Juncker bringing 2 trade ideas for discussion with Trump

EU has no expectations that the meeting will produce a breakthrough.

WASHINGTON — European Commission President Jean-Claude Juncker will present two ideas for reducing trans-Atlantic trade tensions when he meets with U.S. President Donald Trump on Wednesday, but any negotiations will depend on Trump lifting tariffs on EU steel and aluminum and not imposing new tariffs on European autos, a senior European official said on Tuesday.

“President Juncker will suggest two of these ideas that we’re working on. They’re just suggestions,” the senior European official told reporters during a briefing on Juncker’s visit. He also stressed that the EU has no expectations that Wednesday’s meeting would produce a breakthrough on trade with the U.S.

Trump has inflamed trade relations with the European Union by including the bloc in tariffs on steel and aluminum imports that he imposed in the name of national security. The EU says the tariffs are illegal under WTO rules and a thinly disguised protectionist measure. The Trump administration has justified its actions using a little-used section of a 1962 trade law.

Trump is also threatening to impose tariffs on auto imports to protect national security, and seems particularly keen on imposing a 20 percent tariff on European cars. Currently, the EU has a 10 percent tariff on auto imports, compared with the 2.5 percent tariff that the United States collects. Trump regards that difference as unfair, and believes it contributes to the substantial auto trade imbalance between the two countries.

One idea Juncker will raise Wednesday would be for the United States, the EU, Japan, South Korea and other nations that are significant makers of autos and auto parts to negotiate a “plurilateral” agreement aimed at reducing tariffs on those products to zero, the senior European official said.

The EU prefers such a deal involving multiple countries over a one-on-one pact with the United States because under WTO “most-favored nation” rules, a bilateral deal would require the U.S. and the EU to provide duty-free access to other countries — even those countries have not made any concessions themselves, the official said.

The second idea Juncker will raise would be to negotiate a limited free trade agreement between the United States and the EU focused only on industrial tariffs, the official said.

Under such a pact, the U.S. and the EU could eliminate tariffs on each other’s auto exports, but they wouldn’t be obliged to provide duty-free treatment for other countries. That’s because the agreement would be large enough to fit the WTO requirement of covering substantially all trade between the U.S. and the EU, he said.

As a result, the United States and the EU would not be bound by WTO rules to provide duty-free access to any country not part of the pact, the official added.

Whatever course is taken, future talks depend on Trump withdrawing the steel and aluminum tariffs and not proceeding with new ones he has threatened on autos, the official said. The official spoke on the condition of anonymity in order to outline the background issues and positions clearly.

“We’ve been very clear. We think these are illegal tariffs. If we’re going to find a way forward, if we’re going to have some kind of discussion or negotiation, then obviously we think in those circumstances in order to build confidence it would be necessary to suspend the measures,” the official said.

In that case, the EU would also suspend its retaliation to the steel and aluminum tariffs and obviously not proceed with plans to retaliate against Trump’s auto tariffs, should those be imposed, the official said.

Trump and other administration officials have also raised concerns about EU agricultural barriers. It’s possible those issues could come up on Wednesday as well.

In the EU’s view, bilateral trade between the United States and the EU is largely in balance, despite Trump’s harping on the U.S. goods trade deficit with the U.S.

In that regard, a big part of Juncker’s task will be simply to try to better understand what Trump is asking the EU to do, the European official said.

“We’re still trying to figure out what the question is, so we can get the right answer,” he said.

The EU is willing to enter into negotiations with the United States to address bilateral trade concerns on both sides of the Atlantic, as it was doing with the Obama administration in talks on the proposed Transatlantic Trade and Investment Partnership, the senior European official said.

But if Trump wants the EU to take some specific efforts to reduce the bilateral trade deficit, he’s likely to be disappointed because there’s not a lot the EU can do to address that concern, the official said.

That’s because the U.S. trade deficit is not a result of any unfair EU trade practices; rather it is largely the result of U.S. economic factors, such as the country’s high spending and low savings rates, he said.

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