How the EU Bureaucrat Won Bigger Than Trump
Trump needed a deal, but it’s the European Commission president who exceeded expectations.
European Commission President Jean-Claude Juncker proved on Wednesday that the EU isn’t the useless bunch of bureaucrats populists and nationalists make it out to be. He came to Washington with a bridge to sell, and in three hours of talks he sold it to Trump.
The joint statement Juncker and U.S. President Donald Trump signed hints at what the bargaining was about. The parties agreed “to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods” (translation: tariffs on cars, the major sticking point in U.S.-EU trade relations under Trump, will not be touched) and to “reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans” (translation: the EU will keep its trade barriers against U.S. agricultural imports but is happy to buy more soybeans).
Juncker also told Trump that the EU “wants to import more liquefied natural gas” from the U.S. (but not that it will work to reduce imports of Russian pipeline gas) and that it’s happy to work together with the U.S. to reform the World Trade Organization.
This may sound almost as unspecific as the statement Trump signed with North Korea’s Kim Jong Un in Singapore: There are no numbers, no deadlines and no specific measures outlined in the Trump-Juncker document. Yet it’s clear that Trump’s fire and fury against European car imports have been put to rest, at least temporarily. Trump had threatenedto impose a 20 percent tariff on European cars (mostly German ones – few others are sold in the U.S.), and his ambassador to Germany, Richard Grenell, suggested to German auto industry bosses that the U.S. might be open to dropping this threat if Europe eliminated its 10 percent tariff on U.S. cars. Juncker didn’t promise that and got the threat removed, anyway.
Trump appears to believe he got two important promises from Juncker. “European Union representatives told me,” he tweeted, “that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!”
In fact, the EU, which barely produces any soybeans, is already buying them from the U.S. and will increase imports of the oilseed this year because of a low domestic rapeseed crop and smaller supplies of sunflower seed meal from Ukraine and Russia. (According to the U.S. Department of Agriculture projections, however, the increase still won’t cover the shortfall for U.S. farmers caused by China’s new 25 percent import tariff on U.S. soybeans, a result of Trump’s trade war).
As for “vast amounts of LNG,” Europe does have the capacity to import much more LNG. Its existing terminals are chronically underutilized, and projects exist to build more (notably, Germany, which doesn’t have an LNG terminal yet, plans to start building one on the Elbe). And last year, the EU’s LNG exports rose 12 percent to cover 14 percent of total EU gas exports, mainly thanks to southern European countries. But only 4 percent of the imports came from the U.S., less than from Trinidad and Tobago, which accounted for 6 percent of the EU’s LNG imports in the fourth quarter of 2017. U.S. suppliers have to compete in a lively market with big players such as Qatar, Algeria and Nigeria.
In the first quarter of 2018, Europe’s LNG imports dropped 13 percent year-on-year, however: In winter, prices are higher in Asia, which makes Europe a less attractive destination for suppliers. In the first three months of the year, the U.S. supplied less LNG to Europe than Russia, which has also built liquefied gas capacity.
It’s not as if U.S. suppliers were sitting on lots of LNG they couldn’t sell. Their exports and their destinations are dictated by highly flexible demand. The EU cannot order member states to buy more from the U.S.: Unlike the market for pipeline gas, where costly fixed infrastructure dictates the sources, an LNG carrier can come to Europe from Peru, Trinidad or the U.S., and it makes little difference to the buyers as long as the price is right. Juncker’s “promise” to Trump means merely that demand for natural gas is growing in Europe and capacity exists to accept more imports if they’re competitive.
It’s possible that the post-Helsinki bout of Russia panic in the U.S., which has forced Trump to put off his next meeting with Putin until next year, made Trump more amenable to a deal with Juncker. Trump needed a nice moment, if not quite a win, to erase the bitter aftertaste of the Putin meeting and the accusation that he treated America’s adversaries better than it’s long-standing allies. In this sense, timing worked for the wily European Commission president. It’s certainly an outcome markets can cheer (until the next all-caps tweet).
Juncker, often criticized by euroskeptics, deserves credit for his contribution to the meeting’s success for the EU. Where German Chancellor Angela Merkel failed with her cool directness and French President Emmanuel Macron with his slightly pompous verbosity, Juncker delivered with an easy bonhomie combined with an ability to run circles around Trump when it came to the subject matter. That performance, and the leverage that comes from pooling power, is part of the reason European nations pay to be EU members.
No comments:
Post a Comment