US tensions are set to lead EU trade policy in second half of year

22 August 2018 1:36pm

13 August 2018. By Joanna Sopinska.

Steering the EU out of the crisis in trade relations with the US is likely to remain the primary focus of the bloc’s trade policy in the second half of this year.

The Austrian government, which holds the EU’s rotating six-month presidency until the end of the year, will also want to make progress on draft rules on screening foreign investments into the EU.

The EU’s trade relationship with the US has already turned a corner since, after months of rising tensions, European Commission President Jean-Claude Juncker visited US President Donald Trump in Washington. In a joint declaration on July 25, the two leaders agreed to work toward “zero” tariffs for trade in industrial goods, and refrain from any new tariffs while talks were open.

Now more work is needed to keep up the momentum, since any deadlock in the talks could tempt Trump back to the path of escalation.

The commission, which oversees EU trade policy, said it would consult governments on the objectives of future talks with the US. Under the bloc’s decision-making rules, the governments must approve a mandate for trade negotiations before they can formally start.

Usually, it takes the commission up to six months to put together a draft negotiating mandate for a comprehensive deal on trade in goods, services and market access for public-procurement contracts. Should talks with the US focus exclusively on industrial goods, the time the commission would need might be much shorter.

The governments will also need a few months to agree on a final version of a mandate. Any inclusion of sensitive farm goods in the scope of negotiations might complicate and prolong talks among countries, some of which firmly oppose such a move.

Meanwhile, the US is continuing its investigation into global imports of cars and car parts. An outcome of this probe is expected to be published in late August or early September. While Trump has said he won’t impose any tariffs on the EU for as long as trade talks continue, the conclusion of the cars probe could put pressure on him to act.

After the summer break, the commission is expected to inform governments whether it plans to continue working on retaliatory measures that could be needed, should talks with the US fail.

In anticipation of US measures, the commission said last month — before Juncker’s meeting with Trump — that it had started working on a list of US goods that could be hit with punitive tariffs to offset the EU’s trade loses from any new US duties.

A week earlier, Austria’s economy minister Margarete Schramböck told EU lawmakers that her country would try to build consensus among national governments on a response to any new tariffs on cars.

“We need to have an agreed package among ourselves and that’s the approach that Austria will be recommending,” she told the European Parliament’s trade committee on July 10. “We will be working with you and the commission in order to achieve our common goals.”

― Foreign-investment vetting ―

Schramböck also said it was “extremely important” to make progress on how to vet foreign investments on security or public-order grounds, and that Austria hopes to reach an agreement between member states, lawmakers and the commission by the end of the year.

The commission sketched out vetting plans in September last year. Acquisitions in industries such as communications, data storage, energy and transport infrastructure, artificial intelligence and robotics could be reviewed before receiving their final go-ahead, according to the draft plans.

The rules involve developing a mechanism for closer cooperation and better coordination between European governments when reviewing foreign investments. It means national governments could raise concerns with each other about problematic investments.

Furthermore, if an investment concerns EU funds, such as for the bloc's space or research programs, the commission wants to be able to carry out its own review into the impact on security and public order.

EU lawmakers and governments agreed on their positions on the commission’s proposal in May and June, respectively, paving the way for three-party negotiations. The first round of talks was held in July, with the parties presenting their objectives.

The main sticking points might include a clause proposed by EU governments that would give the European Commission the power to pass judgment on completed investments, and a year-and-a-half delay in bringing the new law into force.

EU lawmakers insist in turn on extending the scope of the new vetting rules by adding more sectors such as media, biotechnology and critical real estate that should fall under tighter scrutiny.

The original proposal said the heightened scrutiny should apply to sectors including energy, transport, financial infrastructure, cyber-security and the “supply of critical inputs.” This would mean that a Chinese company buying a stake in such a business could trigger an EU mechanism coordinating the review of whether this purchase endangered “security or public order.”