On 11 January 2019 and 18 January 2019, the United States Trade Representative (“USTR”) and the European Commission (“Commission”) released their respective negotiating objectives for a U.S.-EU trade agreement, potentially marking a new phase in the transatlantic trade relationship. The release follows from the joint agenda agreed to in July 2018 by European Commission President Jean-Claude Juncker and U.S. President Donald Trump to work together toward “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods,” increased cooperation on regulatory issues and standards, and protecting European and U.S. companies from unfair global trade practices. The release could also signify an important expansion of market opportunities for EU and U.S. companies.

The road ahead is fraught with obstacles, however, as the EU and U.S. negotiating positions differentiate substantially. The USTR’s summary of specific negotiating objectives seeks a broad free trade agreement with the EU, including on sticky issues such as agriculture, while the Commission aims to limit trade negotiations to reciprocal commitments on conformity assessment and industrial goods. This makes any future transatlantic trade negotiations challenging at best and raises the question of whether the two sides will be able to arrive at an agreement at all. The situation is further complicated by the Trump administration’s ongoing 232 investigations on imports of certain automobiles and parts, as the EU stands ready to suspend any trade talks and retaliate with duties on U.S. exports should the investigation lead to the imposition of tariffs on certain EU automotive products.

EU Perspective

EU Commissioner for Trade, Cecilia Malmström, has clearly stated that the EU is “not proposing to restart a broad free trade agreement negotiation with the US,” referring to the breakdown of negotiations, five years ago, of the Transatlantic Trade and Investment Partnership (TTIP). On 30 January 2019, the Commission published a progress report concerning the joint agenda agreed to in July 2018. The report indicates that talks between the parties have so far focused on potential regulatory cooperation initiatives. The EU has also taken some measures to avoid the escalation of trade tensions with the United States. Specifically, the EU has increased imports of U.S. soybeans and of liquefied natural gas and more recently, on 29 January, has authorized U.S. soybeans as a source of biofuels. The EU is also interested in negotiating trade facilitating actions in a number of identified sectors including, services chemicals, pharmaceuticals, medical devices, and soy beans. On a separate track, the EU, in cooperation with the U.S. and Japan, is seeking to reform the World Trade Organization (WTO), specifically aiming at addressing China’s unfair trade practices.

US Perspective

In contrast to the Commission’s objectives, USTR’s negotiating objectives touch on a broad range of issues and industry sectors. In particular, USTR seeks to address “both tariff and non-tariff barriers,” in order to reduce the U.S. trade deficit with EU, which stood at $151.4 billion in 2017. Moreover, in addition to industrial goods, USTR’s negotiating objectives extend to agricultural goods and include the elimination of “{n}on-tariff barriers that discriminate against U.S. agricultural goods,” and “{r}estrictive rules in the administration of tariff rate quotas,” among the agricultural-specific objectives. In addition to trade in goods, USTR specifically identifies trade in services, including telecommunications and financial services, as well as digital trade in goods, services, and cross-border data flows, among its objectives.

A Path Forward

Despite the apparent differences in breadth and goals laid out by the Commission and USTR, there is still reason for optimism. There is significant overlap in the parties’ objectives. For example, each side seeks to reduce tariffs on industrial goods. Each side has also set as objectives the negotiation of rules of origin that will benefit both parties to the agreement as well as the establishment of a dispute settlement mechanism. Additionally, the Commission’s and USTR’s objectives also both note the particular importance of an agreement for small and medium-sized enterprises (“SME”).

By focusing on common ground, the Commission and USTR have the opportunity to begin negotiations and avoid thorny issues related to autos and agriculture. The USTR has also indicated it “may seek to pursue negotiations with the EU in stages,” which may allow the parties to find agreement on common objectives.