EU’s negotiating skills come to the fore

Over the past few months things were looking particularly gloomy for EU-US relations: tensions ramped up considerably after the initial announcement that the EU would not be exempt from US tariffs on steel and aluminium. In June, Donald Trump threatened to impose 20 per cent tariffs on cars from the European Union in response to the EU’s retaliatory tariffs on over $3 billion worth of US goods ranging from whiskey to peanut butter.

Then, in an interview with CBS ahead of his meeting with Russian President Vladimir Putin, Trump described the EU as a “foe” because of “what they do to us in trade,” adding that EU countries had taken advantage of the US, by failing to pay their “bills.” Trump has repeatedly criticised the level of defence spending by other members of NATO in Europe.

Long-standing hostility

Trump’s long-standing hostility to the EU and some of its member-states is well known: even ahead of his election he vocally supported the British campaign to leave the EU, insisting at one point that his victory would be like “Brexit, plus, plus, plus.” He has been particularly critical of Germany, over the years, once describing Merkel (ahead of his election) as the person who was “ruining Germany,” while he has repeatedly attacked the region’s immigration policy (and Germany’s decision to open its doors to refugees in 2015), insisting they were changing the “fabric” of the region.

Last year, well before the tariff war kicked off, he reportedly made remarks sharply criticising the country’s trade surplus, while advisor Peter Navarro, accused Germany of using a “grossly undervalued” euro to “exploit” the US. Trump has recently criticised Europe’s energy dependence on Russia and the construction of the Nord Stream 2 gas pipeline in particular.

Leaders of individual EU nations — as well as senior figures in the commission — have not held back from their criticism of Trump either. Last year, European Commission President Jean Claude Juncker spoke in mocking terms about the way Trump ran the White House, telling Politico (in the days following the firing of Anthony Scaramucci after 10 days as director of communications at the White House) that the EU was “better organised” than the Trump administration because internal difficulties were fixed through “direct conversation” rather than simply firing people.

In the days leading up to a meeting in Washington DC, senior EU executives gave little sign that they were willing to back down on retaliatory tariffs: Cecilia Malmstrom the Trade Commissioner warned in an interview with a Swedish newspaper that $20 billion worth of US goods could face tariffs if a solution were not found.

The EU’s unflinching approach appeared to have worked as on July 25, as the prospect of an all-out trade war faded — at least for now. Trump and Juncker stood in the White House’s Rose Garden to announce plans to move to a “new phase” of “close friendship” and “strong trade relations” and crucially plans to push for zero tariffs, zero non-tariff barriers, and zero subsidies, including on chemicals and pharmaceuticals — and, the President emphasised: soybeans. “It’s a big deal: the EU is going to start to buy a lot of soybeans,” Trump remarked, also pointing to plans to buy more LNG from the US.

Soybean deal

The deal would undoubtedly have scored Trump some points at home ahead of the mid-term elections but it would be hard to see the developments as anything than a success for the EU. By all accounts, soybean sales by the European private sector has been on the increase in recent months, following retaliatory action by China against the US (which saw a rise in China-Brazil soybean trade).

On Wednesday this week, the commission put out a statement that EU imports of US soybeans had increased by 283 per cent against a year ago and that the commission had put in place a mechanism to report on US-EU soybean trade every two months as a first concrete follow-up to the Washington DC meeting, in a clear peace-offering to the White House.

Observers noted that while soybean sales were on the rise already, the focus on LNG from the US was also already in the works. While even a former US Ambassador to the EU pointed out that LNG could never be competitive with piped-gas in Europe, it enabled the EU to present something that was already in the works as a concession to Trump: a small price to pay for the avoidance of a trade war.

However, Europe has been firm on rejecting some suggestions made in the US (since the Rose Garden statement that had indicated agricultural produce could be included).

Trump told a gathering in Iowa that he had “opened up” Europe for the state’s farmers, while senior officials in Brussels insisted that agricultural products were in no way involved in the deal struck, beyond the talks on specific products such as soybeans.

The developments present an insight into Europe’s negotiating tactics — relevant to anyone eager to strengthen trade relations with them: be it India or Britain: it knows how to pick its battles and stand firm on issues that really matter to it, while willing to appear to concede on issues that might play well at home with the party its negotiating with.

It suggests that in Britain Brexit-supporters looking for major concessions from the EU are unlikely to succeed in extracting anything that would substantially change the EU’s approach till now. However, it would be unlikely to be averse to allowing a “deal” that really didn’t involve major change on its behalf, to be presented as a political victory in Brexit Britain in order to calm the waters domestically.

With India, however, much remains to be seen: it has been widely acknowledged, including by many in Britain, that it was Britain that stood in the way of progress on an EU-India FTA, and just what the EU’s red lines may now be in any negotiations remains to be seen. One thing is certain: its negotiating savviness can’t be underestimated.

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