The U.S. and the European Union released Aug. 21 a joint statement establishing a framework for a bilateral trade agreement that includes the provisions listed below. The two sides said they intend this framework to be “a first step in a process that can be further expanded over time to cover additional areas and continue to improve market access and increase their trade and investment relationship.”
It therefore appears that a final agreement must still be negotiated. The EU said it will “rapidly proceed … to implementing the main aspects of the deal,” including by translating key elements into legislative proposals. The EU said it will also “engage in negotiating an agreement on fair, balanced and mutually beneficial trade with the U.S. in line with the agreed framework.” Neither side indicated when those negotiations might be concluded.
Tariffs
- The EU intends to eliminate its import tariffs on all U.S. industrial goods and to provide preferential market access for a wide range of U.S. seafood and agricultural goods, including tree nuts, dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, and pork and bison meat. The EU said that in general these tariff reductions will be implement via product-specific tariff-rate quotas.
- The U.S. will apply the higher of either its most-favored-nation tariff rate or a tariff rate of 15 percent (comprised of the MFN tariff and a “reciprocal” tariff) on EU-originating goods.
- Effective Sept. 1 the U.S. will apply only its MFN tariff rate to the following EU products: unavailable natural resources (including cork), all aircraft and aircraft parts, and generic pharmaceuticals and their ingredients and chemical precursors. Other sectors and products that are important for the two economies and their value chains will be considered for addition to this list.
- The U.S. intends to promptly ensure that the tariff rate applied to EU-originating goods that are subject to Section 232 tariffs on pharmaceuticals, semiconductors, and lumber does not exceed 15 percent.
- Effective from the first day of the month that the EU formally introduces the necessary legislative proposal to enact the tariff reductions set forth above, the U.S. will reduce Section 232 tariffs on EU automobiles and automobile parts as follows: (1) no such tariffs will apply to covered goods with an MFN tariff of 15 percent or higher, and (2) for covered goods with an MFN rate lower than 15 percent, a combined rate of 15 percent will be applied. EU trade commissioner Maroš Šefčovič said the legislation will be introduced this month, which would reduce this tariff rate from 27.5 percent to 15 percent retroactive to Aug. 1.
- No tariff reductions were announced with respect to steel, aluminum, and their derivative products, although the possibility of tariff-rate quotas on such goods was suggested as a way of “ring-fencing their respective domestic markets from overcapacity while ensuring secure supply chains between each other.”
Other
- The U.S. and EU will negotiate rules of origin that ensure that the benefits of the agreement accrue predominantly to each other.
- The EU will work to address concerns about the impacts on bilateral trade of its non-tariff barriers affecting trade in food and agricultural products, deforestation regulation, Carbon Border Adjustment Mechanism, and Corporate Sustainability Due Diligence Directive.
- Collaborative measures to strengthen economic security alignment and enhance supply chain resilience and innovation will include taking complementary actions to address the non-market policies of third parties as well as cooperating on inbound and outbound investment reviews, export controls, and duty evasion.
- The two sides will provide mutual recognition to each other’s automobile standards and will identify and develop standards for the transatlantic marketplace in key sectors of mutual interest.
- The EU intends to (1) procure $750 billion of U.S. liquified natural gas, oil, and nuclear energy products through 2028, (2) purchase at least $40 billion worth of U.S. artificial intelligence chips for its computing centers, and (3) substantially increase its procurement of U.S. military and defense equipment.
- EU companies are expected to invest an additional $600 billion across strategic sectors in the U.S. through 2028.
- Other anticipated measures include (1) negotiating a mutual recognition agreement on cybersecurity, (2) strengthening cooperation and action related to export restrictions on critical mineral and other similar resources by third countries, (3) discussing high-standard commitments on intellectual property rights protection and enforcement, (4) ensuring strong protection of internationally recognized labor rights, including with regard to the elimination of forced labor in supply chains, (5) addressing unjustified digital trade barriers (including continuing a moratorium on customs duties on electronic transmissions), and (6) collaborating on the digitalization of EU trade procedures and the implementation of legislation currently proposed on EU customs reform.
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