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US President Joe Biden is rushing to recruit the EU as an ally against China, but cautious Europeans want him to end trade hostilities against them first.
Biden would like to use an EU summit in Brussels on Tuesday to show that America and Europe can unite in the showdown for technological and trade supremacy in the 21st century against Beijing.
A big deal on airplanes would help rebuild confidence. In the hours leading up to the summit, negotiators tried to permanently resolve the 17-year-old dispute over subsidies for aircraft manufacturers Airbus and Boeing, but on Monday evening it was unclear whether they would achieve a historic breakthrough in a case that has three US presidents, five US sales agents and six EU trade commissioners survived.
Even if an 11 hour deal is struck, Europe wants Biden to go further. The problem is that behind all the smiles expected at the transatlantic love festival, EU officials are angry that Biden did not end the trade war initiated by his predecessor Donald Trump, which imposed high tariffs on the EU. While the two sides are likely to issue a joint statement emphasizing their common goals, the grumpy European camp has a laundry list of unresolved differences in areas like data transmission, green taxation, and a global trade court where the divisions between the US and the EU are than every inch as difficult to mend as the one with China.
Regarding the most toxic issue of the Trump-era tariffs on steel and aluminum, EU trade chief Valdis Dombrovskis has urged Biden to “speak up” and drop the tariffs on his trip to Europe.
While such a move would be the ultimate signal of US goodwill and could help win EU support for a broader realignment against Beijing, with which Brussels signed a landmark investment deal in December, Biden seems in no hurry to bury this hatchet. When asked what he would do with the EU tariffs, the US president said at a press conference on Sunday: “One hundred and twenty days” and referred – roughly – to his term in office. “Give me a break. I need time.”
The lowest hanging fruit for a transatlantic rapprochement would be a peace agreement on state subsidies for Airbus and Boeing. Both sides are terminally ill and negotiations for a permanent settlement are in full swing. Until Biden meets with EU Council President Charles Michel and Commission President Ursula von der Leyen on Tuesday, this dispute will be difficult to resolve. The Commission is pushing for an agreement, but the big question mark depends on whether aircraft manufacturers like France, Germany and Spain will support the agreement.
People following the case said Monday night there was still huge disagreement over what kind of subsidies should be allowed for aircraft manufacturers.
“The talks are constructive … but it is unlikely that we will reach an agreement before July 11th,” said Bernd Lange, chairman of the European Parliament’s trade committee, when asked about the attempts to resolve Airbus-Boeing.
The EU and America agreed in March to suspend the retaliatory tariffs in the dispute between Airbus and Boeing for four months, setting the deadline for July 11th. This pause should give them time to negotiate a solution, but the clock is ticking.
Lange argued that it was already a great step forward that both sides were negotiating constructively and freezing their retaliatory tariffs on products such as cheese, spirits and wines.
At a closed meeting with EU trade diplomats on Friday, EU chief trade official Sabine Weyand lamented the lack of engagement on the part of the US. According to an EU diplomat, Weyand complained that the US wanted more transparency on EU subsidies but refused to reciprocate.
In theory, the July 11 deadline can be extended again. However, a second EU diplomat feared that an extension would simply mean “kicking the can out on the street”.
To conjure up positive news, Biden and von der Leyen will announce the creation of the new Trade and Technology Council body on Tuesday to have a wide-ranging partnership around technology and trade.
Both sides will establish joint policy teams to create transatlantic positions on a range of global trade and technology standards. These teams will focus on artificial intelligence, cybersecurity and what is known as export screening – a step towards a unified front against China’s digital ambitions worldwide.
An EU official said the goal is to organize regular meetings between Washington and Brussels to prevent the council from becoming a paper tiger. Earlier efforts, such as the George W. Bush-era Transatlantic Economic Council, were forgotten as policy makers did not meet regularly to advance a unified agenda – which explains the skepticism of many trade diplomats.
The new trade and technology committee is a sign of willingness on both sides to turn a new page. And if a face-saving deal on aircraft subsidies is struck by the set July deadline, it would surely be a defining moment on Biden’s tour.
But it would not mean the end of the transatlantic trade war.
So-called Section 232 measures, in which Trump led national security to impose tariffs on steel and aluminum, sparked a global trade war. Brussels pressed the pause button on retaliatory tariffs in May to find a long-term solution to global steel overcapacity, but Biden is facing internal pressure from steelmakers and unions to keep it up.
On the technology front, Washington and Brussels are still a long way from reaching an agreement on transatlantic traffic – the basis of billions of dollars in annual trade – almost a year since Europe’s highest court invalidated the previous pact. The Biden government is keen to reach a political agreement with the EU on solving the problem in the hope of winning a problem area that has persisted for years.
Still, the Commission is still cautious about backing US plans after EU negotiators raised concerns that they have not yet received legally binding proposals from Washington on how the US would restrict the ability of its national security agencies without judicial oversight on that Access data from EU citizens. This sensitive issue, which puts American national interests against safeguarding EU data protection rights, must be overcome if a new data transfer agreement can be reached that will withstand a likely legal challenge in European courts.
The Biden government has also taken no steps to undo the blockade of the World Trade Organization’s judicial system.
These are just a few of the issues on which Brussels and Washington are not on par. In addition, the EU’s planned CO2 border levy, which aims to price imports of aluminum, cement, fertilizers and electricity to offset production in areas with more lax green rules, is another bogeyman in relations between the EU and the EU UNITED STATES.
But having a common enemy in China, Biden hopes, can help strengthen transatlantic ties. Airbus CEO René Obermann warned on Monday of the impending Chinese advance into the civil aircraft market, which Airbus and Boeing are currently dominating.
“Aviation is increasingly influenced by digital technologies and the market entry of new competitors. A new, important one is coming from China, ”he said Handelsblatt in an interview. “In the [telecoms], the Chinese competition, especially Huawei, has more or less conquered the global industry within a decade. If we want to defend our world leadership in aviation in ten or 15 years, we must make every effort to achieve efficiency and innovation, ”he said.
“At some point, both sides of the Atlantic will have to look up from their mutual struggles and look to China,” agreed an EU diplomat.
However, he acknowledged that US and EU leaders have not yet reached that point.
Sarah Anne Aarup and Jacopo Barigazzi contributed the reporting.
This story has been updated.
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