U.S. & EU: Contrasting Trade Agendas

The U.S. trade agenda stands in stark contrast to that of the European Union. While one is inward looking and narrowly focused, the other looks outward and calls for an ambitious negotiating schedule. This post highlights the major actions that the Atlantic trading partners are taking to implement their respective trade visions.

U.S. Trade Agenda: President Trump’s 2017 Trade Policy Agenda sets four major priorities: defending U.S. sovereignty over trade policy; strictly enforcing U.S. trade laws; using all sources of leverage to open foreign markets; and negotiating new and better trade deals. The Administration is taking a variety of actions to implement the agenda.

Withdrawal from Trade Agreements: The President began his “America First” trade policy by pulling the U.S. out of the Trans-Pacific Partnership (TPP) agreement, his greatest impact on U.S. trade policy to date, as the TPP would have set new trade standards and anchored the U.S. in Asia. Trump has also threatened to withdraw the U.S. from the North American Free Trade Agreement (NAFTA) and the Korea-U.S. Free Trade Agreement (FTA).

Trade Negotiations: The only current U.S. negotiations is the renegotiation of NAFTA. The U.S. set broad objectives for those negotiations, which included issues such as digital trade and state-owned enterprises that the TPP agreement addressed. While the Administration has indicated it wants to negotiate an FTA with Japan, Japan shows little interest, holding out hope that the U.S. will eventually re-join the TPP. The U.S. interest in an FTA with the United Kingdom will need to wait until the UK has exited the EU and regained authority to negotiate its own trade deals.

Review of Trade Agreements: An April 29th Executive Order tasked the Secretary of Commerce and U.S. Trade Representative (USTR) with conducting comprehensive reviews of all bilateral, plurilateral and multilateral trade and investment agreements. The reviews are to identify violations or abuses of U.S. and WTO agreements, unfair treatment by trade and investment partners, instances in which an agreement has failed with regard to factors such as creating new jobs, favorably effecting the trade balance, expanding market access, lowering trade barriers or increasing U.S. exports. There is little indication of interest in the benefits of agreements. The reports are due by October 26, 2017. In a separate exercise, the President called for an assessment of international agreements that open foreign procurement markets and their impact on Buy American laws.

Trade Deficit Executive Order: On March 29, the President ordered the Secretary of Commerce and USTR to submit an Omnibus Report on Significant Trade Deficits within 90 days. For each trading partner with which the U.S. had a significant trade deficit in 2016, the report must assess: (i) the major causes of the deficit; (ii) whether the trading partner is imposing unequal burdens on, or unfairly discriminating against, U.S. commerce; and (iii) the effects of the trade relationship on the U.S. manufacturing and defense industrial bases and U.S. employment and wage growth.

Using Trade Tools: The Administration is aggressively using various trade tools, which have had little use in recent years. It launched investigations to determine whether imports of steel and aluminum are threatening U.S. national security. The U.S. International Trade Commission is conducting safeguard investigations under section 201 of the 1974 Trade Act to determine whether imports of solar products and residential washers are harming U.S. industry. Affirmative findings in these cases would enable the President to impose remedies such as tariffs and quotas.

On August 28, at the President’s behest, the USTR initiated an investigation of China’s technology transfer, intellectual property and innovation practices under section 301 of the Trade Act of 1974. If USTR finds that they are unreasonable or discriminatory and burden or restrict U.S. commerce, the President could take a variety of actions, including increasing tariffs.

EU Trade Agenda: On September 13, the European Commission unveiled a “package of trade and investment proposals for a progressive and ambitious trade agenda”.

CETA: On September 21, the EU and Canada will implement their Comprehensive Economic and Trade Agreement (CETA) on a provisional basis. They will not be able to implement CETA’s investment provisions until all the parliaments of the member states and regional parliaments ratify it, which could take several years, and could be torpedoed by a single parliament. But, in the meantime, most of CETA will move forward.

Singapore and Vietnam FTAs: The EU has completed negotiations of trade pacts with Singapore and Vietnam, and now needs to determine how to implement them. That will be complicated by the FTA’s inclusion of investment protection provisions, since the European Court of Justice ruled in May that the EU must share competence on those provisions with the member states. That means their parliaments must ratify them. It may be possible for the EU to implement those agreements on a provisional basis, as with CETA, without the investment provisions.

Japan FTA: In July, the EU and Japan reached an agreement in principle on an FTA and are working to resolve remaining issues. The U.S. withdrawal from the TPP gave a boost to the negotiations and could position the EU for a greater leadership role in Asia.

Latin American FTAs: The EU’s trade negotiations with Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay, are again advancing after years of limited progress. The EU is negotiating a trade agreement with Mexico and preparing for negotiations with Chile. Trump’s threats to withdraw from NAFTA appear to have given an impetus to the negotiations with Mexico. The EU is aiming for a political agreement in the Mercosur and Mexico negotiations by the end of 2017.

Negotiating Mandates: On September 13, the European Commission issued draft mandates for FTA negotiations with Australia and New Zealand for approval by the Council of the European Union. It hopes to complete the negotiations by March 2019. The mandates omit investor-state dispute settlement to give the EU exclusive competence over agreements and avoid the need for ratification by member state parliaments.

Multilateral Investment Court: The Commission is proposing the launch of negotiations to establish a multilateral court to resolve investment disputes. It would build on the investment court system in CETA and the Vietnam FTA.

As for its future trade relationship with the U.S., the EU recognizes its importance, but also points to the need for high ambition.

Jean Heilman Grier

September 19, 2017

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