EU navigates rocky start to Biden trade relationship


When top EU trade officials first dared to dream of working with a US administration led by Joe Biden, they probably didn’t imagine that the early days of the relationship would be characterised by eerily familiar tensions over China and protectionism. 

The new US administration has taken barely-veiled swipes at the EU’s freshly minted investment agreement with Beijing, which is seen in Washington as a breach of the common front needed to deal with China’s economic policies. 

This week, another potential source of discord arrived on the scene with Mr Biden’s decision to sign an executive order reinforcing “buy American” policies in public procurement. 

Mr Biden said the move would help rebuild the economy and ensure “resilient supply chains”. He also said that the tighter rules were part of a strategy that foresees global co-operation “to modernise international trade rules, including those relating to government procurement”.

But the reception in Brussels was frosty. Asked about the policy at a press conference on Tuesday, Valdis Dombrovskis, EU trade commissioner, had this carefully weighted response: “We would recall that we are working for open procurement markets everywhere in the world.”

He went further, mentioning that the EU is readying legal powers to restrict foreign companies’ abilities to win public procurement contracts if they come from countries that give the cold shoulder to EU businesses. “We need to accelerate the work,” he said.

The international procurement instrument has often been highlighted by the EU as an important part of its arsenal to defend the bloc from perceived unfair treatment.

The problem is that the plans have been in the works for close to a decade and the instrument is still not ready. 

France has been a consistent supporter of the measure, which has proven politically divisive over concerns that it could worsen economic relations with other countries — notably China — to little practical benefit.

Still, there has been increased political momentum since 2019. An EU diplomat said that positions were converging among the bloc’s governments, but there was still work to do on the design to spare companies from being ensnared in red tape.

Portugal, which holds the EU’s rotating presidency until the end of June, might well be able to secure a consensus position within the EU Council.

The public procurement tool is just one of the steps the EU is taking to fight for its interests. Another in the pipeline is an “anti-coercion mechanism” that would give the EU more firepower to hit back on the kinds of punitive tariffs Donald Trump repeatedly threatened against Europe’s car sector.

Much of this work is wrapped up in a commission-led trade policy review that is expected to yield results next month.

Mr Dombrovskis insisted that, beyond whatever irritants there might be, there remained a large and important trade agenda for the EU and US to work together on. He cited WTO reform as well as the need to find a solution to a long-running dispute on aircraft subsidies that has left products from whisky to ornamental fish weighed down with punitive tariffs. 

Brussels’ strategy is now two-pronged: get that positive work under way, while equipping itself with the tools necessary to defend its interests — even against friends. 

Chart du jour: Economic pain and no gain

Bar chart of (%) showing GDP losses in 2022 compared with pre-Covid forecasts

The IMF has updated its forecasts for 2022. The economies of China and the US are expected to be only 1.5 per cent smaller than before the pandemic, but Europe and other advanced economies are expected to lag behind at about 2.5 per cent less than their pre-Covid levels. The poor performance of Europe seems in part due to the strict lockdowns imposed throughout the eurozone. (chart via FT)

Europe news round-up

  • German chancellor Angela Merkel and EU commission president Ursula von der Leyen spoke at the World Economic Forum’s virtual gathering on Tuesday. Ms Merkel emphasised international co-operation in dealing with the pandemic as well as climate change. Ms von der Leyen used part of her speech to warn of the power of Big Tech and invite the new US administration to help “contain the immense power” that tech companies wield. The FT has the highlights.

  • Rechargeable battery makers in twelve EU member states will receive up to €2.9bn in public support as part of efforts to boost the fast-growing industry and cut the bloc’s reliance on scarce imported raw materials. The money approved by the commission on Tuesday is aimed at developing new technologies and helping the industry provide batteries for at least 6m electric cars each year by 2025. “By these steps, Europe will cement its position as a global hotspot for battery investment,” said Maros Sefcovic, the commission’s vice-president for foresight.

  • The German health ministry has had to quash claims made in the country’s media that the AstraZeneca Covid-19 vaccine is only 8 per cent effective for over-65s. The ministry suggested newspaper reports had “mixed up” several statistics in the trial data. (FT)

  • While Brexit might have seen the EU lose a member state, the European Council on Foreign Relations argues that the mechanisms and solutions the EU employed in Brexit negotiations can be co-opted to make the bloc more flexible in dealing with neighbours such as Turkey.

Coming up today

Portugal’s prime minister António Costa will discuss his country’s EU presidency priorities at the European Economic and Social Committee from 14.25 (CET). EU home affairs commissioner Ylva Johansson will also take part in a debate on Brussels’ new draft migration pact.

EU commissioner Dubravka Suica will present a green paper on ageing and present the outcome of the EU executive’s weekly college meeting.; @jimbrunsden


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