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EU-US trade truce can’t hide deep divergence

By Sun Chenghao (People's Daily)    16:35, August 01, 2018

Illustration: Liu Rui/GT

With European Commission President Jean-Claude Juncker's visit to the US on July 25, it seems that the trade confrontation between the US and the EU has eased temporarily as the two sides issued a joint statement following the Trump-Juncker meeting.

Several events during the visit deserve attention. First, the two sides set the tone for future transatlantic relations by defining them as entering the new phase, a period of closer friendship and stronger trade relations, which provides a more clear-cut strategic direction for the US and the EU.

Second, the US and the EU expressed their willingness to iron out differences on trade, agreeing to the goal of working together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods, reducing barriers and increasing trade in services, chemicals, pharmaceuticals, medical products and soybeans.

Third, the EU is making compromise on bilateral trade with the US in exchange for Washington's endorsement for multilateral trade system or returning to the mainstream values of the West. For instance, the EU intends to import more liquefied natural gas from the US to diversify its energy supply and lower trade barriers for US soybeans. In return, Washington agreed to work closely together with the EU to reform the WTO and to address "unfair trading practices." The consensus on that could be the foundation for the two sides to reach a new grand bargain on trade in the future.

Fourth, both sides decided to launch new talks and mechanisms to discuss details of a possible trade deal. The Trump-Juncker meeting serves as a point of departure followed by an establishment of Executive Working Group consisting of closest advisors from both sides to carry forward the consensus. Under such mechanisms, it is possible that the two sides will lift the current tariffs against each other after talks and hold a new round of talks on an upgraded Transatlantic Trade and Investment Partnership (TTIP).

The US should stop lambasting the EU on trade issues. The tariffs against the EU have already backfired. Domestic pressure is mounting on Trump as most bipartisan lawmakers believe tariffs would only drag the two economic giants into a spiral of trade restrictions and countermeasures. Trump is also facing a global wave of anti-tariff measures by Canada, Mexico and China, all of which would impose retaliatory tariffs against the US. To step back from a larger trade war with the EU would ensure that the US is not to be isolated by all its trading partners.

However, it is still too early to conclude that transatlantic relations will be back to the right track. The two sides have not reached a deal on how to roll back current tariffs. A significant omission during the meeting has been the Iran nuclear deal. The joint statement did not mention the Iran issue and both sides did not come up with plans to solve the differences. If the US imposes secondary sanctions on EU enterprises due to their business connections with Iran, it will definitely break the spirit of the joint statement and create more troubles for transatlantic relations.

Despite the de-escalation of the US-EU trade row, transatlantic ties seem to be drifting toward an uncertain future. It certainly is a product of Trump's policies but also following the historical trend since the end of the Cold War. What had united Europe and the US has lost strength these years, be it ties in security, economy or shared values. 

NATO, the most important institution binding the US and Europe together, is under pressure not only from Trump. Transatlantic economic links, though still extremely close, are facing challenges to explore growth areas when reviving the TTIP or a less ambitious mini-TTIP is far from easy. The EU, which particularly relies on exports, is dependent on other important economic centers around the world. In terms of shared values, the US under Trump is less interested in it and the EU, considering its own situation in the age of rising populism and illiberal tendencies inside its own borders, has become increasingly lonely. 

More importantly, the US and the EU look increasingly different now in terms of their basic views about the world we live in and the role they should play. The Trump administration's National Security Strategy depicts a dangerous world where the US, which still boasts of immense power, should fight single-handedly with those revisionist powers. 

On the contrary, the EU in its first Global Strategy which was adopted in June, 2016 sees a world where both challenges and opportunities abound and Brussels could succeed using its considerable soft power and its success formula - multilateralism. These underlying differences between the US and the EU have been the sources of many intense moments between the two and will become more obvious during Trump's era. 

In a nutshell, though the joint statement of the EU and the US is comforting to many in the West in the sense of averting an imminent trade collision between the two, it is certainly not the end of the story. Trump's unpredictability cannot be underestimated and the foundation of the transatlantic partnership has already been eroded. 

The author is an assistant research fellow, Institute of American Studies at China Institutes of Contemporary International Relations. 

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Hongyu, Bianji)

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