21st Mar 2018

EU insists on US tariffs exemption

  • Chinise overcapacities on the steel market will be on the agenda of EU-US talks over the weekend to diffuse the crisis. (Photo: Cheryl Marland - Flickr)

The EU is trying to be exempted from tariffs on steel and aluminum to be imposed by US president Donald Trump and avoid a trade war between close allies.

"Europe is certainly not a threat to American internal security, so we expect to be excluded," EU trade commissioner Cecilia Malmstroem said in Brussels in Friday.

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She insisted that "nobody has an interest of escalating this situation."

Malmstroem will meet US trade representative Robert Lighthizer on Saturday, along with Japan's trade minister Hiroshige Seko.

She will argue that EU companies are not state-subsidised nor in overcapacity, and that therefore they are not a source of "unfair trade" with the US.

She will also insist that US tariffs fail to address the main problem on the global steel market: China's overcapacity by state-owned companies.

"We agree on the problems, not on the remedy," said an EU official on Friday, insisting that tariffs are "a prescription for the wrong illness".

"Overcapacities will be on the agenda" of Saturday's meeting, European Commission vice president Jyrki Katainen confirmed. 

He warned however that the dispute will not be solved on Saturday.

"Tomorrow's meeting is a meeting, not the meeting," he said, adding that "most probably the discussion will continue."

He added that the EU was still preparing to impose counter-measures, including tariffs on US products.

"We are hoping we are not forced to use them," he said, but warned that "if the worst case scenario happens, we are ready to take the US to the WTO [World Trade Organization] court."

When signing the proclamations imposing 25-percent tariffs on steel and 10-percent tariffs on aluminum, Trump said that he would show "great flexibility" for "real friends".

"We want to get as much clarity as possible," said Katainen who insisted that the EU is "an ally, not a threat" to the US.

He also rejected US attempts to negotiate bilateraly with EU countries, saying that the EU expected "to be treated as a trading bloc."

The UK however cracked EU unity, with trade secretary Liam Fox saying that the UK will look at how it could "maximise [its] case for exemption under these particular circumstances."

In private, the US administration has also stressed that Chinese overcapacity is a common challenge for both the US and the EU.

The White House is expected to ask the EU and other countries like Japan to tackle more strongly the issues, as well as other issues identified by the US, such as intellectual property theft or transfer of technologies.

In that context, the tariffs and the possibilities of exemptions are a leverage Trump could use to get other countries following his line over China.

Trump's tariffs have been met with widespread opposition, including from the business sector.

"Unilateral actions which could be followed by counter-measures help no one," said Maxime Bureau, chairman for Europe of AmCham, the US chamber of commerce.

Bureau urged the EU and the US to "find solutions in the coming days."

The potential trade war - a expression that EU leaders and Brussels officials are keen to avoid - comes at a time of booming transatlantic economic relations.

"The transatlantic economy is powering ahead," said AmCham and the Johns Hopkins University's Center for Transatlantic Relations in their annual reports on the transatlantic economy.

The report, published on Friday, noted that 54 percent of global investment into the US comes from Europe, and that 64 percent of US global investment goes to Europe.

"Economics trumped politics in 2017," the report said, referring to a relatively healthy economy despite concerns over Trump's protectionism and aggressiveness towards the EU.

The dispute over steel and aluminium comes "when times are good, despite Brexit and Trump's election", said Joseph Quinlan, a Senior Fellow at the Center for Transatlantic Relations, who coordinated the report.

He told EUobserver that he was "cautious but optimistic" about the current dispute.

He said he expected that "tariffs will be more narrowly defined" after discussions.

"Washington realises that the economic consequences would be detrimental to business," he pointed out.

"US companies have to do business in Europe, and it's the same for European companies in the US."

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