Trade

Brussels mulls offer of trade deal to Trump, if he drops tariff threat

The European Commission is developing a plan to offer Donald Trump the prospect of a trade deal with the EU in exchange for a permanent exemption from U.S. steel and aluminum tariffs, according to five EU officials and diplomats.

The plan, which has strong backing from Berlin, has been raised in bilateral discussions with France, Italy and other EU countries. It foresees offering the U.S. a scoping exercise in which both sides would analyze the content and feasibility of a potential trade deal.

The aim is to use the prospect of a trade deal as a bargaining chip to exclude the EU from punitive tariffs of 25 percent on steel and 10 percent on aluminum announced by the American president last month. The U.S. subsequently exempted the EU from the tariffs until May 1 pending further discussions, although Trade Commissioner Cecilia Malmström has demanded the EU be permanently released from the tariff threat.

“In our ongoing talks with the American side, we are insisting on getting a full exemption from the announced steel and aluminum tariffs. Once that has been agreed, we would be open to discuss various possible ways of reducing trade irritants,” said a Commission spokesperson.

“The Germans have calculated that industrial trade with the U.S. is so big that it would cover substantially all trade” — EU diplomat

“Malmström is already discussing the plan with [U.S. Commerce Secretary Wilbur] Ross,” said one EU diplomat.

One of the options under the plan the Commission is discussing is to limit a potential future trade agreement to eliminating tariffs on industrial goods, such as cars and machines, the officials said. The Commission is also keen to get some concessions from the Americans on public procurement, according to one person briefed on the talks.

Another, less ambitious option would be to look at reducing non-tariff barriers, such as different safety standards on vehicle parts.

“The Germans have calculated that industrial trade with the U.S. is so big that it would cover substantially all trade,” said an EU diplomat. Thats important, because covering the vast majority of bilateral trade is an important criterion for a deal to be valid under global trade rules.

The officials stressed that the discussions are still ongoing and that no proposal has been approved by EU countries. Germany and France are in close bilateral consultations over the plans, and French President Emmanuel Macron will be in Washington from April 23-25, where he is expected to raise the issue of potential trade talks with Trump.

France is insisting that the EU should only negotiate trade deals with countries that have signed the Paris climate agreement.

Daniel Caspary, an MEP with the European Peoples Party who is close to the German government, said that he had also heard of the Commissions proposal for a tariff-only trade deal, but said he didnt support the move.

“A pure tariff-only trade agreement isnt reasonable in my opinion,” said Caspary, an advocate of the Transatlantic Trade and Investment Partnership trade deal that the EU was negotiating with the U.S. until Trump took office. He said France is skeptical of the proposal as well.

“We dont need to hand the Americans the opportunity, via a pure tariff-based agreement, to pit individual EU countries against each other,” said Caspary.

France is insisting that the EU should only negotiate trade deals with countries that have signed the Paris climate agreement, from which the U.S. withdrew its participation under President Trump.

“Thats a factor that would complicate talks,” said a French official.

One EU diplomat also cautioned that offering a tariff-only deal would go against the EUs goal of negotiating broad and ambitious trade agreements. “Once you have given away all the tariffs, there is little leverage left to get further concessions from the Americans,” the diplomat said, for example on issues such as sustainable development or geographical indications.

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