US haggles for cut in EU car tariffs in exchange for permanent metal tariff exemption

3 April 2018 1:52pm
US and EU Flags

29 March 2018. By Joanna Sopinska.

The US has asked the EU to slash tariffs on American cars, auto parts and other products in exchange for a permanent exemption from US duties on metal, MLex has learned.

In a closed-door meeting yesterday, the European Commission’s top trade official told senior diplomats from EU countries that this request will be part of “exploratory” talks on a “balanced and mutually-beneficial” solution on trade between the two sides.

The US administration granted the EU a 40-day waiver from the new metal tariffs — 25 percent on steel and 10 percent on aluminum — which entered into force on March 23. It wasn’t immediately clear what other conditions the US would seek to grant the bloc a permanent exemption.

Jean-Luc Demarty, the commission’s director general for trade, told EU ambassadors yesterday that the US has meanwhile demanded better market access for its cars, pharmaceutical products, processed food and farm products.

US Commerce Secretary Wilbur Ross made the request during a video-conference with EU Trade Commissioner Cecilia Malmström earlier this week, MLex understands.

Formal trade talks with the US would require a new mandate from EU governments, Demarty said during yesterday’s meeting, and therefore talks will simply be “exploratory” until May 1 — when the temporary exemption expires.

Talks between the EU and the US on a comprehensive trade agreement started in 2013, but were put on ice shortly after US President Donald Trump took office. The planned deal was supposed to eliminate tariffs and other trade barriers, including in the automotive sector.

Washington appears unwilling to reopen full trade talks, and is instead attempting to use the steel and aluminum tariffs as leverage to wring concessions from the EU.

The EU is seeking to secure a permanent exemption from these tariffs within the coming weeks to avoid another 6-week rollover, Demarty told EU ambassadors. But he ruled out offering any “unilateral concessions.”

Earlier this week, South Korea won a permanent exemption from the new metal tariffs by updating its 7-year old free trade agreement with the US. Seoul accepted among other things a 20-year extension of the 25 percent US tariff on small truck imports from South Korea. The deal also doubles the cap on US truck exports to South Korea to 50,000 per manufacturer.

Trade experts have said that these concessions aren’t major.

The EU isn’t able to cut tariffs on US imports as South Korea did. Because it doesn’t have a free trade agreement with the US, World Trade Organization rules would oblige it to provide all other WTO members with the same tariff cuts. Such a move could risk opening the European market to cheap Chinese imports, at the moment when Chinese electric-car production is expected to accelerate.