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Hello from Pittsburgh, where your intrepid journalist bravely traveled (well, caught a plane) to bring you all the latest news from the premier business and tech summit hosted by top US and EU officials.
I’m happy to report that the early evening flight from DC apparently had half the staff of the Office of the United States Trade Representative (USTR) and Department of Commerce, as well as Secretary of Commerce Gina Raimondo and Chief of American Trade Katherine Tai. The EU delegation, including EU Trade Chief Valdis Dombrovskis, was also full – which had the slightly comical effect of making our trip to Pittsburgh a bit redundant, given that the characters concerned were all in situ in DC. Perhaps this is part of the Biden administration’s efforts to make the Rust Belt part of heart-beating trade policy. Whatever the reason, it’s nice to be in Pittsburgh and move from one hectic metropolis to another every now and then. I will definitely try very hard to see some of the sights of this great city in Pennsylvania.
Our note today picks up a bit from the top, which has yet to start at the time of writing, but focuses primarily on steel (speaking of Pittsburgh) and aluminum, the subjects of a exceptional cut of commercial beef from the Trump era between the two sides.
Chartered waters, meanwhile, looks at the rise in the price of peas.
Is Europe committing to quotas?
So here we are in Pittsburgh (can you tell I’m excited to be leaving DC?) For the first business and technology council to be held between the US and the EU. For a moment it seemed that the French might derail this. We have written a lot about the TTC (as it is called) already and we expect all joint statements made today to be based on drafts seen by Trade secrets, pretty boring.
As my Brussels colleague Alan Beattie pointed out, some of the most urgent items on the agenda will really be better addressed at Member State level (see his note on the state of play of export controls here). The United States knows this, although that hasn’t stopped Raimondo from telling us that she hopes to move the file forward this week (“it’s a high priority”). There will of course be other commitments to “tackle non-market economies” and all that jazz, and European diplomats insist that the meeting is always a good thing because it creates a new forum in which to discuss. the future.
Yet there is one point that is not on the agenda and is in fact very urgent – the Trump-era US tariffs on European steel and aluminum. In 2018, Trump imposed high tariffs on steel and aluminum imports from Europe and other countries, based on the controversy on national security grounds (so-called tariffs of the article 232), and although a solution has been found with Canada and Mexico, there is not one with Europe.
In May, both parties reach relaxation when Europe agreed to delay raising its retaliatory tariffs on clothing, bourbon and motorcycles until December 1. But time is running out. Visiting Washington on Tuesday, EU trade chief Valdis Dombrovskis said Brussels actually needs to decide what to do – whether or not to reinstate those tariffs – closer to early November, which means that an agreement must indeed be concluded in a little over a month. Dombrovskis was to have serious tariff meetings with Raimondo (Section 232 tariffs are under trade jurisdiction) and Tai before leaving for Pittsburgh.
So what is the way forward? Various ideas have been put forward by savvy trade observers, including strengthened surveillance mechanisms to stop transshipment (whereby steel from countries known to overproduce dodges tariffs by being processed through a third country) and quotas, with a tariff triggered when imports exceed historical standards. This is usually calculated roughly as the average of the previous three years.
This, I suppose, is where part of the feud between the EU and the US lies. You will recall that Canada was quite angry when Bob Lighthizer removed its aluminum tariffs and then reimposed them because of what he called a “surge” in imports. Opponents of the tariffs argued that yes, there was more Canadian aluminum entering the United States than when it was tariffed, but the volume was at a similar level to 2017 and before.
There is also some difficulty in complying with the WTO if S232 tariffs were converted into “safeguards” designed to handle a sudden influx of imports. Yesterday, Dombrovskis was very careful not to question whether he thought the US agreements with Canada and Mexico, or the tariffs, were WTO-compliant. But he said that any deal with Europe would have comply with the WTO, and that it “would respect historic trade flows pre-Trump tariffs.” Which sounds a lot to us as if Europe is heading down the quota route, but we really couldn’t get more from Dombrovskis before his encounters with Tai and Raimondo.
A broader point: the legality of S232 tariffs has been contested by several countries. Europe and Washington will want to avoid an embarrassing fight at the WTO, which in this case would be forced to rule on the legitimacy of what is a trade response to a national security problem. It would not be good for the reputation of the WTO among its many skeptics in Washington: it does not need to give more ammunition to its enemies here.
Finally, it’s important to remember that the steel industry in particular is a powerful political element, with factories in states President Biden wants to try to win, including Indiana, Ohio, and Pennsylvania. United Steelworkers, the union, supports tariffs, as does the AFL-CIO, America’s largest federation of unions. And if we know one thing about Biden’s trade policy, we know it’s ‘worker-centered’, so union support seems important. However, many American companies have complained about tariffs on steel and aluminum, including companies that process raw alloys into boxes and large sheets or plates.
Either way, the Biden administration, which is trying to conduct trade policy that wins back the voices of industrial workers, is going to have to be cautious. Just taking tariffs away won’t reduce it – it wouldn’t go down well, for example, in Pittsburgh. The name of their powerful football team? The Steelers.
They might not be the world’s most glamorous product, but the humble peas are seeing some kind of price spike. The prices of Canadian peas, often used by producers of meat substitutes, have skyrocketed in recent times.
It’s not just a growing demand for non-meaty alternative proteins, it also reflects a supply shortage due to a drought in Canada this summer. Claire Jones
Gina Raimondo said that Biden administration will push US companies to trade with China even as Washington takes an increasingly tough stance on Beijing on human rights and national security. “As the president said, we have no interest in a cold war with China. It’s too big an economy – we want to have access to their economy, they want to have access to our economy,” he said. Raimondo.
Meanwhile, the European Commissioner for the Internal Market Thierry breton is in Asia to court Tokyo and Seoul as partners of the European Chips Act, present Europe as a buffer amid trade tensions between the United States and China. (Nikkei, $).
Staying with China, new research suggests that its Belt and Road Initiative left dozens of low and middle income countries struggling with “hidden debts” totaling $ 385 billion. The results imply that the financial liabilities of many countries linked to that of President Xi Jinping characteristic foreign policy initiative have been systematically underestimated for years.
Sahil Bloom To an excellent Twitter thread explain the problems of global supply chains. And finally, in the latest issue of the Trade Talks podcast, hosts Soumaya Keynes and Chad P. Bown discuss Europe’s trade policy and why the EU is developing a host of new policy tools to address concerns about bullying by business partners.