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Trump is Escalating the Trade Fight with Europe-and There’s No Easy Way Out

  • Edward Alden
  • Aug, 2020
  • 158
  • U.S. Voice

Not even a Biden victory would heal the wounds in the U.S.-EU relationship

When the United States and the European Union fight over trade, it might lack the intensity and geopolitical impact of the U.S.-Chinese trade war. But what trans-Atlantic trade disputes have so far lacked in drama, they make up for with a history of irreconcilable differences and sheer tenacity-which does not bode well for the relationship going forward, no matter who wins the U.S. presidential election.

Take the dispute of more than 15 years over the various government subsidies enjoyed by rival aircraft-makers Airbus and Boeing. On Friday, Airbus and the European Commission announced they would change the terms of state support in an effort to persuade the United States to lift $7.5 billion in tariffs. The move came after Washington escalated the dispute last month by serving notice that it would strike the EU with a particularly punitive form of tariffs. Under the so-called carousel retaliation, the United States said it would rotate its current tariffs of 10 to 25 percent on European products to a different set of items every six months, affecting goods such as trucks, beer, olives, and gin. Washington has not yet said whether it is prepared to lift the tariffs in response to the EU’s new move. The two sides have a history of rejecting each other’s overtures.

The ongoing Airbus-Boeing dispute was one of several that derailed the grandly named Transatlantic Trade and Investment Partnership, which was supposed to be a comprehensive deal to align the two superpowers of trade at a time when the growing challenge from China was becoming apparent. But in 2016, after three years and 15 rounds of negotiations, the planned agreement died without a single chapter being concluded. Growing popular opposition on both sides of the Atlantic to trade deals that were seen as infringements on sovereignty, and the inability of Brussels and Washington to agree on the proper role for government regulation and subsidies, doomed the effort. Few mourned its passing when the deal was quietly abandoned, even before President Donald Trump assumed office and began his systematic pushback against trade.

Today, with the once rule-bound world of global trade nearly unrecognizable, the failure of that U.S.-EU deal looms much larger. An increasingly assertive China, which has refused to bow to U.S. trade demands-while cracking down on domestic dissent and imposing a new security law on Hong Kong-needs a strong, coordinated response from the United States and Europe, which share similar interests and together dominate global trade. Instead, the two are mired in their own increasingly caustic trade battles.

Last month, Trump reiterated his threat to impose a hefty tariff on European cars, mainly aimed at German companies such as Volkswagen and Daimler. In front of reporters last week, Trump claimed that the EU was “formed in order to take advantage of the United States,” and he has frequently said that Europe “treats us worse than China.” The United States has also launched an investigation under Section 301, the same law used to impose tariffs on China, into new digital taxes levied or under consideration in the EU and several of its member states. The EU, in turn, has promised to retaliate in kind against any new U.S. tariffs. EU Trade Commissioner Phil Hogan warned that he expected an especially turbulent relationship with the United States in the months leading up to the November presidential election.

The feud is particularly corrosive given the otherwise shared values of the world’s two largest trading powers, which should be a model to the rest of the world. The building of the modern global trade system was a project led by the United States and Europe over several decades following World War II. If the two cannot find ways to cooperate-on trade and economic relations, on defense, and on shared global challenges such as pandemics and climate change-then the prospects for the future world order are dim. Instead, the two are now setting an example of how not to resolve differences.

How did the relationship deteriorate so badly-and can it be healed? A good place to start, both to understand the underlying U.S.-EU tensions and to learn lessons for resolving them, is the futile struggle between Boeing and Airbus over dominance of the world’s civilian aircraft market. Since Airbus’s government-backed creation in 1970, initially as an alliance of several smaller European aircraft manufacturers, it has been Europe’s champion and a global leader in aviation. Boeing has lost much of its luster since the two deadly crashes of its new 737-MAX aircraft in 2018 and 2019, and the subsequent allegations of safety oversights, but the company is still the largest U.S. exporter and the closest thing to a national manufacturing champion. The...

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