Biden’s trade policy for the middle class takes shape and begins in Europe

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The following is a message from Jennifer hillman, senior researcher in international business and political economy, and Alex tippett, associate researcher in international economics, at the Council on Foreign Relations.

Tuesday OK between the United States and the European Union (EU) to end a 17-year dispute over Boeing and Airbus aircraft subsidies marks a significant shift in U.S. trade policy from dependence on the Trump administration to from unilateral tariffs to a policy based on collaboration with the main trading partners. It also exemplifies the international element of the Biden administration’s “middle-class trade policy”. In addition to take aggressive action at homeThe Biden administration hopes that the resolution of transatlantic trade disputes will enable the United States and its allies to devote their attention and resources to the thorniest and most important issues that threaten American and global prosperity: how to fight against them. China’s unfair trade practices, fight climate change, and quickly distribute the vaccines and drugs needed to fight COVID-19.

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European Union

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It’s easy to forget how important the transatlantic economic relationship is. In 2020, despite the impact of the pandemic, more than one trillion of goods and services crossed the Atlantic. US investment in the EU is 2.5 trillion dollars, which is three times the Asian investment in the EU, while European investment in the US is around 2000 billion dollars. Much of the trade between the United States and Europe takes place within companies operating on both sides of the Atlantic, underscoring how closely linked the two economies are.

Significant progress has already been made. The resolution of the Boeing-Airbus subsidy dispute includes a five-year suspension of tit-for-tat tariffs that had been imposed on a variety of products, a commitment to ensure that future R&D funding does not harm either party, and , above all, and a collaboration agreement to fight against “third party non-market practices”. This is a reference to the attack by the Commercial Aircraft Corporation of China (COMAC), a heavily subsidized state-owned company, which will soon launch a narrow-body aircraft that will compete with the Boeing 737 and Airbus A320 and has entered into an agreement with a state-owned Russian company to develop a jumbo jet.

While finding a way to sideline the Boeing-Airbus is an important and laudable first step, other transatlantic business irritants must also be removed.

The next step to be resolved could be the dispute over the imposition of taxes on digital services. These taxes on the selected gross income streams of large digital companies from activities such as online advertising, the provision of digital interfaces or the transmission of advertising-related data were first implemented in France. , with Austria, Hungary, Italy, Poland, Spain, Turkey and the United Kingdom following suit. Because of the design of these tax regimes, which include very high minimum incomes for tax enforcement, US businesses would be the ones to bear the lion’s share of the tax burden on digital services. The United States Trade Representative’s office (USTR) determined they were discriminatory and threatened to impose retaliatory tariffs.

The Biden administration hopes that this dispute can be resolved as part of a broader agreement currently being negotiated within the Organization for Economic Co-operation and Development (OECD) aimed at reforming the international tax regime and developing a global minimum corporate tax rate. To allow these negotiations, the USTR suspended in January the first round of retaliatory tariffs, which would have targeted $ 1.3 billion of French goods, before their implementation. In June 2021, the USTR also suspended another round of tariffs that reportedly targeted $ 2.1 billion in goods from five European countries and Turkey.

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European Union

Joe biden

Tariffs on steel (25%) and aluminum (10%) imports imposed in 2018 by the Trump administration under the pretext of protecting US national security are also on the agenda. Europe has responded with shame to the accusation that European exports threatened the security of the United States and imposed retaliatory tariffs. The first tranche of tariffs covered 2.8 billion euros of US exports. A second tranche targeting an additional 3.6 billion euros of US exports was to be put in place in June 2021. The EU has chosen to suspend these tariffs to facilitate negotiations. While the initial tariffs implemented by the two blocs are still in place, policymakers in the US and the EU have expressed optimism that this issue can be resolved before the end of the year. US Trade Representative Katherine Tai, however, declared that a meaningful solution will have to resolve the problem of global overcapacity and the overproduction of steel and aluminum, especially in China, in addition to the lifting of transatlantic tariffs. But solving the structural problems plaguing the industry, especially in a way acceptable to various national ridings, will be difficult, especially since tariffs have helped save jobs in the United States.

The desire to resolve trade problems has been accompanied by other actions, such as the decision to lift the sanctions linked to the Nord Stream 2 gas pipeline and the creation of a new EU-US Trade and Technology Council aimed at developing common technology standards and potentially reworking sensitive supply chains. The US and EU, along with other members of the Group of Seven (G7), have also come together to develop an alternative to China’s Belt and Road Initiative and insist that China address issues relating to forced labor in Xinjiang. Taken together, these efforts represent an important renewal of the transatlantic relationship.

While the resolution of tariff disputes is a positive result in itself, rapprochement with Europe also serves a broader objective. The Biden team correctly calculated that European support will be essential to achieving some of its most important foreign policy goals. Tackling overcapacity exacerbated by Chinese state subsidies or reforming the World Trade Organization (WTO) will require European cooperation. Climate action requires a united front of the United States and Europe. Without transatlantic cooperation, there is little hope of building a coalition capable of pushing laggards to comply with emissions targets set in the Paris Agreement or pushing for open and transparent technology standards. Going forward, transatlantic technology and infrastructure coordination, as discussed by G7 members, will be key to mitigating China’s growing advantages in these areas.

However, the outcome of President Biden’s strategic bet is far from certain. Europe has strong economic ties with China which have been strengthened by investments made along the Belt and Road. These economic ties have helped make some European leaders like German Chancellor Angela Merkel more skeptical of EU-US coordination aimed at stifling China. Depending on how it is pursued, the EU’s desire for “strategic autonomy” can also create complications for an Atlantic partnership. Attempts to support European tech companies through regulatory measures and industrial policies to ensure “digital autonomy”, for example, can ruffle the feathers of US incumbents if not treated with delicacy. Likewise, the apparent lack of alignment between the United States and Europe on the issue of adjusting the carbon border could lead to clashes or jeopardize the upcoming climate negotiations in Glasgow.

By resolving or ironing out long-standing disputes, however, the multilateral approach taken by the Biden administration is already bearing fruit. Hopefully the courtesy and relationships established during this process will enable the Biden administration to successfully address the major threats to American and global prosperity.


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