WASHINGTON, May 20 (Xinhua) -- A few weeks after the European Union (EU) agreed to start trade talks with the United States, the White House on Friday delayed slapping additional tariffs on imported autos and auto parts for 180 days.
Analysts said such olive branch gesture aims to serve Washington's purpose of reaching voluntary export restraint agreements with its major auto trading partners, which would go against the rule of the World Trade Organization (WTO).
Although Washington's announcement signaled a willingness for a truce, at least for now, the prospect of a U.S.-EU trade deal appears slim in the short term, plagued by three major discrepancies.
DEADLOCK OVER AGRICULTURE
U.S. President Donald Trump and European Commission President Jean-Claude Juncker agreed in July 2018 to work together toward "zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods," but trade talks have been put on hold until recently.
The lengthy delay can be explained by multiple obstacles, one of which is the division in the scope of the trade talks. The EU wants to exclude agriculture, considering it a sensitive issue, while the United States strongly demands otherwise.
In April, the European Council approved mandates for the European Commission to open negotiations with the United States on two agreements, one to cut tariffs for industrial goods, excluding agricultural products, and the other on "conformity assessment" to make it easier for companies to prove their products meet EU and U.S. standards, with the objective of removing non-tariff barriers.
"Agriculture will certainly not be part of these negotiations. This is a red line for Europe," said EU Trade Commissioner Cecilia Malmstrom, noting that the "limited" negotiations are still meaningful and mutually beneficial.
Meanwhile, U.S. lawmakers and agricultural groups have demanded agriculture be included in the trade talks, and Congress approval for a deal without agriculture remains a long shot.
"Agriculture is a significant piece of the global economy and it simply doesn't make sense to leave it out," said U.S. Senate Finance Committee Chairman Chuck Grassley of Iowa, a top agricultural state.
"Bipartisan members of the Senate and the House of Representatives have voiced their objections to a deal without agriculture, making it unlikely that any such deal would pass Congress," Grassley said.
DISPUTE OVER STEEL, ALUMINUM TARIFFS
Besides the fundamental disagreement on the scope of trade talks, steel and aluminum tariffs imposed by the Trump administration have further driven a wedge between the United States and the EU, complicating the negotiations.
On June 1, 2018, the United States imposed steep import tariffs on steel (25 percent) and aluminum (10 percent) from Mexico, Canada and the EU, citing national security concerns. Later in the month, the EU imposed retaliatory tariffs on 2.8 billion euros (3.3 billion U.S. dollars) worth of U.S. goods.
According to the European Council, the mandate ensures that the EU will not conclude negotiations with the United States "as long as the current tariffs on EU exports of steel and aluminium remain in place," and that it would be able to "suspend negotiations unilaterally" if Washington were to impose further trade restrictions against European products.
In an unexpected move, President Trump agreed on Friday to lift tariffs on steel and aluminum imports from Mexico and Canada, removing a major barrier to Congress approval of the U.S.-Mexico-Canada Agreement, which would replace the 25-year-old North American Free Trade Agreement.
Despite easing tensions with its two neighbors, the United States continued to maintain pressure on its European allies, who are still not exempt from the steel and aluminum tariffs.
Meanwhile, EU members could still be subject to auto tariffs of up to 25 percent, if Trump eventually decides to impose them, should negotiations on export limit break down.
RENEWED SPARRING OVER AIRCRAFT SUBSIDIES
The United States has recently accused the EU of illegally subsidizing Airbus and the EU has in turn challenged the United States for aiding Boeing Co, ratcheting up a protracted bilateral dispute over aircraft subsidies.
In April, Trump, citing EU subsidies to Airbus, said the United States will impose tariffs on 11 billion U.S. dollars' worth of products from the EU. The Office of the United States Trade Representative (USTR) also issued a statement saying it has begun a process under Section 301 of the Trade Act of 1974 "to identify products of the EU to which additional duties may be applied until the EU removes those subsidies."
About a week later, the European Commission threatened to place additional tariffs on 20 billion dollars' worth of U.S. goods, as countermeasures against what Brussels deems as American subsidies to Boeing.
At a two-day public hearing held by the USTR on Wednesday and Thursday, U.S. companies and interest groups representing a wide range of industries lined up to voice their grievances over the potential tariffs Washington is threatening on imports from the EU.
"It is American consumers and our heartland that has borne the brunt of America's global trade war," said Hun Quach, vice president of international trade at the Retail Industry Leaders Association.
There has been a decade-long fight in the WTO between the two sides over subsidies to Airbus and Boeing, the world's two leading aircraft manufacturers. The WTO has previously ruled that both the United States and the EU provided illegal subsidies to their airlines.
"Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft," U.S. Trade Representative Robert Lighthizer said in the statement in April. "When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted."
The EU also showed it's willing to resolve the issue through dialogue. Brussels doesn't want a "tit-for-tat," Malmstrom said in a statement.
"While we need to be ready with countermeasures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the U.S., including in bringing an end to this long-standing dispute," Malmstrom said.
