US-EU talks struggle, threatening a new front in trade war

Bloomberg

Even though President Donald Trump held fire earlier this month on auto tariffs that have the potential to further roil Europe’s struggling economy, a succession of domestic dilemmas on both sides of the Atlantic threaten to frustrate efforts at a trade pact before they’ve even begun.
Ten months after Trump and European Commission President Jean-Claude Juncker struck a Rose Garden truce meant to clear the way for negotiations to reduce tariffs on industrial goods and eliminate regulatory hurdles, those talks are showing few signs of going anywhere meaningful.
European officials have blamed a Trump administration that has had little time for dealing with a bureaucracy in Brussels already held in low regard by many in the US president’s orbit. Distracting Trump has been a breakdown in talks with China and a need for a quick deal with Japan to assuage American agricultural interests.
“I don’t think the US is ready to start on the tariff negotiations,” Cecilia Malmstrom, the EU’s trade commissioner, told reporters in Paris earlier this month after meeting with US Trade Representative Robert Lighthizer.
Yet it is the growing polarisation in Europe evident in the recent elections that saw a fragmentation of the mainstream center-right and center-left parties that some in Washington see as a sign of the bigger structural obstacles to a deal.
With the Brexit process thrown into turmoil after Prime Minister Theresa May announced her resignation this month, eastern nations testing the limits of “illiberal’’ democratic reforms, an assertive Russia threatening pillars of European Union security and an increasingly fragile economic backdrop, the 28-nation bloc faces plenty of its own distractions.
“You’re seeing an EU that is fighting fires on so many fronts that I just don’t think they are going to be confident and able to negotiate that deal’’ with the US, said Heather Conley, head of the Europe program at the Center for Strategic and International Studies.
The 180-day deadline that Trump set for a negotiation with the EU and Japan over reducing their exports of cars and parts to the US holds to the president’s pattern of steadily increasing pressure on trading partners to cut a deal more to his liking. As he made clear during his recent trip to Japan, Trump is eager to see at least some rapid deals going into his 2020 re-election run.
With Japan he may have some luck. People close to those talks see the very real possibility of a deal being struck by the end of the year with negotiations due to accelerate after Upper House elections in Japan in July.
For Europe, though, the signs are more ominous. The auto deadline will hit just as a new European Commission, the bloc’s executive arm, is due to take over from the Juncker-led one that has governed for the past five years.
Moreover Germany and France, the EU’s two dominant powers, appear to have increasingly clashing conceptions of the economic direction they want to take Europe in.
France’s Emmanuel Macron led some EU member states in resisting US efforts to include agriculture in any transatlantic discussions, something the EU insists Trump gave away last July as part of the Rose Garden truce. Though many in Washington, including Senate Finance Committee Chairman Chuck Grassley, have said any deal that didn’t include agriculture wouldn’t get through Congress.