New EU Trade Commissioner Says US Holding Up Airbus Solution

The joint statement on how to confront Chinese abuses through the World Trade Organization (see 2001140044) has been the highlight of the first visit to Washington by Phil Hogan, the new European Union Trade Commissioner. Hogan, who spoke to the Center for Strategic and International Studies Jan. 16, acknowledged that the WTO doesn't have the capacity to act on these ideas “quickly enough.”

Hogan, who had already met with U.S. Trade Representative Robert Lighthizer during his trip, and was scheduled to meet again later in the day, said Europe agrees with the U.S. that the WTO needs substantial reforms. “We fully agree with the United States, it needs to be fixed and it needs a profound overhaul, not just tinkering at the edges,” he said. “So-called emerging countries like China have emerged,“ he said, and added that a broad exception to trade obligations for developing countries -- 2/3 of WTO members -- “is unacceptable.”

“The hostage-taking and consensus-blocking attitude will not work anymore,” he said. Changes to WTO rules require unanimity, which is why no rules have changed in 25 years.

But Hogan complained that the U.S. has not brought its own proposal forward on how to fix appellate body overreach. “I don’t detect an appetite to engage in the WTO reform this year,” he said.

Still, Hogan said the EU would be talking to like-minded countries in the hopes that more will sign on to the ideas in the trilateral statement, and by the June ministerial meeting of WTO countries, there could be a critical mass of members on board, which would allow them to confront the issue more effectively.

He also complained, as his predecessor did, that the U.S. is not negotiating in earnest on a settlement to the Airbus and Boeing subsidies. Both Europe and the U.S. were told by the World Trade Organization that their subsidies for their aircraft manufacturers distort trade. The U.S. implemented tariffs on 150 tariff lines in October, most at 25 percent, and some at 10 percent, to encourage the EU to reach a settlement on Airbus subsidies. The USTR has said it may increase tariffs on some of those products -- cheese and wine are the highest-profile products with the higher tariffs -- or change the mix of targets.

“If he believes that tariffs and the threat of tariffs brings people to the table, he’s wrong,” Hogan said of the approach taken by the USTR. “We want to come to the table anyway. We don’t need any threats of tariffs to come to the table on the Airbus-Boeing issue. If you want to solve the problem we can sit down and solve it in a few days.”

He challenged the idea that European steel and aluminum deserve tariffs, and Trump's argument that Europe has been taking advantage of the U.S., as proven by the size of the goods trade deficit. He noted that the U.S. sells substantially more services to the EU than vice versa, and that American companies operating in Europe send $123 billion a year back to the U.S.

Also, he noted that two-thirds “of all European imports need further processing and production” in the U.S. He asked rhetorically why the American government would put tariffs on manufacturing inputs, since that makes it more expensive for U.S. businesses.

Hogan did not bend on the European position that trade talks on lowering industrial tariffs and increasing regulatory conformity will not include access to European agricultural markets through changes to tariffs or tariff rate quotas. But, he said, regulatory cooperation could be a way to lower non-tariff barriers in agriculture. He said when he met with Senate Finance Committee Chairman Chuck Grassley, R-Iowa, the senator showed him a sack of soybeans (or soya beans, as the Irishman put it) and corn. Hogan said that when he reminded Grassley that European imports of American soybeans increased 120 percent from 2018 to 2019, and imports of corn were up 180 percent, “he didn't realize this.”

Hogan said there was a “little bit of receptiveness” to his argument that regulatory convergence is a way to improve American ag exports to the EU.

Hogan said the EU would discuss opening its ag markets if the U.S. would end its Buy American policies for government purchases, be willing to discuss its maritime restrictions or talk about honoring European geographical indicators for certain foods and drinks. “If they've changed their mind, let me know,” he said to CSIS moderator Bill Reinsch.