EU and U.S. look to gang up on China after trade war truce

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ROME – Europe is not happy with the conditions Trade peace on Saturday with the US, but EU officials eventually admitted it was worth accepting Washington’s terms in order to focus on the common enemy: China.

The ceasefire is intended to end the bitter trade war that former US President Donald Trump ignited in 2018 with high tariffs on EU steel and aluminum because they threatened US national security. While Saturday’s deal lifted these tariffs, Brussels is still furious that the legal basis for Trump’s duties – the alleged European security threat to America – is still in place and being used to limit EU metals exports.

The battle for metals has been one of the darkest clouds over the transatlantic relationship in recent years, and one of the main reasons it ended was the growing desire of European and American officials to help tackle what they believe to be massive overcapacity in Chinese steel mills to work together, fueled by the generosity of the government.

Saturday’s deal creates a “Global Sustainable Steel and Aluminum Agreement” that includes: “like-minded” Nations. This is the diplomatic code for maneuvering against Beijing’s overcapacity. Brussels and Washington are also committed to working together on more environmentally friendly steel production.

US President Joe Biden stressed that the steel truce fit with his vision of a global front against Beijing. He described the deal as part of an effort to “prove to the world that democracies – democracies – take on difficult problems and provide solid solutions. The EU and the US will continue to be closest friends and partners. “

“These agreements will … restrict access to our dirty steel markets from countries like China and counterparts that dump steel in our markets,” added Biden.

Similarly, EU Trade Commissioner Valdis Dombrovskis said the plan is to focus on “how to restrict market access for non-participants who … do not meet the conditions for market orientation or the standards for low carbon intensity not meet “. Beijing knows exactly who he’s talking about.

Bitter pill

However, there is much in the business that leaves a bitter taste in European mouths.

The EU had originally hoped that Biden would simply relax Trump-era tariffs and step back from Trump’s legal basis for action against Europe: Section 232 of the Trade Expansion Act of 1962. Citing Section 232, identifies Europe as a threat to national security America.

However, Biden has become paralyzed by his own need to keep key steelmaking constituencies on his side, and his deal with Europe is not the complete setback Europeans wanted.

The deal provides that in return for the abolition of tariffs, the EU can export an annual quota of 4.4 million tonnes that are not subject to national security levies. Around 1.1 million tons of it come from a clause that only applies for the next two years. Exports over 4.4 million tons are subject to the existing 25 percent surcharge from the Trump era.

In practical terms, this is an immediate relief for the European steel industry. In the years leading up to the trade war and the coronavirus pandemic, EU exports generally fell below this level. Data from Eurofer, the European steel lobby, showed that EU exports to the US peaked at 4.1 million tonnes in 2014.)

The European Commission is bitter about having to accept any form of quota it deems illegal because it is still based on the hated Section 232.

“For us that [the deal] is not the ultimate goal, “said Dombrovskis on Sunday.” The goal should indeed be the complete abolition of 232 tariffs, “he added.

That view was shared by the US Chamber of Commerce, which in a statement said Washington should drop “baseless accusations that imports of metals from Britain, Japan, Korea and other close allies pose a threat to our national security”.

Lipstick on the pig

Basically, the EU’s objection is legal, as the two sides disagree about the compatibility of the steel agreement with the rules of the World Trade Organization. The US failed to get the EU to fully withdraw its lawsuit against the legality of the tariffs, but Brussels agreed to “suspend” the case. The EU also issued a separate statement to reiterate its position that US actions are incompatible with global rules.

An EU official pointed out that a Commission representative last week described the upcoming deal to diplomats as a “pig that needs all the lipsticks in the world”. Another Western diplomat, however, adopted a more pragmatic tone, saying, “It’s a pig, but it’s better than a prolonged, distracting fight. On 232, the EU agreed to quotas that they hate, but … they negotiated a large quota that also enables growth. ”

Looking ahead, however, the two-year period for at least part of the deal adds to the uncertainty. New negotiations must take place shortly before the next US presidential election and the change in leadership of the European Commission. Both events will take place in 2024.

Barbara Moens contributed to the reporting.

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