When U.S. President Donald Trump threatened tariffs on steel and aluminum imports from the European Union in March 2018, then-European trade commissioner Cecilia Malmström promised retaliation. When Washington moved ahead, the EU kept its word and struck back with duties on a range of American goods.
At the time, Brussels' firm stance proved effective in dissuading Trump from escalating a trade war and convinced him to agree to a truce.
Nearly a decade later, the situation is very different. The European Commission last summer yielded to Trump's demands to lower his threatened 30% tariffs on most European imports to 15% in exchange for the EU bringing its own duties to zero.
The agreement, reached at Trump's golf course in Turnberry, Scotland, was finally ratified by European lawmakers and national governments last month.
The decision disappointed Malmström. In an interview with The Parliament, she described the so-called Turnberry deal with the U.S. as "asymmetrical" and "humiliating."
According to the former commissioner, Brussels initially accepted these terms to ensure "stability and predictability" for European businesses and preserve Trump's support for Ukraine. Yet, "both of those two reasons are not there anymore," she said, referring to the U.S. President's unpredictable approach toward allies and his decision to step back from unconditional military assistance to Kyiv.
This article is part of the The Parliament's special policy report "The EU's trade question."
In recent months, however, the Commission has secured several significant trade deals with major economies including Indonesia, India, Australia and Mexico, while the Mercosur agreement with Argentina, Brazil, Paraguay and Uruguay began provisional application.
As part of its efforts to diversify commercial partnerships, Malmström considers particularly promising the Trade and Investment Dialogue between the EU and the 12 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP — comprising both traditional European partners such as Australia, Canada, Japan and the United Kingdom, and countries like Chile, Peru and Singapore.
Together, the two blocs account for 32% of global gross domestic product and 37% of worldwide trade, and Malmström sees the potential for a concrete partnership that "can help set new rules for the future" of international trade.
This interview has been edited for length and clarity.
The agreement with Australia spans both trade and defense. How much are security and geopolitical considerations now shaping the EU's external partnerships beyond trade?
I think it's both. Australia is a close friend and a partner and is part of the pro-Ukraine alliance, and [the agreement] would have happened anyway.
But the EU-India agreement would not have happened without the current context. We've been negotiating back and forth for over 20 years and concluding it is fantastic for business and our strive to de-risk from other partners, but also a very clear geopolitical statement.
Has the EU-India agreement effectively paved the way for a new European approach that uses commercial ties to strengthen political alignment with partner countries?
We have been doing that for a long time. When I had the privilege to negotiate [CETA], this was a way to bring [European] countries closer to Canada. CETA is now seen as a role model for trade agreements.
I hope that the Mercosur agreement will have similar results. So, it has always been in the philosophy of the EU to facilitate trade, but all the EU trade agreements are embedded in [broader] partnerships. Our cooperation with Japan, for instance, led to cooperation on shipping, green trade and research.
Lately, because the geopolitical situation is tense and the EU feels squeezed between China and the U.S., it has become even more a geopolitical statement that [some] consider that trade, as we used to do, is dead. We disagree. We want to make trade, we negotiate, we have chapters, there’s transparency, [agreements] are WTO-compliant, there is a conflict resolution mechanism embedded.
What are the concrete results of these European efforts to safeguard rules-based cooperation?
Look at what's happening in the rest of the world. The ASEAN [countries] are deepening their trade cooperation, as well as Australia and Canada; the African Union is slowly moving forward with trade integration [across] the continent; the CPTPP too, with Costa Rica just accepted as a new member, joining [next year].
It's a clear statement that rules-based trade is not out of fashion.
In the specific case of the deal with India, what could its most immediate effects be?
India is a market of 1.4 billion citizens and consumers, and it's a growing power in many ways. So, having facilitated trade and access to their market is very interesting. They are very big now on digital, which is also good to diversify our needs in that [field].
It hasn't entered into force yet and there's still some scrubbing and translation to do, but it could also bring us closer in many other areas where — surprisingly enough — we haven't had a lot of cooperation with India. Prime Minister Modi was just in Sweden, in my home country. We never had an Indian prime minister in Gothenburg. The biggest companies [from] all over Europe were there to discuss how we can deepen this relationship and increase investment cooperation between us.
The relationship with the U.S. is moving in the opposite direction. To what extent does the Turnberry agreement reflect European concessions in response to Trump's threats of even higher tariffs?
It's a bad agreement, it's very asymmetrical, it's humiliating. We give in, we don't get anything. And these tariffs, according to the U.S. Supreme Court, are illegal. It is hard to see why the world should endorse these illegal tariffs. But the whole world has done the same [thing]: the EU, the U.K., Australia, New Zealand, Japan, South Korea. [These deals] are not WTO-compliant.
Why didn't the EU try to push back more forcefully?
We should have been tougher. The two reasons why we were not [tougher] were, first, because business — for perfectly legitimate reasons — wanted stability and predictability. [But] if you have dealt with Trump, you know that these words are not in his vocabulary. So, there won't be stability and predictability. There will be new things coming all the time.
Secondly, because we wanted Trump's cooperation on Ukraine — a very strong argument, but it didn't materialize. Both of those two reasons are not there anymore. But here we are, and I guess the agreement will enter into force soon.
Meanwhile, China is weaponizing trade relations with the EU. How can the Commission respond?
That is very difficult because, on the one hand, we are dependent on China, we trade with China and we need that for jobs and growth. It has a lot of good green technology. But, on the other hand, China is a threat because of fair and unfair competition.
The most urgent thing we need is a joint update of the EU [-China] strategy, because [while] the Commission [has opened] investigations on anti-subsidies vis-à-vis China, you have a parade of individual [European] prime ministers going to China, shaking hands and trying to do deals that, from their point of view, are defendable. I don't criticize them, but that doesn't give the image of a united Europe.
Besides the U.S. and China, the Commission has several other ongoing negotiations. Which ones are the most significant to advance or conclude in the second half of the year?
The Mercosur deal is now in force, even if it's provisional. I hope that the India deal will be translated and passed by the end of the year. The same with Australia, Indonesia and Mexico. I hope they go forward as much as possible, [although] translation and legal scrubbing can take some time and then they [must] go through Parliament and member states.
The most promising evolution in the trade area is the rapprochement between the EU and the CPTPP. I have been advocating for many years that [the EU] should join the CPTPP. But now they have launched a very hopeful Trade and Investment [Dialogue].
I think they will launch some sort of digital trade agreement shortly and are looking at simplifying rules, customs procedures and maybe rules of origin. This can be the coalition of the willing that can help set new rules for the future, standing by existing rules [while also] strengthening and developing them — both in the WTO and on a plurilateral level between the CPTPP and the EU. Maybe some others could join, [such as] South Korea and Mercosur countries.
[These countries] should also look at issues such as subsidies and the greening of trade. If they can find some way to deal with all the carbon pricing mechanisms — so that they are combined and [there is] not rivalry between each other — that would be fantastic.
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