The German government has proposed restarting EU-US free-trade agreement negotiations. However, it is unlikely a deal will be reached, as businesses and the European Commission set more hope on a step-by-step approach to remove trade barriers.

As part of an agreement on the future trade policy agenda reached last Friday (11 November), Germany’s centre-left “traffic light” coalition agreed to attempt to restart trade negotiations for a free-trade area encompassing the EU and the US.

The last attempt at such an agreement, the negotiations for a Transatlantic Trade and Investment Partnership (TTIP), failed after Donald Trump took office as US president in 2017. Yet the German push to revitalise the talks is likely to fail, with even business representatives being sceptical about the success chances.

“I’m not quite sure that there is the political momentum that would be required, to be honest, on either side of the Atlantic to get into a massive and comprehensive trade negotiation,” Thibaut L’Ortye of the American Chamber of Commerce to the EU, who is representing American businesses operating in the EU, told EURACTIV.

This view was echoed by the European Commission, saying that negotiations for a new, TTIP-style trade agreement were “not on the agenda”.

Instead, L’Ortye puts his hopes on the Trade and Technology Council (TTC), a forum created between the US government and European institutions to increase cooperation in strategic economic areas.

Thus, while the appetite for all-encompassing and lengthy trade negotiations is small, cooperation has moved to a more small-scale approach.

“The [TTC] has become our main cooperation platform where we talk about both bilateral trade facilitation and global standards,” a Commission spokesperson told EURACTIV.

The next meeting of ministers of the US government with EU Commissioners is set to take place on the 5th of December.

“Everybody feels confident that there will be a series of announcements,” L’Ortye told EURACTIV, pointing to multiple working groups on topics like artificial intelligence, semiconductors, supply chain risks and cybersecurity.

‘Inflation Reduction Act’ under fire

German industry representatives agree on the importance of the forum.

The TTC “should be used more to jointly shape tomorrow’s trade standards instead of having them imposed by a world dominated by China”, Volker Treier, head of Foreign Trade Policy at the German Chambers of Industry and Commerce (DIHK) told EURACTIV.

However, the association also points to multiple barriers for European companies which should be addressed to improve trade relations. This includes the flagship project of the Biden administration, the ‘Inflation Reduction Act’, which subsidises the uptake of green technologies but also aims at promoting quality jobs in the US by favouring domestic production.

“The expansion of value creation in the United States is currently heavily promoted by subsidies – in part also in a discriminatory manner,” Treier said.

“Many companies in Germany are concerned about these US tax incentives in the automotive and environmental sectors, which only apply to production in the USA and thus discriminate against German companies and, according to experts, clearly violate WTO law,” he added.

To address those concerns, the EU and US have created a “task force”, which the European Commission hopes can take decisions to remove discriminatory elements of the Inflation Reduction Act (IRA).

“The Task Force is a clear, senior-level commitment by the US to address the serious concerns raised by the EU related to the IRA, in particular on discrimination, local content requirements and production subsidies,” the Commission spokesperson said.

For, L’Ortye, this should not prevent progress on the technical work of the Trade and Technology Council.

“Our feeling is, because you’ve got the task force, they’re going to be able to find a way to address it and move forward. But at the same time, because it’s in a separate task force, you can still also continue to advance the TTC agenda,” he said.

Meetings of the task force are taking place every week, with the aim of finding a solution before the TTC ministerial meeting, an EU official told EURACTIV. However, the Europeans are waiting for the US to pose a solution, such as exempting European manufacturers from the discriminatory provisions, the official said.

Moving closer together as geopolitical tensions rise

Both the German and the American business representatives argue that, in the face of the Russian invasion of Ukraine and systemic competition with China, it would be a good moment for transatlantic economic relations to intensify.

“In a difficult foreign trade environment, the USA is becoming an even more important trading partner for the German business community,” Treier underlined.

This was echoed by the American business representative. “The geopolitical case and the economic case for the transatlantic relationship has probably never been stronger,” L’Ortye said.

In his view, the TTC has even helped with the response to Russia’s invasion of Ukraine. “It’s because of some of the contacts that were intensified as part of the working groups on export controls of the TTC that actually the response could be facilitated,” he said.

Source: Euractiv