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EU Sees Progress in U.S. Trade Talks but Warns on Tariffs on Autos, Steel, Aluminum

Friday, February 01, 2019
Sandler, Travis & Rosenberg Trade Report

The European Union reports that it has made progress on a number of trade-related issues in talks with the U.S. since last summer but warns that additional movement would be jeopardized if the U.S. increases tariffs on imports of automobiles and auto parts from the EU. A decision on that issue could come as early as mid-February.

The U.S. and the EU announced in July 2018 an agreement to work toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. They also agreed to explore trade facilitating measures on services, chemicals, pharmaceuticals, and medical products; increase U.S. exports to the EU of soybeans and liquefied natural gas; pursue closer cooperation on standards; and work together on World Trade Organization reform and unfair trading practices around the world.

Following talks between EU Trade Commissioner Cecilia Malmström and U.S. Trade Representative Robert Lighthizer in Washington Jan. 8-10, the EU has issued a report on progress made to date on the issues set forth in the July 2018 agreement. Highlights of this report include the following.

- On Jan. 18 the European Commission submitted a proposal to the European Council for the launch of negotiations on the elimination of tariffs on industrial goods, together with draft negotiating directives.

- The EU has put forward ideas for stronger multilateral disciplines on industrial subsidies in the context of work on WTO reform.

- An agreement in principle has been reached to expand the scope of the U.S.-EU Pharmaceutical Good Manufacturing Practices Mutual Recognition Agreement to include veterinary drugs, with an informed decision anticipated by July. This MRA could be expanded to human vaccines and plasma-derived pharmaceuticals no later than 2022.

- The EU and US have pledged to cooperate to ensure the alignment of electronic database specifications for unique medical device identifiers and will develop a plan for a test of the compatibility of their respective UDI databases.

- Over the first 31 weeks of the marketing year (through Jan. 27, 2019) the EU imported 6.1 million tons of soybeans from the U.S., a 114 percent increase compared to the same period in 2017-18, giving the U.S. a 77 percent share of all EU soybean imports (up from 39 percent).

- The U.S. soybean industry’s voluntary sustainability certification scheme has been recognized under the EU's Renewable Energy Directive, a decision that, once in force, will open additional commercial opportunities for U.S. exporters.

- The EU has proposed to enhance cooperation on the development and use of new standards in support of regulations; e.g., in areas such as additive manufacturing, robotics, and automated and connected vehicles.

- The EU and U.S. are examining the possibility of holding a high level event on LNG in early May in Brussels.

- The U.S. has indicated some openness to relaxing its mandatory discretionary licensing requirement for export shipments to the EU but is looking for reassurance that it will continue to benefit from an open EU market to trade and investment.

However, the EU emphasizes that any action by the U.S. to impose tariffs or quotas on EU exports of automobiles and auto parts as a result of the ongoing Section 232 investigation “would be hugely disruptive” to the work outlined above and “would effectively block further progress on key elements.” In particular, such a move would “lead to the suspension of negotiations in industrial tariffs as well as to rebalancing measures in the area of steel and aluminium.”

In addition, the EU states that its proposed negotiating directives on industrial tariffs “envisage that the removal of [Section 232] restrictions on exports of steel and aluminium is a precondition for the conclusion of negotiations.” However, the EU notes that the U.S. has “made no movement” toward lifting those restrictions since July 2018.

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