Review: U.S.-EU trade talks halfway through 2019
Updated 18:32, 06-Aug-2019
Yao Nian
[]

The U.S. held a Monday hearing about proposed tariffs on a supplemental list of European Union (EU) products including olives, cheese, milk, coffee and whiskey worth four billion U.S. dollars in a nearly 15-year dispute with the bloc over aircraft subsidies.  

The widening of the dispute to other sectors adds to the impasse in trade talks. The additional four billion U.S. dollars list is on top of an original proposal in April to target EU products worth 21 billion U.S. dollars, expanding the final scale of EU exports under U.S. sanctions to 25 billion U.S. dollars. 

In addition to the escalation of the dispute over aircraft subsidies, the EU's concerns about the U.S. auto tariffs, and disagreement on agricultural market access, are also major obstacles that could hinder the U.S.-EU trade talks in the second half of the year. 

Airbus and Boeing standoff

The dispute over aircraft subsidies dates back to 2004 when the U.S. initially accused the EU of illegal subsidies to Airbus' A380 and A350 at the WTO. The EU followed suit and filed a case alleging illegal government aid to Boeing's B787 and 777X jets. 

The WTO ruled that both the EU and the U.S. have problems in providing illegal subsidies to their respective aviation companies. In response to the U.S. tariffs, the EU sought retaliatory tariffs on U.S. exports worth 20 billion U.S. dollars. 

Both sides are awaiting the WTO's arbitration before implementing the punitive tariffs. The WTO will decide in September the specified scale of tariffs that the U.S. can impose against the EU in the aircraft subsidies row. It is reported that the final scale will be around 5-7 billion U.S. dollars. 

Concerns about auto tariffs

The EU has been concerned about the prospect that Trump will slap tariffs on foreign-made cars and parts. Although Trump announced in May a delay in imposing the tariffs for 180 days to pursue negotiations, he told reporters last week that "auto tariffs are never off the table."  

Should Trump go ahead with auto tariffs, the EU had a list of U.S. products worth 35 billion euros (39 billion U.S. dollars) on which retaliatory tariffs could be levied, said EU Commissioner for Trade Cecilia Malmstrom last month. The list will include U.S. manufacturers like Caterpillar, Samsonite and Xerox. 

The bilateral trade relations became strained last year after Trump targeted EU steel and aluminum with tariffs. The EU in the same month imposed tariffs on U.S. products worth 2.8 billion euros as a countermeasure. Trump then threatened to impose auto levies on the EU. 

Agriculture not part of trade talks

There has been a huge disagreement on whether to include agriculture in the U.S.-EU trade talks. For the EU, France and other agricultural countries have strongly opposed adding it to the agenda.

However, U.S. Congress members from agricultural states and agricultural groups have required that agriculture be included in the talks, otherwise the trade agreement reached between the two parties will not be approved by Congress. 

The disagreement on agricultural market access also caused the failed conclusion of negotiations on the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the EU, said Peter Rashish, a senior fellow at Johns Hopkins University. 

The two sides have reached no consensus on trade negotiations since they agreed on a trade truce when President of the European Commission (EC) Jean-Claude Juncker went to the U.S. a year ago. The latest round of trade talks in July also ended with no results due to EC election. 

The U.S.-EU trade relations may become more controversial in the coming months, and the bilateral trade negotiations will be more difficult than the fierce TTIP negotiations, according to Peter Chase, a senior fellow at the German Marshall Fund.