Are the re-emergence of EU/U.S. trade talks a sign that trade remains the EU’s foremost priority?

By Eva McCarthy

With the discussion of a trade deal between the EU and the U.S. back on the table, the EU faces a crucial decision about whether to prioritise its environmental obligations or future impacts on trade. The EU has stated that it cannot trade with a country outside of the Paris Agreement. But if one of the largest trading markets pulls out of the Paris Agreement and threatens to increase tariffs on EU imports, the EU’s agenda to uphold the Paris Agreement will be seriously tested.

The controversial free trade deal between the EU and the U.S., known as the Transatlantic Trade and Investment Partnership (TTIP), has already been years in development but was halted by protests from left leaning members of the European Parliament and the public (Keating, 2018). Protestors said that a trade agreement with the U.S. would require the EU to lower its environmental, health and safety standards to American levels (Keating, 2018).  In 2015 the EU signed the legally binding Paris Agreement, with the goal of keeping the increase in global average temperature to well below 2°C above pre-industrial levels (European Commission, 2018). The Trump administration has threatened to withdraw from this agreement, in November 2020, when the treaty rules allow (Keating, 2018).

Leading figures in the EU have claimed that the EU will not sign deals with countries who do not implement the Paris Agreement. France’s foreign affairs minister Jean-Baptiste Lemoyne told the French Parliament in February 2018 that his country will insist that TTIP not be relaunched if Trump carries through on his promise to leave the Paris Agreement (Keating, 2018). EU’s trade chief, Cecilia Malmstrom responded on twitter about whether she agreed with the French minister, saying: “Yes Paris deal reference needed in all EU trade agreement today. In Japan agreement and will be in with Mexico and Mercosur.” (Keating, 2018).

Recently, however, this hard-line stance on the Paris Agreement seems to be weakening. On 19 February 2019, the international trade committee voted in favour of a resolution calling for trade talks to start, but only under certain conditions (European Parliament , 2019). This pressure to re-engage trade talks with the U.S. is due to renewed threats made by Donald Trump to Brussels that the EU has to “play ball” in trade talks or “we’re going to tariff the hell out of you.” (Von Der Burchard, 2019). Washington is pushing the EU to include agriculture in talks, which the EU refuses to budge on (Von Der Burchard, 2019). The Trump administration has until mid-May to decide whether to impose tariffs on auto imports, at potentially 25 percent, in the name of national security (Von Der Burchard, 2019). Currently, the EU’s tariff on cars is 10 percent, while the U.S. tariff is at 2.5 percent (Von Der Burchard, 2019). MEPs have called for resolutions during the talks to protect EU interests such as; the lifting of US tariffs on aluminium and steel, the dropping of car tariffs and the exclusion of agriculture from talks (European Parliament, 2019).

Fears have been expressed in Brussels, however, that tariffs on EU car exports will be used as leverage by the U.S. during negotiations (Von Der Burchard, 2019). Every EU-member state has veto power over new free trade deals, which could make it difficult for the progression of negotiations if the Trump administration still presents intentions to withdraw from the Paris Agreement (Keating, 2018). On the other hand, the economic impact of increased tariffs could push the EU to give trade precedence over the environment.

The car industry constitutes a significant part of the economy of the EU while also playing a major role in international trade (Eurostat, 2018). Car exports to countries outside the EU were € 132 billion in 2017, of which the US was the largest receiver of EU exports at € 38 billion (29 % of total) in 2017  (Eurostat, 2018). Therefore, the EU economy will be hit hard if the U.S. does decide to raise tariffs to 25%. Furthermore, Germany is the largest EU car exporter at € 73 billion, 55 % of total exports, in 2017 (Eurostat, 2018). Germany is one of the most powerful and influential EU members states and thereby it will be expected that they will respond to these threats of tariff hikes with great precaution.

The EU does have some cards to play at the negotiation table. President of the European Commission, Jean-Claude Junker has stated that if Washington imposed increased tariffs on European cars, the EU would react immediately with EU tariffs on US imports (Brunsden, 2019). EU officials said that they have a draft retaliation list which covers a range of sectors, including products such as luggage and photocopiers (Brunsden, 2019). Junker also said the EU would no longer stick to its promise to buy more soybeans and liquefied gas from the United States (Nienaber & Hummel, 2019). Furthermore, the EU could use trade negotiations as a way to persuade the U.S. into staying in the Paris Agreement, by allowing them some concessions (Keating, 2018).

If the U.S. withdraws from the Paris Agreement, it will impact greatly on the EU and global efforts to halt climate change. The absence of the U.S. would undermine the universality and legitimacy of the Paris Agreement, harming the effectiveness of climate governance (Hai-Bina, et al., 2017, p. 222). The bottom-up approach in the Paris Agreement relies on strong leadership that leads by example to achieve compliance (Hai-Bina, et al., 2017, p. 222). U.S. exiting sets a bad precedent for global climate cooperation and there are fears that other countries will follow the same path (Hai-Bina, et al., 2017, p. 222). Furthermore, by withdrawing from the Paris Agreement, the U.S. obtains more emission space and lower mitigation costs which limits other countries’ emission space and raises their mitigation costs (Hai-Bina, et al., 2017, p. 222). This will in turn make it more difficult and expensive to achieve the 2°C  target of the Paris Agreement (Hai-Bina, et al., 2017, p. 222).

Therefore, the EU is faced with the moral question of whether to stand up to the United States’ threats and abide by its agenda to uphold Paris, or else surrender to the risks imposed on trade. The EU began as a common market in coal and steel products, before evolving into an economic, social and political union (Hix & Høyland, 2011, p. 1). Judging by the re-emergence of talks, it seems like the EU still maintains that trade and economics are its foremost function.

Biography

Eva McCarthy is a stage three single major BA student in Politics and International Relations. This blog post discusses the status of the Paris Agreement in future EU – U.S. trade talks. It was written as part of coursework for the module ‘Introduction to the EU’ – INRL20160.

 

References

Brunsden, J. (2019) EU prepared to cut US car import tariffs as part of trade pact. Financial Times, 18 January.

Eder, F. (2019) Weber says EU won’t be blackmailed by Trump. Politico, 6 March.

European Commission (2018) Paris Agreement. [Online]
Available at: https://ec.europa.eu/clima/policies/international/negotiations/paris_en
[Accessed 8 March 2019].

European Parliament, (2019) EU-US trade talks: Parliament moves to protect key interests. [Online] Available at: http://www.europarl.europa.eu/news/en/headlines/world/20190214STO26415/eu-us-trade-talks-parliament-moves-to-protect-key-interests [Accessed 7 March 2019].

Eurostat (2018) International trade in cars. [Online]
Available at: https://ec.europa.eu/eurostat/statistics explained/index.php?title=International_trade_in_cars [Accessed 9 March 2019].

Hai-Bina, Z., Han-Chengb, D., Lai, H.-X. & Wen-Tao, W. (2017) U.S. withdrawal from the Paris Agreement: Reasons, impacts, and China’s response. Advances in Climate Change Research, 8(1), pp. 220-225.

Hix, S. & Høyland, B. (2011) The political system of the European Union. 3rd ed. London: Palgrave Macmillan.

Keating, D. (2018) EU Tells Trump: No Paris Climate Deal, No Free Trade. Forbes, 8 February.

Nienaber, M. & Hummel, T. (2019) Germany sees ‘most difficult part’ in EU-US trade talks ahead. Independent, 19 February.

Von Der Burchard, H. (2019) Trump to EU: Play ball or ‘we’re going to tariff the hell out of you’. Politico, 25 February.

 

 

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *