Ahead of Biden Visit, EU Looks to Consign Trade Tensions to Past

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When President Joe Biden travels to Brussels next month, the European Union and the U.S. will commit to trying to end the trade conflicts that have tainted the transatlantic relationship while also pledging to work together to move past the Covid-19 pandemic.

The allies will aim to resolve a long-running aircraft dispute by July 11, reach a global consensus on a new tax system by mid-2021 and remove punitive tariffs on steel and aluminum exports by the end of the year, according to a copy of a draft statement obtained by Bloomberg.

The EU is keen to reset relations with the U.S., which soured over the last four years when the Trump administration undercut multilateral organizations such as the World Trade Organization, left the Paris Agreement to limit global warming and hit the 27-nation bloc with metals tariffs in the name of national security.

“Recognizing the importance of the EU-U.S. partnership as an anchor for peace, security and stability around the world, we pledge to join forces to prevent and peacefully resolve conflicts, uphold the rule of law and international law, and promote human rights for all, gender equality and the empowerment of women and girls,” according to the statement, which was drafted by the EU.

A spokeswoman for the White House’s National Security Council declined to comment.

The EU-U.S. summit will take place in Brussels on June 15 and will coincide with Biden’s first trip to Europe since he became president. The draft points are subject of ongoing talks and are already being changed, according to two people familiar with the matter.

Transatlantic Truce

The push to reach a consensus on global tax issues comes as the world’s biggest economies have been debating where to tax firms in the digital era and how to apply a minimum tax rate on multinationals. Group of Seven finance minsters will discuss the issue next week, and European governments are increasingly optimistic of a breakthrough.

The EU and U.S. will also redouble efforts to put an end to two separate trade disputes: a 17-year fight over illegal government aid to Europe’s Airbus SE and Chicago-based Boeing Co. and a metals conflict in which the U.S. imposed levies on steel and aluminum imports, citing national security concerns, leading to an EU retaliation. Both sides sought to deescalate the issues in recent months in an effort to smooth the way to a resolution.

The draft also indicates a possible WTO proposal aimed at curbing state-support of industries as part of a joint effort to limit China’s excessive subsidies for its private companies. If the talks advance to a broad coalition of countries it could become the most significant attempt to rewrite WTO rules in more than two decades.

The draft document also suggests that the EU will seek to align itself more closely to the U.S. on China; calls for launching a Trade and Technology Council that will bolster commerce and investment in critical technologies; proposes the creation of a joint Covid vaccine taskforce to collaborate on fighting the pandemic globally; and pledges to work together on foreign policy issues.

The statement notes the similarity of the two sides multi-faceted approach to China, highlighting the need to address both challenges and areas of cooperation with Beijing. It also underscores the intent to develop a digital governance system that protects critical technologies, and is based on shared rules and values, including human rights.

The EU and U.S. are also set to agree on closer cooperation to promote bigger efforts to cut emissions before a key round of United Nations climate talks in Glasgow in November. That includes speeding up the green transition in the poorest countries and a commitment to scaling up efforts to meet the goal of ensuring $100 billion per year in climate finance.

Discouraging investment in fossil fuels and calling for a phase out of unabated coal in energy production is also part of the draft statement, as is a vow to work together on “carbon pricing, including addressing the risk of carbon leakage, and on sustainable finance.”

To prevent carbon leakage, or relocation of companies to regions with laxer climate policies, the EU is planning to introduce a levy on imports of certain emissions-intensive goods. A draft law on the so-called carbon border adjustment mechanism is due to be unveiled on July 14 as part of a broader package of measures to adjust the EU economy to a stricter climate goal for 2030.

Biden embraced the idea of carbon adjustment fees or quotas during his campaign for president. The Office of the U.S. Trade Representative says “carbon border adjustments” are among several “market and regulatory approaches” under consideration to address greenhouse gas emissions.

The draft also mentions a recent G-7 agreement to put an immediate end to financing new coal infrastructure abroad.

©2021 Bloomberg L.P.

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