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U.S. President Joe Biden is rushing to recruit the EU as an ally against China, but wary Europeans want him to end trade hostilities against them first.
Biden would love to use an EU summit in Brussels on Tuesday to show that America and Europe can unite against Beijing in the showdown for technological and trade supremacy in the 21st century.
A big deal on planes would help rebuild trust. In the hours running up to the summit, negotiators were trying to lock down a permanent fix to the 17-year dispute over subsidies paid to plane makers Airbus and Boeing but it was unclear on Monday night whether they would make a historic breakthrough on a case that has outlasted three U.S. presidents, five U.S. trade representatives and six EU trade commissioners.
Even if an 11th-hour deal is struck, Europe wants Biden to go further. The problem is that, behind all the smiles expected at the transatlantic lovefest, EU officials are fuming that Biden hasn’t ended the trade war initiated by his predecessor Donald Trump, who slapped heavy tariffs on the EU. While the two sides are likely to produce a joint statement stressing their common goals, the grumpy European camp has a laundry list of unresolved differences in areas such as data transfers, green taxation and a global trade court, where U.S.-EU rifts are proving to be every inch as difficult to patch up as those with China.
On the most toxic issue of Trump-era tariffs on steel and aluminum, EU trade chief Valdis Dombrovskis has urged Biden to “walk the talk” on his trip to Europe and drop the duties.
Although such a move would be the decisive signal of U.S. goodwill and could help win EU support for a broader realignment against Beijing, with which Brussels struck a landmark investment deal in December, Biden seems in no hurry to bury that hatchet. When asked at a press conference on Sunday what he would do about the EU tariffs, the U.S. president said: “A hundred-twenty days,” referring — roughly — to how long he’s been in office. “Give me a break. I need time.”
Planes, PCs and passwords
The lowest hanging fruit for a transatlantic rapprochement would be a peace deal on state subsidies to Airbus and Boeing. Both sides are sick to death of the case and negotiations for a permanent settlement are going at full pelt. That dispute is, however, proving hard to put to bed by the time Biden meets EU Council President Charles Michel and Commission President Ursula von der Leyen on Tuesday. The Commission is pushing hard for a deal, but the big question mark hinges on whether plane making countries such as France, Germany and Spain will back the accord.
People following the case said on Monday night there were still major differences over what kind of subsidies should be allowed for airplane makers.
“The talks are constructive … but it is unlikely that we will have a deal before July 11,” said Bernd Lange, chair of the European Parliament’s trade committee, when asked about attempts to resolve Airbus-Boeing.
The EU and America agreed in March to suspend retaliatory tariffs in the Airbus-Boeing dispute for four months, creating the July 11 deadline. This hiatus was meant to give them time to negotiate a solution, but the clock is ticking.
Lange argued that it was already big progress that both sides were negotiating constructively and had frozen their retaliatory tariffs on products like cheeses, spirits and wines.
In a closed-door meeting with EU trade diplomats on Friday, the EU’s top trade civil servant Sabine Weyand lamented the lack of commitment from the U.S. side. According to one EU diplomat, Weyand complained the U.S. wanted more transparency on EU subsidies, but refused to reciprocate.
Theoretically, the July 11 deadline can be extended again. But a second EU diplomat feared that an extension would simply mean “kicking the can down the road.”
In an effort to conjure up positive news, Biden and von der Leyen will on Tuesday announce the creation of the new Trade and Technology Council body to have a wide-ranging partnership around technology and trade.
Both sides will set up joint policy teams to help create transatlantic positions on a number of global trade and tech standards. Those teams will include a focus on artificial intelligence, cybersecurity and so-called export screening — a step toward a united front against the rise of China’s digital ambitions worldwide.
One EU official said the goal was to create regular meetings between Washington and Brussels to avoid the Council from becoming a paper tiger. Previous efforts like the George W. Bush-era Transatlantic Economic Council fizzled into obscurity as policymakers did not meet regularly to push a unified agenda — which explains the skepticism among many trade diplomats.
The new trade and technology body is a sign of willingness from both sides to turn over a new leaf. And if a face-saving deal on aircraft subsidies is made within the set July deadline, it would certainly be a defining moment of Biden’s tour.
But it would not mark the end of the transatlantic trade war.
So-called Section 232 measures, where Trump cited national security to impose tariffs on steel and aluminum, ignited a global trade war. Brussels in May hit the pause button on retaliatory tariffs to find a long-term solution for the global steel overcapacity, but Biden faces internal pressure from steelmakers and unions to maintain them.
On the technology front, Washington and Brussels are still far from reaching a deal on transatlantic data flows — the bedrock of billions of euros of annual trade — almost a year since Europe’s highest court invalidated the previous pact. The Biden administration is eager to secure a political agreement with the EU on how to unlock the issue, hoping to score a win on the problematic area that has been years in the making.
Yet, the Commission is still wary of backing the U.S. plans after EU negotiators raised concerns that they had yet to receive legally binding proposals from Washington on how the U.S. would limit the ability of its national security agencies to access EU citizens’ data without judicial oversight. That thorny issue, which pits American national interest against upholding EU privacy rights, must be overcome if a new data transfer agreement can be reached that will survive a likely legal challenge in European courts.
The Biden administration has also not made any move to resolve the blockade of the World Trade Organization’s court system.
These are only some of the issues where Brussels and Washington don’t see eye-to-eye. In addition, the EU’s planned carbon border levy that would seek to put a price on imports of aluminum, cement, fertilizer and electricity to make up for production in areas with laxer green rules is another bugbear in EU-U.S. relations.
But having a common enemy in China may, as Biden hopes, help to strengthen transatlantic bonds. Airbus Chairman René Obermann on Monday warned of the imminent Chinese push into the civil aircraft market, which Airbus and Boeing currently dominate.
“Aviation is increasingly influenced by digital technologies and the entry of new competitors into the market. A new, important one comes from China,” he told Handelsblatt in an interview. “In [telecoms], the Chinese competition, especially Huawei, has more or less conquered the global industry within a decade. If we want to defend our world market leadership in aviation ten or 15 years from now, we have to make every possible effort to achieve efficiency and innovation,” he said.
“At some point, both sides of the Atlantic have to look up from their mutual fights and look toward China,” one EU diplomat agreed.
He acknowledged, though, that U.S. and EU leaders have not yet reached that point.
Sarah Anne Aarup and Jacopo Barigazzi contributed reporting.
This story has been updated.
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