EU-US trade agreement potentially harmful to Europe's economic prosperity, according to economist's perspective
EU-USA Trade Deal Renegotiations: A Closer Look
The EU-USA trade deal, originally signed in 2018, is set for renegotiations in the coming years, with a focus on adjusting tariff regimes, investment commitments, and sector-specific carve-outs. These renegotiations are aimed at addressing unresolved tensions and economic disadvantages, particularly those highlighted by Jens Südekum, a chief advisor to Federal Finance Minister Lars Klingbeil (SPD).
Südekum has pointed out that the trade imbalances often alleged by Trump do not apply to the EU when considering services and capital flows. However, he believes that the current deal is economically disadvantageous for Europe, a view he expressed in a guest article for the "Handelsblatt" (Wednesday edition).
One potential tool for renegotiations is a list of products on which the USA has agreed to waive tariffs. According to Südekum, using this list could turn the current agreement into a "real trade deal". EU governments and industry groups are lobbying for exemptions or adjustments to reduce the tariff impact on sensitive sectors.
Tariff adjustments and carve-outs are a key aspect of the renegotiations. The current deal proposes a baseline 15% tariff on EU exports to the U.S., a compromise from a threatened 30%, but still burdensome for many European industries. Notably, there are no carve-outs for wine, a significant export for many EU countries.
In addition to tariff adjustments, the EU is expected to increase imports of U.S. liquefied natural gas (LNG) and make other investment pledges. These commitments are part of the deal framework and may be further negotiated to balance trade flows and ease economic strains on the EU.
Negotiations could also facilitate or coincide with the EU’s drive to modernize industrial policy to better withstand trade headwinds. This includes incentivizing investment in R&D, automation, and diversification to reduce reliance on vulnerable export markets and mitigate economic disadvantages.
Further talks are anticipated to recalibrate tariffs and trade rules to better align with EU economic interests and address Südekum's concerns about competitive disadvantages. These sessions could help lower or exempt tariffs on critical EU export sectors, enhance investment commitments and trade flexibility, support EU industrial policy modernization, and ensure that the EU’s trade stance avoids retaliatory escalations that could harm fragile transatlantic supply chains.
Despite the criticism, Südekum acknowledges that Europe has little power to counter Washington's aggressive course. Some EU countries view the deal as "an act of self-diminishment" or "the death knell for free world trade". However, Südekum sees opportunities for renegotiations, emphasizing that the EU-USA trade deal is not yet finalized.
[1] European Commission, "EU-US Trade and Technology Council: Joint Statement," 2021. [2] European Commission, "EU-US Trade and Technology Council: Joint Staff Working Document," 2021. [3] European Commission, "EU-US Trade and Technology Council: Factsheet," 2021.
In the context of ongoing EU-USA trade deal renegotiations, business sectors and politicians are closely observing the adjustments made to tariff regimes and sector-specific carve-outs, as these changes could have significant financial implications. (finance, business)
The ongoing trade negotiations between the EU and USA are not only focused on tariff adjustments but also extend to the modernization of industrial policy, which includes investment in R&D, automation, and diversification, all of which are influenced by political decisions. (politics, general-news)
