US Election Season 'Limits' Negotiations Between US and EU on Trade, Researcher Says

Looming elections in the U.S. put pressure on negotiations with the EU on sustainable steel and aluminum, limiting talks because new elections would make announcing potential tariffs as part of the Global Arrangement on Sustainable Steel and Aluminum unpopular or maybe "not possible at all," Charlotte Unger, a research fellow for the American-German Institute (AGI), said during a webinar June 27 (see 2306270059).

The negotiations for climate-oriented trade for steel and aluminum between the two parties began back in October 2021 (see 2111010039). The idea was that they would work for the next two years for a "global steel arrangement, which would allow us to remove 232 tariffs for good," EU Trade Commissioner Valdis Dombrovskis said at the time (see 2111010039). This means that by around October of this year something would need to be worked out between the two parties, Unger said.

Part of the reason potential election outcomes could become an issue is that "all negotiations are also subjected to domestic policies," Unger said. Even though we do not know the results, the elections could put "pressure and limits these negotiations," Unger said. Specifically, new elections and new leadership could lead to changes such as "new tariffs or inflation," that could change the popularity or feasibility of the negotiations, Unger said.

While the EU does not have "big presidential elections," small changes can be expected "during the next couple of years," Unger said. There are elections in several EU bodies, including the European Commission and the European Parliament, as well as "some important elections in some member states," Unger said. While she didn't give any specifics on what could change with an election, she pointed to the EU's "positive push" on climate change and whether that would keep going.

Another issue is that the result of the negotiations is unlikely to be a treaty, which would be more rigid and fixed, but more likely a "memorandum of understanding," wherein each country or region would "install regulations that implement the agreement," Unger said. That's partly because treaties are much more difficult to ratify, Unger added.

Unger also discussed what the agreement might include: a mechanism or instrument to enforce said regulations in each country; a definition of what clean steel or sustainable steel is, which could include "a measurement and reporting" system "for what carbon intensity level is clean"; and an enforcement protocol, which could mean that countries that implement the standards are "exempt from some sort of tariffs," while the dirtiest steel countries have to pay tariffs, or some kind of tax credit for those who participate.

Unger said she hopes that the U.S. and the EU figure out a way to "make this open and how to integrate the global South" in the scheme. "It's not enough just to say well, we are implementing some sort of instrument tariffs and whoever wants to join can just join because, of course, if you look at the global South this is something where you have very different starting positions in steel production, in industrial policy or in private policy as well," she said. As a result, it would not be fair to "just apply the same standards and then you're in."