Politics

No 'deals under pressure': EU takes trade worries to White House

U.S. President Donald Trump bragged on Twitter Tuesday that "everybody's talking" now and ready to negotiate because of harsh American tariffs on imports. But there's no evidence his administration is listening to the chorus of voices advising him against following through on his threat to impose tariffs on auto imports.

Most witnesses at U.S. Commerce Department hearings told Trump not to impose 25 per cent tariff on cars

U.S. President Donald Trump hosted a "Made in America Product Showcase" at the White House on Monday, part of his administration's efforts to bolster domestic industries and reduce what he says is America's problematic trade deficit. (Evan Vucci/Associated Press)

U.S. President Donald Trump bragged on Twitter Tuesday that "everybody's talking" now and ready to negotiate trade terms with the United States because of his administration's aggressive tariff policy.

But there's no evidence the White House is listening to the chorus of voices advising against his presumptive follow-up tariff target: auto imports. There's also no sign other countries are prepared to give in without securing concessions from the American side.

European Commission President Jean-Claude Juncker and his trade commissioner Cecilia Malmström arrive at the White House Wednesday as trading nations — Canada included — carry on an anxious debate over how to respond to the Trump administration's data-defying trade agenda.

"They're coming in to see me Wednesday and we'll see if we can work something out," Trump said Monday. "Otherwise, we'll have to do something with respect to the millions of cars that they send in every year."

By showing up in Washington prepared to talk, have the Europeans already given Trump a win?

"We will not make deals under pressure," said Bernd Lange, the German member of the European Parliament who chairs its international trade committee. "It could only be talks about talks."

Trump does things his way, disregarding and defying the multilateral rules-based trading system previous U.S. administrations built and shaped.

"Of course there are some problems in the global trading system, no doubt about it," Lange told CBC News earlier this month. "I suspect that Mr. Juncker will have in his luggage some ideas for reforming the World Trade Organization, its rulings, the dispute settlement mechanism as well.

"But he will not have a specific proposal for a deal with the United States."

Talk beats tariffs?

If Trump agreed to enter into negotiations on auto tariffs — with the EU or with all major auto manufacturing countries, as the WTO may require — it could offer an off-ramp away from an escalating loop of tariffs and counter-tariffs that not only taxes consumers and manufacturers, but also bends the global trading rules players like the EU and Canada want to uphold.

European Commission President Jean-Claude Juncker. (Francisco Seco/Associated Press)

German Chancellor Angela Merkel said Friday that the EU's current work on countermeasures was "by far, the worse solution."

Countermeasures such as retaliatory tariffs — which drive up prices and ultimately threaten jobs — are not Canada's preferred approach to car tariffs either, said Canada's deputy ambassador in Washington, Kirsten Hillman, at the Commerce Department's public hearings last Thursday.

Well, then. Time to talk?

That seemed to be what was happening — in an unconventional way —earlier this month.

The German business daily Handelsblatt reported that Trump's ambassador in Berlin, Richard Grenell, invited a small group of German auto executives, including BMW and Volkswagen, to a secret meeting at the embassy to propose abolishing tariffs on each other's cars. Currently the U.S. auto tariff is 2.5 per cent (25 per cent on trucks), while the EU's is 10 per cent.

That was Grenell colouring way outside the lines. First, trade negotiations occur between countries' negotiators and ministers, not between ambassadors and CEOs.

Second, Germany doesn't negotiate its own trade policy — that's the EU's role. And other EU players (France, come on down) want to stand tough against Trump.

"Of course we have some nuances inside the European Union," Lange said, adding that doesn't mean it will bow to pressure. "As we were united … in the steel case, I suspect we will also be united in the car case."

The Trump administration's desire for the EU to simply drop all car tariffs isn't a realistic approach, Lange said.

Lange, the former rapporteur for the EU-U.S. Transatlantic Trade and Investment Partnership (TTIP) talks under the Obama administration, said any deal worth doing must go beyond cars and include trade in services and procurement as well.

And if the U.S. only wants to talk about cars?

"We have a good understanding with partners like Canada and Japan that we stick to our multilateral system and we will only make some steps if the partners are on board," Lange said. "If we were to discuss the reduction of tariffs on cars, then the only chance would be a plurilateral agreement with the relative market partners worldwide."

'Very different situation'

The Canadian government hasn't fully disclosed the scope or substance of its own conversations with "partners."

When South Korea's trade minister Kim Hyun-chong came to Ottawa last week to meet with Foreign Affairs Minister Chrystia Freeland, there was no press release and no social media from Canada's side.

But The Korea Herald reported that the two countries, which both have broad free trade agreements with the U.S., agreed to "jointly deal" with the U.S. tariff move and put up a united front to defend their auto industries.

"We're clearly working with Europe and with other partners around the globe in terms of trying to preserve but improve the rules-based trading approach," Canada's U.S. Ambassador David MacNaughton said on CBC Radio's The House last weekend. But he added Canada and the EU face "a very different situation in terms of autos."

"I don't think there's any common ground on that, other than the fact that [section 232, the U.S. law that enables the tariff on national security grounds] shouldn't be used for silly purposes," the ambassador said.

"Where is the necessary nexus between civilian vehicles and national security? It simply does not exist, and there is no credible basis upon which to conclude that it does," Hillman told the Commerce hearings.

Does Trump care?

"The idea that you're going to talk reason ... and he's going to change his mind, just strikes me as a completely wrong reading of the man," said trade lawyer Mark Warner.

'You need to give him a real, tangible win'

Canada sits in an awkward spot, even without the threat of car tariffs hanging overhead.

Canada has trade agreements that include automotive deals with the EU and the 11-country Trans-Pacific Partnership (including Japan). The U.S. doesn't.

NAFTA negotiations are set to restart with the U.S. and Mexico this week. Some thought a NAFTA automotive deal was close to completion when negotiators hit pause on the talks for Mexico's presidential election last spring.

Good luck trying to keep Trump from using the threat of auto tariffs in an attempt to secure leverage in the NAFTA talks, Warner said.

"As a negotiator, linkage is what the other guy says it is," Warner said. "If he thinks there's a linkage, there's a linkage.

"You need to give (Trump) a real, tangible win on something. Talks are not going to do it for Trump."

Only America can hit brakes?

"I would not expect a glorious agreement to be coming out of this [EU] meeting," said Martha Harrison, a partner in McCarthy Tétrault's international trade law practice. The best they may be able to do, she said, is agree to keep talking.

Juncker's conversation could "calm the rhetoric, calm the environment, so the administration could be in a position to make more of a level-headed decision," she added.

What may slow or stop the escalation of Trump's tariff war is domestic pressure.

Normally, Americans apply tariffs because an industry wants protection from a perceived threat. "That hasn't happened in this case," Harrison points out. American carmakers oppose Trump's tariff pitch.

The political heat is ramping up as well. On July 11, the U.S. Senate voted 88-11 for more congressional say over tariffs.

"Right now I think Americans would really like to see a cool down, and are demanding that," said trade economist Tori Whiting from The Heritage Foundation, a conservative think tank in Washington. 

"The administration does not have many allies in their efforts to increase tariffs on automobiles. Forty-four of the 45 folks who testified in front of the Commerce Department last week were all saying, 'Please, don't do this.'"

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