EU, Japanese, Canadian Ambassador Say US Should Draw on Collective Economic Strength

While the U.S. is either the second or No. 1 trading partner for the European Union, Canada and Japan, their ambassadors warned that some of the actions the U.S. has taken in the last five years undermine its alliances. They spoke at the end of the first day of the Washington International Trade Association annual conference.

As one example, Japanese Ambassador Tomita Koji said that Japan regrets that the U.S. decided to withdraw from the Trans-Pacific Partnership; even though the trade deal went forward, its strategic vision is lacking as a result, he said. He said that the Japanese government welcomes the U.S. interest in an Indo-Pacific Economic Framework, and said "we look forward to working with them to flesh out the idea."

EU Ambassador Stavros Lambrinidis criticized the U.S. blockade of appointments to the World Trade Organization's appellate body, which caused that group to become defunct. "If you don't like the rules, you don't kill the referee," he chided. "We need a referee out there, because otherwise, you have chaos."

He also said that the EU is troubled by a proposal that would not only put the exports of electric vehicles from the EU at a major competitive disadvantage, but would also put U.S.-assembled EVs from Volkswagen at a disadvantage, as well, since the Volkswagen plant is not union-represented. The Build Back Better bill passed by the House of Representatives provided an additional $4,500 tax credit at purchase for cars and trucks made at American union plants, and also proposed that any purchase credit would only be available for American-assembled cars after a few years. Currently, there is a $7,500 tax credit for the purchase of electric vehicles that are from automakers who have not sold a lot of electric cars yet, so Tesla and General Motors cars are no longer eligible.

Build Back Better faces an uncertain path to passage in the Senate, and Sen. Joe Manchin, D-W.Va., whose support is critical to getting a bill through, opposes the richer subsidy for union-represented plants.

Canadian Ambassador Kirsten Hillman said that she and her staff have been talking to many members of Congress about the problem with how this purchase incentive is structured. She said, "It rips apart supply chains right at the point when we say we want those to be more resilient with our allies and trading partners."

Lambrinidis said that the richer tax credit amounts to a more than 30% tariff on EU companies' electric vehicles. "Do not undermine our collective economic strength," he said. He later said, "Advanced democracies can do more together than they could alone."

Lambrinidis talked about the U.S.-EU agreement to discuss a united approach on favoring steel produced in a way that reduces its contribution to climate change, and how that's just one aspect of how the EU seeks to use trade tools to support its efforts to decarbonize its economy. He said that while the EU is not hearing "full agreement" on how it has proposed to implement its carbon border adjustment mechanism, other countries are engaged in discussing it.

Tomita said that Japanese officials "were not too happy when the administration prioritized negotiating with the EU" to change the Section 232 action on European metal exports, given that Japan was nearly alone in choosing not to retaliate against the Section 232 tariffs back in 2018. But, he said, now there are robust negotiations with the U.S. on Section 232, including at the ministerial level. He said that Japan and the U.S. could work together to address the market-distorting overcapacity that led the Trump administration to impose the tariffs.