No Sweeping Free Trade Deal, Brussels Tells Washington

Six months after U.S. President Donald Trump proclaimed he’d already reached a trade deal with the European Union, Brussels has only now laid out its preliminary conditions for talks. And they don’t point to a quick or a comprehensive trade pact, or, more importantly, one that could ever pass muster with the U.S. Congress—adding to two years of Trump administration failures when it comes to trade.

The European Union on Friday released its objectives for trade talks with Washington, which are, by design, focused and narrow. Brussels hopes to slash the existing tariffs on trade in industrial goods between two of the world’s biggest economic blocs, and to harmonize some regulations, but made clear it has zero interest in a full-fledged free trade agreement with the United States.

“We are not—and I want to be very clear—we are not proposing to restart a broad free trade agreement negotiation with the United States,” said EU Trade Commissioner Cecilia Malmstrom at a press conference on Friday.

To drive home the limited nature of the European proposal, Malmstrom underscored that discussion over greater access for U.S. agricultural products in Europe is off the table. The position is at odds with the negotiating objectives released by Trump’s trade team last week and makes it virtually impossible any agreement could win Senate approval.

“We are not proposing any negotiations with the United States to reduce or eliminate tariffs on agricultural products,” Malmstrom said, reiterating the agreement reached in July 2018 by Trump and EU President Jean-Claude Juncker.

The U.S. trade objectives, published earlier this month, call for much greater access to the European market for U.S. agricultural products, which is a big issue for Trump’s base but a non-starter for many powerful EU member states. Europe did highlight its increased imports of soybeans, which were diverted east after China refused to buy any more U.S. beans because of the trade war between Washington and Beijing, but there are no further discussions planned on agricultural access.

The gaping chasm between how Brussels and Washington view the trade negotiations points to trouble, especially because the Trump administration, after two full years in office, has nothing to show for its campaign-trail promises of “quick wins” to deliver new trade deals.

Trump pulled out of the world’s biggest trade pact his first week in office, severely limiting access to Asian markets for U.S. farmers and manufacturers. The slightly renegotiated North American Free Trade Agreement must still win congressional approval, and the House is now in Democratic hands. Talks to begin discussions with Japan over a trade deal are now underway, though with plenty of contentious issues to deal with. There is no short-term prospect of any trade agreement with the United Kingdom, which is currently on the verge of leaving the European Union. Trump’s lieutenants did secure one partial success: cosmetic but unimportant changes to the existing free trade deal with South Korea. At the same time, the Trump administration has soured relations with friends and foes alike by levying tariffs on steel, aluminum, and other goods, and threatening steep tariffs on imported cars.

The looming impasse with Europe over trade underscores the difficulties Trump’s trade insurgents have encountered.

“The lack of motion on trade deals in prior administrations wasn’t because of laziness or a lack of imagination. It’s because there were very real constraints,” said Philip Levy, a senior fellow on the economy at the Chicago Council on Global Affairs.

The United States and Europe spent years during the Obama administration hashing out prickly issues with a view to completing the Transatlantic Trade and Investment Partnership, a trade agreement with the entire EU, but the Trump administration quickly iced that when it took office. Last summer, amid rising trade tensions due to Trump’s use of tariffs on EU and NATO allies, leaders signed an apparent truce, agreeing to hold off on further tariffs while trade talks continue. The joint statement made clear that any agreement would be limited and would not address the main U.S. objectives. Trump at the time touted it as a done deal.

Malmstrom, the EU trade commissioner, reiterated Friday that the EU objectives are in line with what the two presidents agreed to last July, and she added that she has made clear to U.S. trade officials and lawmakers that agriculture will not be part of the talks.

More than any other issue—and there are dozens of potential sticking points on everything including the treatment of digital information and phytosanitary inspections—access for U.S. farm goods is the hinge for trade talks between the United States and Europe. U.S. farmers, hammered by two years of uncertainty over NAFTA, the loss of a huge trade deal in Asia, Chinese boycotts, and falling prices, are desperate to line up new markets. But that won’t happen with Europe—which will make it nearly impossible for Congress to sign off on any such accord.

“You can’t get a limited deal through the Senate,” Levy said. Agricultural interests are overrepresented in the upper chamber, and lawmakers such as Iowa Republican Sen. Chuck Grassley have been vocal about opening up new outlets for farmers who’ve seen their export markets shrink. There won’t be many other chances for U.S. farmers to crack the EU market, either: World Trade Organization talks are moribund, and the proposed Transatlantic Partnership is dead. “If you are a U.S. agricultural exporter hoping to gain access to the EU, and you’re told to wait until next time, when is that?” Levy said.

Hampering all U.S. trade relations is the Trump administration’s insistence on resorting to protectionism to advance its economic goals, even at the cost of alienating close allies. Canada and Mexico, for instance, both still face tariffs on their steel and aluminum exports—even after agreeing to renegotiate NAFTA. Europe also suffers U.S. tariffs on steel and aluminum—and it has made clear those will have to end before any trade agreement is signed—as well as the prospect this spring of hefty tariffs on cars and car parts. Malmstrom made clear that any imposition of auto tariffs would have a “very damaging effect” on talks, instead of forcing Brussels to the table.

That makes many trade analysts wonder if the Trump administration, led by the self-proclaimed “Tariff Man,” isn’t really interested in free trade after all.

“What I am seeing is lots of tariffs and very little trade negotiation,” said Simon Lester, a trade expert at the Cato Institute. “They have tariffs in place, maybe that’s all they really wanted.”