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Info Service on WTO and Trade Issues (Jul25/30) Geneva, 28 Jul (D. Ravi Kanth) — The United States and the European Commission concluded a framework agreement at a private meeting at the Turnberry Golf Resort in Scotland on 27 July, with Brussels reportedly agreeing to a unilateral tariff of 15% on all its goods entering the US market, including automobiles and auto parts, as well as purchases of hundreds of billions of dollars in energy and military equipment from Washington. The European Commission President, Ms Ursula von der Leyen, claimed that the deal will avert a trans-Atlantic trade war, though the bilateral agreement allegedly violates the WTO’s binding tariff commitments as set out in Article II of the GATT. The EU, which all along claimed that it strictly adheres to the WTO rules, has seemingly opted for a bilateral deal at the expense of the multilateral trade rules, said people familiar with the agreement. The agreement was finalized in one hour after US President Donald Trump severely criticized the EU as to how it has allegedly ripped off the US over the years (see below). Ms Von de Leyen has also agreed to open the doors to American agricultural products and automobiles to enter the EU market, according to President Trump at a brief presser at his Turnberry Golf Resort in Scotland on 27 July. “And very importantly, they’re going to purchase $750 billion worth of energy” from the US, while investing $600 billion in different areas in the US, and that “basically concludes the deal,” he said. “I mean, those are the main factors,” President Trump further said, adding that “I don’t think there are too many other factors, other than what we’re going to get.” President Trump congratulated his EU counterpart, saying, “I think it’s great that we made a deal today instead of playing games and maybe not making a deal at all.” Ms Von der Leyen claimed that “we have a trade deal between the two largest economies in the world… And it’s a big deal … It’s a huge deal.” She said that the deal “will bring stability” and “it will bring predictability.” “It’s 15% tariffs across the board, all inclusive,” she further said, instead of the 30% tariff on EU goods as was announced by the US earlier. “The investments Mr. President just described, they’re going to go to the United States and the purchases over there,” she added. The President of the European Commission also indicated that zero tariffs will apply to a range of American exports to the EU such as “all aircraft and component parts, certain chemicals, certain generics, semiconductor equipment, certain agricultural products, natural resources and critical raw materials.” The EU had earlier prepared a list of retaliatory measures against the US but placed it on the proverbial backburner on grounds that the measures will only kick-in if no agreement is reached. President Trump said the deal does not cover pharmaceuticals coming from the EU, which is one of the export items. “We’re going to be, as you know, a lot of companies are coming into the US [in the pharmaceutical sector], and that’s unrelated to this deal,” he declared. The US Commerce Secretary Howard Lutnick, who was present at the briefing, said that Washington will be announcing pharmaceutical tariffs under Section 232 of the Trade Expansion Act of 1962 on grounds of national security in order to bolster its domestic production. He said that the US and the EU will meet in a fortnight to discuss the pharmaceutical tariff issue. Ms Von de Leyen said that “the starting point [of the bilateral negotiations] was an imbalance, a surplus on our side and a deficit on the US side,” adding that “we wanted to re-balance the trade relation.” “And we wanted to do it in a way that trade goes on between the two of us across the Atlantic, because the two biggest economies should have a good trade flow between us,” she insisted. Another area of contention is computer chips, and it appears that the US is also planning to impose Section 232 tariffs on chips. “Well, the expectation is in two weeks’ time, we’re going to come out with our chips [tariffs],” Lutnick said. “But we were going to be bringing chip manufacturing back to the United States from there,” said President Trump, adding that “we’ll be doing a lot of chips [manufacturing].” He said some American cars and pick-up trucks, together with SUVs, can now enter the European market. President Trump was seemingly outraged at the closed-door policies adopted by the EU, an hour before the two teams hammered out the framework agreement. Both sides initially kept saying that the deal remains at 50-50, with President Trump expressing his unhappiness while simultaneously insisting that Washington wants fairness. In contrast, the President of the European Commission acknowledged that Brussels enjoys a trade surplus with the US in two-way trade between the two trans-Atlantic giants, totalling around $1.7 trillion, emphasising that the EU wants to “re-balance” the trade, as opposed to President Trump’s demand for a “fair” agreement. President Trump said “we look forward to talking to see if we can do something,” suggesting that “we’ve had a very good relationship over the years, but it’s been a very one-sided transaction, very unfair to the United States.” “And I think both sides want to see fairness,” he said, insisting that “it’s been a very, very one-sided deal, and it shouldn’t be [that way].” He referred to Ms Von der Leyen as “Prime Minister Merkel” at one point. On her part, the President of the European Commission suggested that President Trump is a “tough negotiator and deal maker.” She said “we’re together the two largest economies worldwide … Right, if you look at the trade volume, it’s the biggest trade volume globally with 1.7 trillion dollars,” and with a huge market of 800 million people. President Trump mentioned the agreement that he concluded last week with Japan, pointing out that “we’re very close to a deal with China.” Even as he said that “we really sort of made a deal with China,” he added, “we will see how that goes”, as the negotiators from the US and China are scheduled to meet in Stockholm this week. He further said that “we have numerous other deals, and mostly I’m just going to charge tariffs” from 1 August. He claimed ” it’s not a deal per se, but people are going to pay tariffs and we’re doing them at the low end, not the high end, because we don’t want to hurt anybody,” though the unilateral tariffs seem to be hurting countries in their trade relations with the US. Despite displaying his eagerness to strike what he claimed is a big trade deal with the EU, President Trump said, “I’m actually not in a good mood, but I will tell you …” suggesting that he thinks “the chances are, yeah, I think Ursula would say probably 50-50 of making a deal.” He then said that there are “three or four sticking points I’d rather not get into, we’ll be discussing them but I think the main sticking point is fairness.” He suggested that it is a bad day “but now I think I look forward to this meeting. You know we’ve had a hard time with trade with Europe, very hard time, and I’d like to see it resolved but if it isn’t, well you know [we] have tariffs [of 30% on imports from Europe]. They’ll do what they have to do but we have a good chance of getting it resolved. We’ll probably know in about an hour.” He ruled out any change in the sectoral tariff of 50% on steel and aluminium, saying that the steel and aluminium tariffs have brought revenue to the tune of “hundreds of billions of dollars”. “So, you know, if they don’t want to pay tariffs, the best way to do it is just to build your plant in the United States,” he told the President of the European Commission, insisting that the EU has “to open up to American products” just as the US has opened up to European products. At the presser, he inveighed against the closed-door policies adopted by the EU because “we don’t sell cars and agriculture products [to] Europe.” “They want to have their farmers do it, and they want to have their car companies do it. … I’m not saying anything that nobody knows,” President Trump said, adding that “we have a rough situation. If we want to sell cars in Europe, we’re not allowed to. And as you know, they sell millions and millions of cars – Mercedes, BMW, so many different – Volkswagen – so many different cars, and so many millions of cars.” +
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