EU's Trade Policy Under Fire: A Test of Speed and Imagination

Strategic Insights -

The European Union's (EU) response to US President Donald Trump's tariff threats has exposed both its strengths and weaknesses in trade policy. The sudden 30% tariff threat has put the EU's trade policy machine under pressure, revealing both persistence and precision in its negotiations with Indonesia for a bilateral trade deal. However, the EU's institutional structure and lack of imagination in overcoming its flaws have been exposed in its interactions with Trump.

Key Takeaways:

  • After almost 10 years of negotiation, the EU obtained a "political agreement" with Indonesia for a bilateral trade deal, widening its footprint in east Asia.
  • The EU's traditional trade machinery at work involves a negotiating mandate from member states pursued by the commission in detailed talks, which proved effective in securing a deal with Indonesia.
  • However, the EU's attempts to engage rationally with Trump on trade have been met with failure, as seen in the case of the WTO case against Indonesia's restrictions on nickel ore exports.
  • European officials have difficulty grasping Trump's visceral dislike of the EU, which is driven by the bloc's supranational, legalistic, multilateralist, and socially progressive nature.
  • The EU's car industry obsession has steered EU trade policy, with the commission trying to tell German Chancellor Friedrich Merz that his industry could not emerge unscathed from contact with Trump.
  • Negotiations between Brussels and Washington are focused on a two-way deal for auto trade, which has had difficulty getting traction in Washington.
  • The EU postponed its countermeasures against the US in an attempt to let the talks play out, opting for moderate and proportionate retaliation instead.

Statistics:

  • The EU's bilateral trade deal with Indonesia is expected to do more for Europe's long-term economic engagement with the country than Trump's deal with Jakarta.
  • 19% tariff on Indonesian exports to the US was part of Trump's deal, while EU exports to Indonesia enjoy zero-tariff access under the EU deal.
  • The EU has had to engage in the slow process of a WTO case against Indonesia to resolve nickel ore export restrictions.
  • The US has been criticized for its failure to respect international trade rules, highlighting the EU's efforts to engage in trade policy at speed.
  • The EU's institutional structure and lack of imagination in trade policy have been exposed in its interactions with Trump, highlighting the need for more dynamic and flexible approaches.

Sources:

  • "EU and Indonesia agree trade deal" by Alan Beattie in the Financial Times (no date mentioned)
  • "US threatens EU with 30% tariffs in blow to globalization" by Alan Beattie in the Financial Times (no date mentioned)
  • "EU trade policy: a tale of two deals" by Alan Beattie in the Financial Times (no date mentioned)
  • "Germany's car industry: a trade policy driver" by Alan Beattie in the Financial Times (no date mentioned)