EU Members Weigh Approach to US Tariff Talks, Details Emerge on Draft Deals for Others

9 May 2018

As the clock winds down before a 1 June deadline for the EU’s 28 members and two other countries to reach agreements with the US to avoid steel and aluminium tariffs, the officials involved have been floating ideas on how best to address the issue. 

The US announced on 30 April that it would be setting this new deadline for the EU, Canada, and Mexico, which had originally been set for 1 May, while confirming agreements in principle with Australia, Argentina, and Brazil, though it did not elaborate on details at that juncture. (See Bridges Weekly, 3 May 2018

For those countries still in the negotiating process, however, the White House indicated that it hopes to see deals involving “quotas that will restrain imports, prevent transhipment, and protect the national security.” 

The negotiations have lately brought to the fore comments from EU member state officials on how best to proceed in order to avoid the tariffs, including the possibility of granting some concessions to Washington.

The bloc’s executive arm has argued that it should get a full, unconditional tariff exemption and has questioned the US’ national security claims involving EU-made steel and aluminium, given their deep partnership in security issues.

The European Commission has repeatedly called on Washington to hold off on the duties, warning that it is prepared to impose its own tariffs on a list of several US-made goods if necessary and take WTO dispute settlement action. It is already pursuing a safeguard investigation domestically, prompted partly by concerns that US tariffs on other major steel producers could lead to a rapid influx of inexpensive steel on the European market, which would otherwise have been sold to the US. (See Bridges Weekly, 29 March 2018)

Reports suggest that US trade negotiators had floated the option of binding EU steel and aluminium exports to the US to 90 percent of last year’s levels, according to unnamed officials cited by Bloomberg. Meanwhile, the EU has reportedly balked at the figure, with some member states indicating that this quota should be higher at 100 percent.

Meanwhile, a range of views have been expressed within the European Union over how the bloc should move forward, with three weeks remaining in the negotiating timeframe. Germany, which ranks among the US’ top ten sources of imported steel, has asked for a permanent exemption from tariffs, warning that “neither the European Union nor the United States can have an interest in an escalation in trade relations.”

“Rather, both the US and the EU would benefit from further deepening trade relations. It is particularly important that the European Union has sought talks with the United States and will continue to do so,” said Germany’s deputy government spokesperson Martina Fietz last week, according to comments reported by Reuters.

Germany’s Economy Minister Peter Altmaier called for more talks with Washington, and has lately indicated that there could be some room to negotiate a deal. Altmaier told local press earlier this week that one option could be clinching a focused trade accord with Washington that would involve industrial goods, thus averting the tariffs.

A few days prior, French economy and foreign ministries said in a joint statement they “agree that there is an overcapacity problem in the steel and aluminium sector,” but that while they are ready to cooperate with others to resolve these issues, this could only occur “it we are certain that we will be permanently exempted from the threat of unilateral increases in tariffs.”

Steel deals: details on quota, tariff arrangements

Meanwhile, the details about individual deals with Argentina, Australia, and Brazil are beginning to emerge, indicating that those countries have signed on to voluntary export restraints, or quotas, in order to have a permanent exemption from Washington’s tariffs.

Argentina will be able to export up to 135 percent of the average level of steel sent to the US over the past three years without facing the US tariffs, while that level will be set at 100 percent for aluminium, according to a statement issued last week by the Argentine Minister of Production Francisco Cabrera.

“This is an important achievement that puts Argentine production and jobs in better conditions than those countries that did not manage to obtain tariff exemptions,” Cabrera said.

Unlike neighbouring Brazil, Argentina’s steel exports to the United States did not break into the top ten sources of the US’ imported steel. It is, however, among the top ten sources of imported aluminium, according to the US Commerce Department’s Section 232 report.

Along with Australia and Argentina, Brazil was also among the countries that negotiated a permanent tariff exemption, details of which were confirmed late last week. Brazil’s aluminium sector will face 10 percent import tariffs, while the steel industry will be subject to an import quota system, according to a statement by the Brazilian foreign affairs ministry.

The numbers were agreed following the Brazilian government’s consultations with industry, after the US indicated in late April that it would impose tariffs or quotas either way, according to the ministry.

“It is important to stress that any restrictive measure to be adopted will be under the sole responsibility of the US government. The Brazilian government and the Brazilian productive sector did not take part – nor will take part – in the design and the implementation of restrictions to Brazil exports,” the statement said.

The ministry also stressed that, despite the deal, it had “clarified” to Brazil’s counterparts in Washington that “the Brazilian products do not pose threats to the American national security” but that their respective industries are “integrated and complementary.”

ICTSD reporting; “EU Considers Trade  Quotas to Settle U.S. Tariff Threat,” BLOOMBERG, 7 May 2018; “Australia rejects fears Trump steel tariff exemption subject to quotas,” THE GUARDIAN, 2 May 2018;Spotlight: EU demands permanent exemption from U.S. steel tariffs,” XINHUA, 1 May 2018; “EU demands permanent exemption from U.S. steel, aluminum tariffs,” REUTERS, 1 May 2018; “German minister calls for new EU trade deal with U.S,” REUTERS, 5 May 2018.

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