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24th Jun 2018

EU pessimistic on permanent US trade exemption

The EU's trade commissioner Cecilia Malmstrom on Tuesday (22 May) sounded pessimistic about whether the EU's offer to avoid a trade war with the US would be successful.

Speaking after briefing EU economy and trade ministers in a closed meeting on the latest developments, she told reporters the bloc's offers are probably not enough for the Washington administration that pursues an "America first" policy to avoid new tariffs on steel and aluminium by 1 June.

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US president Donald Trump has threatened new tariffs on EU steel and aluminium unless the EU accepts rebalancing its trade with the US. The EU has been exempted twice from the tariffs during the spring to allow for talks.

The EU has said it is willing to discuss a limited trade deal with the US but only after it receives a permanent exemption from the tariffs, which it deems unlawful under World Trade Organization (WTO) rules.

Last week in Sofia, EU leaders offered an opening to the US.

The bloc decided it was possibly open to more cooperation on market access for industrial products, including cars, government tenders, energy, notably liquefied natural gas (LNG), and reform of the WTO.

"All aspects of the Sofia plan have been presented to the US. They are perfectly capable of reading," Malmstrom told reporters, with EU officials saying that the offer was designed as a result of previous discussions with the US to address their concerns.

"Is this going to be enough, I am not sure frankly," Malmstrom told reporters. The EU' trade chief has been in contact with the US state secretary on commerce, Wilbur Ross, several times a week.

"There have been signals from the US that exemptions will not be prolonged, so either they will be imposed on us on 1 June, or there will be other sorts of limiting measures," Malmstrom said referring to possible quotas imposed by the US.

EU officials are reluctant to speculate on how the bloc might react to quotas and whether they would be willing to go ahead with trade talks with the US, if an exemption happens but with quotas.

Malmstrom also issued a veiled warning to Ross that he should be as open about the options as possible.

"I think the final decision will be made personally by the president. But I count on Wilbur Ross will make a recommendation … I expect Wilbur Ross to be honest with me in a couple of days on what recommendation he will make," she said.

EU officials said the comment might have referred to the initial surprise of the EU when at the end of March the bloc's leaders and officials found out that the first exemption lasts only six weeks.

At the press conference, Malmstrom added that the EU's trade offer means the bloc wants to engage with the US on a bilateral and multilateral level to address the core issue of on steel which is overcapacity – from China, which Malsmtrom did not name.

"If we were to embark on this, it has to be equal and not with a threat hanging over our head," she said repeating the EU's line that talks can only come after the US exemption.

Geopolitics

France originally opposed the EU's move to offer talks to the US, worried about giving in to protectionist Trump's aggressive policy, while Germany was more open to appeasing the US administration.

Berlin is still seen as more open to concessions with the US, but its economy minister insisted in Brussels that "Germany is not isolated".

Peter Altmaier said after the meeting that EU's offer still stands and there have been appeals by other ministers to the commission to "use every window of opportunity" to talk with the US counterparts.

"I understood the answer from Malmstrom as encouraging, we will have a busy week ahead of us," he said referring to the Organisation for Economic Cooperation and Development (OECD) Paris meeting next week, where major countries gather.

Altmaier argued in favour of a "constructive solution" saying the EU's economy has only recently started to grow modestly after a decade of economic crisis, and the fragile increase would be jeopardised by a trade conflict that would eventually spread beyond steel and aluminium.

He also added that the US is a traditional and close ally of Europe that goes beyond the personalities of the current US president or the German chancellor or the French president.

"We share the same values, we have much more in common than issues that divide us," he said, adding he will always advocate for promoting bilateral ties.

"This is quite emotional, but it is my personal conviction that we have a lot to lose, and this does not refer to steel and aluminium in the first place," Altmaier said.

EU rejects US trade 'gun to the head'

EU leaders demanded a permanent exemption from US tariffs on steel and aluminium - and ruled out any bilateral trade talks within the 1 May deadline set by Donald Trump.

Trump starts countdown to EU trade war

EU sales of steel to US to face 25 percent tariff from 23 March, with Europe to hit back on motorbikes and bourbon in looming trade war.

Trump keeps EU leaders waiting on tariffs

European leaders postponed their reaction to US announcement that the EU would be exempted from tariffs on steel and aluminium. "The devil is often in the details", said the Belgian PM.

Sofia summit: EU leaders search for a Trump strategy

"With friends like that, who needs enemies?" European Council Donald Tusk asked on Wednesday, as EU leaders were trying to come up with a reply to the US president's questioning of the transatlantic relationship.

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