Transatlantic Dialogue is More Important than Ever

Dieter Kempf © Christian Kruppa

Dieter Kempf © Christian Kruppa

BDI's President Dieter Kempf spoke about U.S. tariffs and whether a transatlantic trade agreement is still an option today. He stressed that the U.S. measures pose significant risks not only for the global economy and world trade but also for the U.S. economy. With regard to trade negotiations, Mr. Kempf pointed out that looking at tariffs alone gives little indication about the actual state of market access, adding that “a tariff-only treaty with the United States would fall short of the mark.”

Mr. Kempf, under President Donald Trump the U.S. administration has taken numerous measures in recent months that affect, among others, German industry – for example, the tariffs on steel and aluminium. What message do you have for the German government for its talks with the U.S. government?

The German government should urge the Trump administration not to impose any restrictions on steel and aluminium whatsoever. Our government should highlight the risks that are posed by the U.S. measures not only for the global economy and world trade but also for the U.S. economy. Studies suggest that the number of jobs lost in the U.S. steel-processing industries as a result of the tariffs will be far higher than those generated in the steel industry. The tariffs will impact all trading partners unable to obtain an exemption – what they do not do is solve the real problem of China’s excess steel capacity. The G20 has created a global forum to tackle the structural problem on the global steel markets. But that initiative can succeed only if the United States supports it and gives it teeth.

Although Europe is temporarily exempted – once again – from the tariffs on steel and aluminium, the imposition of those duties elsewhere clearly shows that the current U.S. administration is much less in favour of open markets than its predecessors. How should the German government and the European Commission react to this new policy approach?

The bottom line is that dialogue with the United States is more important today than ever. We must make clear to Washington how significant the transatlantic relationship is – above all, in the economic sphere. And it is crucial that any EU decisions on countermeasures to the U.S. tariffs are in line with WTO regulations. We must not allow the multilateral framework to be weakened; on the contrary, it should be strengthened, improved, and further developed. The EU was right to file a complaint against the United States at the WTO, asking for consultations on steel and aluminium tariffs.

If a solution cannot be found through negotiations, a WTO dispute settlement panel should be established. Back at the end of March, the European Commission started to investigate whether the U.S. steel tariffs divert steel exports from third countries to the EU, thereby causing serious damage to the European steel industry. If the EU takes measures to protect its steel industry, it needs to take into account the interests of the processing industries. It also needs to carefully weigh the risks and benefits of any rebalancing duties on U.S. products like whisky and peanut butter. That might only further escalate the conflict.

BDI has always been a strong advocate of the Transatlantic Trade and Investment Partnership – TTIP. But owing to widespread public scepticism, especially in Germany, that project has been put on ice. Developments in recent months have shown many people just how important such agreements can be. Should we give it another go?

It is true that numerous barriers continue to burden trade between the United States and the EU. Dismantling those barriers would safeguard jobs and create prosperity. Unilateral EU tariff reductions for individual U.S. products have been discussed recently, but these would not conform with WTO regulations. If the EU unilaterally lowered import duties for a specific U.S. product, it would have to do the same for its other WTO partners under the WTO’s most-favoured-nation principle. Such moves would not be in the long-term interest of the EU, but a bilateral free trade agreement aimed at the reciprocal opening of markets would be. Today, looking at tariffs alone tells us little about the actual state of market access. For example, the Buy American Act and the Buy America regulations limit the access of foreign companies to the U.S. procurement market. Thus, a tariff-only treaty with the United States would fall short of the mark. But it would be good if the EU and the United States explored the possibility of launching bilateral trade talks and examined whether the preconditions exist for such discussions – that is, among other things, mutual trust and the willingness of society. A precondition for such talks is a permanent exemption from steel and aluminium tariffs for EU member states.

Dieter Kempf is President of the Federation of German Industries (BDI).