Trump’s Other Trade War
(Bloomberg Opinion) -- President Trump’s trade fight with China has been commanding headlines and the attention of financial markets this week — but don’t forget that another trade dispute is simmering alongside. The U.S. has threatened to impose new tariffs on cars imported from the European Union, and the EU has prepared a list of imports from the U.S. that will face higher tariffs if Trump goes ahead.
This other dispute should be a lot easier to resolve than the U.S.-China case. In fact, if common sense prevailed, it would be easy to get past the immediate disagreement and start working on bigger ideas for expanded transatlantic trade.
Right now, it’s hard to be optimistic. Trump has involved himself in the talks unproductively. He’s made implausible demands; antagonized his negotiating partners; dragged in unrelated spats; rashly torn up previous agreements; imposed needless new tariffs; and, on his Twitter feed, issued a flurry of threats, insults and not-so-helpful commentary.
Adding new tariffs on cars would be especially rash. It would harm consumers, depress economic growth, burden U.S. carmakers, invite retaliation, and just possibly tip several American allies into recession — all, mind you, on the absurd premise that European cars represent a national-security threat.
But suspend disbelief for a moment. The key to progress is to concentrate on areas of clear mutual advantage. America’s demand that agricultural goods be part of the negotiations, for instance, is a recipe for failure. Wide-ranging disagreements between the two sides over food safety, farm subsidies and similar issues helped doom the Transatlantic Trade and Investment Partnership. Likewise, disputes over auto tariffs are hard to bridge under present conditions.
For now, two other goals should be the focus.
One is to eliminate tariffs on industrial goods. The existing tariffs are small on average, but taken together they’re costly: By one estimate, eliminating all of them would boost EU exports to the U.S. by 8 percent and U.S. exports to Europe by 9 percent. For two economies that are heavily reliant on one another — with $1.1 trillion in two-way trade each year — that could quickly add up, while making life easier for businesses, improving competitiveness and reducing costs for consumers.
The other goal concerns what’s known as conformity assessment. The idea is to allow products approved by regulators on one side of the Atlantic to be sold on the other without any added certificates or testing requirements. Full mutual recognition isn’t on the cards, desirable as that might be, but progress should be possible in particular industries that are heavily burdened by red tape — such as pharmaceuticals, marine equipment and medical devices. There’s a good chance of eliminating significant expenses and administrative delays, which would be especially helpful to small businesses.
With tensions defused and some degree of trust restored, incremental talks on more divisive issues — including cars and farm products — could get off on the right foot. The two sides could work together to push for broader reforms at the World Trade Organization and to present a united front in pressuring China. They might even get around to the infamous chlorinated-chicken imbroglio.
But none of that can happen until the U.S. recognizes that a trade bloc of the EU’s size won’t be bullied into accepting an inequitable deal. Europe, for its part, should accept that some added aggravation and tweet-threats from the president are the regrettable price of progress these days. If the two sides want to make a deal — and they say they do — it’s there for the making.
Editorials are written by the Bloomberg Opinion editorial board.
©2019 Bloomberg L.P.