that many of the concerns being raised by the ERead More – Source