If U.S. President Donald Trump really wants a trade war, Brussels is more than happy to give him one.
Trump could hardly have chosen a worse moment to threaten to slap tariffs on the European steel industry. The EU trade officials staring him down on the other side of the Atlantic are more confident and assertive than they have been in years. Catalyzed by securing political agreement on a huge trade pact with Japan, they are now relishing the prospect of a tit-for-tat trade war they think they cannot lose.
“The Directorate General for Trade [in the EU] is perfectly equipped for that, and they love it,” said Pierre Defraigne. He was chief of staff to former European Commissioner for Trade Pascal Lamy, who waged the EU’s last successful trade showdown against the U.S. in 2002 — also over steel.
After months of vowing to hammer foreign steel- and aluminum-makers with tariffs and quotas, Trump has backed off from immediate action under pressure from domestic lobbies such as farmers and manufacturers, who fear the knock-on consequences of a trade conflict. The property mogul is, however, still promising to do something “fairly soon.”
At the European Commission, few believe he will simply drop his crusade to protect the steelworkers of Indiana and Ohio from the likes of the EU, which provides a hefty 14 percent of America’s steel imports.
“The EU is able to assert itself and take on the U.S. as an equal” — anonymous Commission official
“He’s got to do something now,” said one EU official, adding that a list of European countermeasures targeting products from Bourbon whiskeys to orange juice is ready to be rolled out. To the official, the outcome was a foregone conclusion: “We are going to win.”
Part of the EU’s swagger in the face of Trump’s threats is because Brussels has been here before.
When former U.S. President George W. Bush announced “temporary safeguards” against steel imports from the EU and other countries in 2002, the Commission struck back on exactly the same sort of farm goods that are back on its list now.
“We had quite some fun,” Defraigne said. “We targeted the orange juice from Florida, where George W. Bush’s brother was governor. It’s one of those cases where you are sure to win. The American actions are completely outside World Trade Organization rules.”
From zeroes to heroes
The EU was not always so self-assured.
The European Commission’s Trade department (DG TRADE) has had such a rough couple of years that there were serious questions last year about whether the department was past its sell-by date. An attempt to negotiate a landmark trade deal with the U.S. turned into a public relations disaster, mired in questions over food safety and international arbitration courts. A supposedly easy accord with Canada only narrowly survived resistance from the parliament in the Belgian region of Wallonia.
Those hurdles seem like ancient history now. Only 10 months after the near-death of the Canada deal, the EU’s trade officials have regained the bravado associated with big beast commissioners like Lamy and Leon Brittan. European Commissioner for Trade Cecilia Malmström can claim credit for saving the Canada deal and reeling in pacts with Vietnam and Japan.
The EU’s rediscovery of its mojo in one of its few hard-power competences is now palpable in the way that Commission President Jean-Claude Juncker is projecting Brussels on the international stage. Whether pushing China to back off from buying out prized EU technology companies or firing warning shots at Trump, there’s a newfound sense of resolve in the way the Commission carries itself. Britain’s muddled attempt to negotiate Brexit also helps make Brussels look like a steady hand.
Only this week, Brussels fired a shot across America’s bows to warn that it would retaliate if Washington’s latest round of sanctions against Russia impacted European companies and energy projects. Juncker insisted he was ready to hit back within days. “America First cannot mean that Europe’s interests come last,” he stressed.
Juncker is using almost identical language on the steel case and promises to retaliate against Washington “within days” of any attack by Washington, saying his team is in “elevated battle mood.”
“There’s a feeling of pride that we are the ones standing up for international rule of law,” one Commission official said. “The EU is able to assert itself and take on the U.S. as an equal.”
The danger for Europe, however, is that this war could spread to an unmanageable number of fronts. Washington already drew up a long retaliation list on products — from Roquefort cheese to Vespa scooters — over an earlier grievance concerning the EU’s refusal to import hormone-reared beef.
The beef dispute is stalled in talks but would almost certainly move to the front of the line if a full trade war breaks out.
Too soft on China
The refound confidence among EU trade officials also owes much to luck, and powerful friends in Paris and Berlin. People in the Commission fully accept that Trump’s unexpected victory — and his lurch toward protectionism — has done much to help turn Brussels into the global trade kingpin.
The Trade department is also benefiting from a big mood swing among the member countries. France and Germany played a key role in undermining the Transatlantic Trade and Investment Partnership between Washington and Brussels, but are now far more supportive of the EU agenda. German Foreign Minister Sigmar Gabriel earlier this year laid down a firm marker of his intent to combat Trump’s protectionism: “We Europeans will not put up with this,” he said.
“They are more assertive towards the USA, because the Commission is aware that global free trade is in danger” — Axel Eggert, director general of EUROFER
The election of President Emmanuel Macron in France is also pushing the block to bolster its trade defenses against China. Macron is a leading proponent of a “Buy European” strategy and the Commission is working on legislation to help stop Chinese takeovers of the EU’s top infrastructure and energy companies. One Commission official described it as “amazing” that these sort of measures were now being discussed among the traditionally liberal free-traders of the Trade department.
Large parts of European industry are, however, unconvinced by the description of a more combative Commission. While they accept that Brussels is standing up to Washington, they argue that the Commission is simply rolling over in the face of Chinese dumping.
Traditional EU manufacturers in sectors such as metals, chemicals, textiles and ceramics argue that the EU’s proposed new methodology to tackle ultra-cheap goods from China will do little to stem the flow.
“They are more assertive towards the USA, because the Commission is aware that global free trade is in danger,” said Axel Eggert, director general of EUROFER, the EU’s steel lobby. “But when it comes to fighting the root causes of Trump’s steel action, the Commission is too hesitant. The real causes are unfair trade practices and overcapacity in China, and the Commission isn’t doing enough to fight these.”