The basis of the agreement signed by the cadet and trump, is the idea that the European Union and the United States “to work together to complete abolition of duties, non-tariff barriers and subsidies to non-automotive industrial goods,” while this work will not create new trade barriers.
But it is not in a potential free trade agreement: it is important that stopped the escalation of trade measures on the principle of “a tooth for a tooth”, which began to trump its decision to impose duties on American steel imports from Europe.
The US President has the authority to set duties and other trade barriers unilaterally is in the interest of national security. That’s why trump was able to start his personal “trade war”, especially not consulting the U.S. Congress. But a full-scale trade agreement will require the approval of Congress. Given a lot of special interests that can mobilize such an agreement, it is very unlikely that any trading agreement (even limited to questions of industrial products) will be able to materialize in the foreseeable future.
As he writes in his article on Project Syndicate, the Director of the Centre for European policy studies Daniel Gros, history demonstrates that the United States was able to conclude trade agreements only when the coalition of stakeholders that were profitable expansion opportunities for export, had more votes than those who were vulnerable to competition from imports.
The Director of the Centre for European policy studies Daniel Gros
“When foreign trade is seen as a purely economic issue, it is usually possible to put together such a coalition, because the benefits of trade liberalization outweigh its costs.
But in the United States is, as a rule, are more difficult to accomplish than in other countries because foreign trade plays a relatively small role in the U.S. economy. Exports of goods may be, and is in the spotlight trump, but the reality is: exports account for less than 10% of US GDP. Direct employment in export industries did not play a major role in the American labor market.
On the contrary, in most European countries the share of exports accounted for more than 25% of GDP, and in Germany, the figure exceeds 50%. When the economy is so heavily dependent on foreign trade, to prove the benefits of liberalization is much easier and this is why Europe has been and with much more enthusiasm than the United States, refers to the idea of transatlantic free trade agreement. The negotiation of such an agreement – the Transatlantic trade and investment partnership – has stalled under the administration of President Barack Obama.
In addition to the agreement itself, Juncker, as you can see, made a personal promise that the EU will buy more US agricultural products. This promise is both empty and easy to keep.
It is empty, because the European Commission has no budget to buy U.S. soybeans, and there are no tools to get it to do consumers in the EU. And it is easily doable, because China has imposed duties on U.S. soybeans in retaliation for American tariffs on Chinese goods, this means that producers of soybeans out of America now is likely to redirect its exports to the Chinese market, freeing up the EU market for manufacturers from the USA. The main effect of the Chinese tariffs on U.S. soy will be the redirection of global flows of soybeans.
However, China’s role is not limited to soy beans. Moreover, the dynamics of trade relations with China precisely due to the willingness of the tramp to come to terms with Juncker.
Duties on imports into the United States will have a much greater effect if they will only apply to Chinese exporters. For example, the introduction of fees in the amount of 25% of the engines from China will allow producers from other countries to increase its share in the U.S. market, and if they had to pay the same fee, then the situation on the playing field would remain unchanged.
Guarantee that the EU will not face the same duties, as China is particularly important because in many sectors of the European suppliers are the major competitors of Chinese exporters. And given that the EU competes with the United States in the Chinese market, it appears that European industry may in fact win (indirectly) from the Sino-American “trade war”. While the US and China will fight over foreign trade, the transatlantic truce will bring benefits to Europe.
This truce is not so beneficial to China. In the words of the leadership of this country advocates freedom of trade, but it still shows no willingness to take into account the dissatisfaction of both the US and Europe. If China wants him to have allies in the “trade war” with the United States, he will have to reconsider many domestic regulations and working methods that constitute actual discrimination against foreign competitors.
Thus the agreement between the EU and the US have put forward in the first place is the real question facing the Chinese leadership whether he should continue strong state support for domestic industry. Protectionist measures could defend 20 years ago, but today the competitiveness of Chinese economy is much higher. Whatever benefits have not received the China from such measures, these benefits may well outweigh the damage from escalating “trade war”, and especially now when the EU has proved to be secure, and China will have to confront the United States alone.”
