EU seeks to 'de-escalate' trade dispute with US but prepares retaliation

25 July 2018 9:51am
US and EU Flags

19 July 2018. By Joanna Sopinska.

The EU hopes to ease trade tensions with the US in talks in Washington next week, but stands ready with "rebalancing measures" if the Trump administration imposes global tariffs on cars and car parts, according to EU Trade Commissioner Cecila Malmström.

She will accompany European Commission President Jean-Claude Juncker in his trip to meet US President Donald Trump on July 25.

The US imposed tariffs on EU steel and aluminum on June 1 and Trump is now threatening to follow up with fresh levies on EU cars and car parts.

The EU countered with tariffs on a list of US products, which entered into force last month.

Malmström said her services started preparing a new list of “rebalancing measures” to offset potential trade loses from the eventual car tariffs.

“We are preparing together with our member states a list of rebalancing measures there as well. And we have made that clear to our American partners,” Malmstrom told a conference hosted by the German Marshall Fund of the United States in Brussels.

It is understood that the list of the US products may be worth around 10 billion euros ($11.66 billion) and will be used only if the US decides to impose car tariffs.

― De-escalation―

Malmström said the aim of the visit to Washington next week was to defuse trade tensions with the US.

“We want to find solutions to de-escalate the present situation and prevent it from worsening.”

She said the EU was prepared to “think outside the box and find solutions that suit us both.”

The commission has been exploring options to avoid US car tariffs. One of them provides for opening talks with the US and other large car-producing countries such as Japan and South Korea on a plurilateral trade deal to cut car tariffs.

Malmström said that maybe it was “worth exploring” this option. But added that for such talks to be successful a support of all major car-producing countries was needed.

Another option, which has been on the table for some time, would be to open talks with the US on a bilateral trade agreement on industrial goods.

Malmström said such a deal couldn’t only cover cars, because this would require an application of the most-favored-nation principle, which would extend preferential treatment to all members of the World Trade Organization.

That would give rise to the risk of having many “free-riders” benefiting from such preferential rules, which could negatively impact European interests and put into question bilateral trade deals the EU have with countries such as Japan, Malmström noted.

― No negotiations ―

“The aim of President Juncker’s visit is to try to establish good relations, try to see how we can de-escalate the situation, avoiding it going further and see if there is a forum where we can discuss these issues,” Malmström said.

“We don’t go there to negotiate anything,” she added.