Could The July 25 Trump-Juncker Trade Agreement Work?

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by: Jeffrey Frankel

August 8, 2018 - President Trump and European Commission President Juncker, in the Rose Garden July 25, announced EU-US trade negotiations. Here are my answers to questions on the negotiations, in the event they actually take place. (The interview appears in Chinese, at Caijing, a Chinese magazine.)

  1. How difficult will the negotiations to flesh out details be?

JF: I don't think they will flesh out the details.

  1. As the EU and the US agree to work together toward zero tariffs, zero non-tariff barriers, will it be a resurrection of TTIP or a TTIP-lite?

JF: They won't negotiate zero tariffs or something as good as TTIP would have been. The best that one can hope for is that Trump gets some sort of concession from the EU, or some words that sound like a concession - enough that he thinks he can claim victory - and that both sides then call off the trade war, cancelling the recent US steel tariffs and retaliation. Such an outcome would just defuse a crisis of Trump's own making, but that is better than not defusing it.

  1. President Trump announced $50 billion tariffs on Chinese product after Treasury Secretary Mnuchin said they had put trade war with China on hold. Will a similar thing happen between EU and US?

JF: I am pretty sure that Secretary Mnuchin wasn't speaking for Trump when he said that the trade war with China was "on hold." Trump does not coordinate with his cabinet. He doesn't even coordinate with himself, from one day to the next. So yes, it is pretty likely that Trump will go back to aggressive words and actions vis-a-vis the EU, just as he did vis-a-vis China.

  1. When the EU and the US agree to work together toward zero subsidies on non-auto industrial goods, why auto subsidies are excluded here?

JF: As I understand it, they did agree to put the auto tariffs on hold, which is a step in the right direction. I suppose Trump wasn't willing to include autos among the goods for which they announced that trade measure reductions would be negotiated because he wanted to preserve his threat of tariffs on European autos. But a good outcome is nevertheless possible. A good outcome would not only call off the trade war on steel and other goods, but would also have the EU really agree to reduce its tariff on imports of autos at the same time that the US agreed to reduce its tariff on imports of pick-up trucks.

Even so, all this focus on tariffs is rather beside the point, as tariffs in the US and EU were long ago reduced to low levels. That is why real progress would take the form of negotiations like TTIP, on the issues that are relevant today.