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.
|Bill Wirtz||Nov 24, 2020||12||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.