Biden Has an Opportunity to Improve Trade With Europe

The Europeans killed a potential deal during the Obama years, but the world is a different place now.

By
7

Trade relationships with Europe have been painstakingly petty for the last four years. In 2019, the U.S ended the WTO’s appellate body by refusing to appoint new members, which meant that the world’s arbiter on trade had had a more difficult time opposing new tariffs—and new tariffs there have been. The ongoing trade war has targeted a wide range of products on both sides, from Harley-Davidson motorcycles to French wine and Kentucky bourbon. Whenever Trump would target a new product, the EU would reciprocate with new tariff implementations or hikes.

What ended up targeting American blue jeans-lovers in Estonia and Bordeaux wine connoisseurs in New York began as a much less symbolic tariff on steel and aluminum. In Donald Trump’s protectionist mindset, he believed he was doing U.S manufacturing a favor, but in reality he punished those businesses that rely on imported industrial goods for their production. During his administration, many Republicans who had held dear the principle of free trade seem to have forgotten their own position. Perhaps his upcoming departure from the White House will allow them to remember it.

Under the Obama administration, the U.S had pushed for the Transatlantic Trade and Investment Partnership (TTIP). The free trade agreement would have created one of the largest trade zones, with the (then) 28 member states of the European Union and the United States. The EU’s executive body, the European Commission, said that TTIP would boost the EU’s economy by $142 billion, the U.S economy by over $100 billion and the rest of the world by $118 billion.

Despite strong American advocacy in Europe for the agreement, the European Union itself stalled and then walked away. Environmentalists held massive demonstrations throughout the EU, claiming that TTIP would undermine European food standards and distort the marketplace by reducing prices. They made a safe bet on the skepticism of Europeans toward American food, and on consumer nationalism. The Anglo-Saxon approach to business does not play well in countries like France, where labor regulations thoroughly protect workers, and the flexibility and entrepreneurship of Americans is seen as obsessively commercial. This played right into the hands of those industries that considered American competition as a scourge.

When Barack Obama left office, TTIP negotiations were not just at a standstill—they were unofficially dead. The election of Donald Trump worsened trade relationships with Europe, but TTIP had been killed by Europeans, not Trump.

That said, political institutions in Europe currently have every reason to be warmer toward trade relations with the U.S. The trade war has been difficult for everyone, and Europe understands that it leads nowhere. After four years of Donald Trump, Joe Biden should present a real alternative based on free trade, not just case-by-case mini-agreements (such as a recently signed deal on free lobster trade). Crucially, if the U.S reaches a comprehensive trade agreement with the United Kingdom (which officially leaves the European Union’s single market at the end of this year), then the EU has no choice but to prevent a loss of its competitive edge. 

Unfortunately, Joe Biden has not quite grasped this window of opportunity but has supported the European Union on the issue of Brexit. Meddling in European affairs, Biden claims that he will not sign any FTA with the U.K. unless Boris Johnson’s government respects the withdrawal agreement’s so-called Northern Ireland protocol. In essence, if the U.K. reestablishes a border (or something resembling a border) between Northern Ireland and the Republic of Ireland, then the U.S will not be a willing trading partner. Both the U.K. and the EU have struggled to find an agreement that allows for the U.K. to leave the EU and make its own internal market decisions, while avoiding cross-border checks on goods between Northern Ireland and the Republic of Ireland. The Good Friday Agreement of 1998 ended most of the violence of the Troubles (between those loyal to the United Kingdom and those who wanted to unite the country with the Republic of Ireland), by promising not to establish hard border infrastructure. To separatists, this signaled a willingness to align the island more closely with the Republic, while loyalists remained under the laws of the United Kingdom. The UK’s exit from the EU might threaten this agreement, and Joe Biden has taken the side of the EU.

Outside of supporting an odd sense of Irish-American pride, how exactly does such a move benefit the United States? While it certainly upsets the British, it would be mistaken to believe that continental Europeans in Paris and Berlin will suddenly jump out of their seats to hand American businesses access to European consumers just because we’ve turned our backs on trade with the U.K.

TTIP would have allowed mutual access to public markets, slashed tariffs, and reduced bureaucratic regulations on everything from clothes to medicine and cosmetics. Many customs duties on products between the U.S and Europe are so high that it effectively kills any trading relationships. For Americans wanting to observe this phenomenon in real time: Follow a European entering an American supermarket for the first time. Choices!

There are also tariff differences depending on goods and destinations. For instance, EU tariffs on American cars are high, while American tariffs on European cars are relatively low. Meanwhile, certain types of peanut tariffs are so high (at a rate of 138 percent) that they never find their way on the European market. In essence, U.S-EU trade is a jungle of tariff distinctions that pile an avalanche of red tape on any type of producer. TTIP intended to scrap nearly all tariffs across the Atlantic, yet the will of the EU at the time was trumped by skepticism toward American agricultural products.

Many of the most political decisions in the European Union are taken because of a sense of urgent necessity. In the European Parliament, you will hear speakers claim that the EU needs to be more centralized, because despite being the largest single market in the world, it is also a declining market. If Joe Biden wanted to save Obama’s (and his own) trade policy legacy, he could do so on one hand by pressuring Europeans to understand that competition is at their doorstep, but also by showing them what the TTIP has to offer.

The more the U.S opens itself to free trade from all over the world, the more it will convince hesitant partners like the EU to drop subsidies to large industries, and allow small businesses not to put “Europe first” at a large price, but choose the best product, including from the United States.

Bill Wirtz is a political commentator from Luxembourg covering EU politics and policy. Follow him on Twitter @wirtzbill.

Photograph by Dennis Jarvis/Flickr.

7
By
Comments (7)
Join The Dispatch to participate in the comments.
 
  1. Avatar photo
    Jason Gibson

    This is a very important discussion and I hope that the dispatch continues to have articles like this

    Collapse
  2. Avatar photo
    James Spiller

    The biggest thing that I am hoping for from Biden is a restoration of the WTO’s dispute settlement capacity followed by a WTO suit to end the EU’s indefensible barriers to the sale of American chicken. It is my sense that that issue alone represented a substantial portion of EU opposition to TTIP and it should be relatively straightforward to resolve through the WTO, such that future negotiations do not get hung up on it.

    I agree that it is unlikely that Biden will stick to his Irish commitment. There’s essentially no comparable opportunity to do something with bipartisan support in his first two years and the Irish border is not a comparably animating issue.

    Collapse
  3. Matt C

    Agreed. TTIP would be great, but to be frank, I always point out that though Americans have plenty of unscientific beliefs, Europeans have their fair share as well. Europe's unscientific stance on GMO's will be a huge obstacle to a trade deal with the US. If they don't relent, a deal isn't worth it in the long-run. But I do think you make an excellent point in that free trade elsewhere builds pressure on the EU, particularly as its economies continue to stagnate (and with one of their largest and most dynamic about to leave).

    Trade-wise, Biden shouldn't focus on Europe right away (outside of doing a deal with the UK, which sadly it seems he may not be willing to do). Instead, he needs to focus on the TPP. He can slightly tweak it and rebrand it if he wants to give Congress excuses to vote for it after opposing it, but this should be our highest trade priority, and will serve as a point of future expansion in Asia and Latin America. That is a fine way to start getting Europe's attention, as they continue to experience low growth.

    Collapse
  4. rob

    The last thing that we need is a United States of Europe to compete against. We should be trying to pry apart the EU that includes supporting Brexit and realigning with reaffirming our deep allies (the five I's).

    Collapse
    1. Avatar photo
      James Spiller

      I agree that we should support Brexit and reaffirm the five Is. I don’t understand why you think that that would prevent a USE from competing with America. Brexit made deeper integration easier by removing core opponents (much like David French’s Texit would make it easier for Democrats to implement their preferred policies in the remaining USA). While the FVEY is awesome, New Zealand’s intelligence services are a little less deeply enmeshed in many areas of interest to us than European intelligence services are, whether for reasons of geography in Eastern Europe or of history in various ex-colonies, or because there are fewer people in New Zealand than in Bulgaria.

      Whether we approve of integration or not, core questions of EU domestic politics aren’t really issue for America to decide, even should it wish to. And there’s not a lot of reason to prefer to deal with Hungarian or Italian legislation than to deal with EU legislation, which is published in English, is harmonized across our European export markets, and tends to be less protectionist.

      Collapse
  5. Jon

    Great article until the last paragraph- which essentially guts your entire argument. It was not DJT that caused this issue with Europe. It was Europe. DJT was reacting to fix the imbalance that they caused with their employment/subsidies policies.

    Now tariffs IMO are never the answered. They don’t work and consumers pay the bill. But if you want to fix the problem you need Europe to back off its own predatory behavior.

    Bidens stance on Brexit however shows me he will not be a problem solver in this area. He’s stuck in the 1970’s. Just like he’s stuck in the 1950’s on Middle East policy.

    Collapse
    1. Avatar photo
      James Spiller

      If you look at the big trade disputes between the EU and US, there tend to be legitimate grievances on both sides. There are some issues, like beef hormones, where the EU is absurd, but there are issues where the US is absurd, too; Trump’s suggestion that there was a national security interest in not buying European steel, for instance, was merely an unusually rabid form of a common US effort.

      Collapse