14 March 2018, Germany, Frankfurt am Main: An Airbus A380 (L) and a retro design Boeing 747-8 cross each others path at the ramp of Frankfurt Airport.
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European governments continued to call for a negotiated settlement to trade disputes between the United States and the European Union (EU) on Thursday.
The latest plea comes a little more than a week before American tariffs of between 10 and 25% are scheduled to take effect on billions of dollars worth of European exports, ranging from civilian aircraft to agricultural products like cheese and wine.
An array of finance ministers gathered in Luxembourg for monthly meetings told CNBC that the escalating global trade disputes represented a significant threat to European economies, but that the imposition of tariffs by Washington would nevertheless force Europe to respond in kind.
Mario Centeno, the Portuguese finance minister who steers the regular gathering of his euro zone counterparts, said the uncertainty over trade and the threat of fresh tariffs were risks to the economic order that were “political in nature.”
“They are not based on fundamentals of our economy,” he told CNBC in an interview. “They don’t respond to any sort of imbalances that we really have in the global economy.”
The Trump administration’s impending tariffs on $7.5bn worth of European goods are scheduled to kick in on October 18th, in retaliation for decades of European nations’ subsidies to aircraft manufacturer Airbus, and subsequent non-compliance with previous World Trade Organisation rulings.
The director general of the Geneva-based multilateral trade arbiter, Roberto Azevedo, acknowledges that some of Washington’s other recent trade moves, executed outside the WTO’s framework, have been “unorthodox.”
But even though the new EU-targeting sanctions will be entirely permissible under WTO rules, he told CNBC’s Joumanna Bercetche in an interview Thursday that he hoped the US and EU would “sit down, talk and find a negotiated solution, because the last thing we need at this point in time is an escalation of tariff barriers and trade restrictions.”
He posited that sanctions and trade conflicts have been “provoking the level of uncertainty that is slowing down the economy, the global economy across the board.”
A separate WTO ruling against Airbus’s competitor Boeing and the United States is expected in the first few months of next year. The equivalent judgment will likely offer the EU an opportunity to seek trade redress for U.S. tax concessions and research funding that unfairly supported its own national aircraft manufacturing champion.
And so Washington’s threatened introduction of tariffs before that Boeing ruling has triggered anger among national leaders across Europe, as well as the EU’s executive arm, the European Commission.
Airbus is headquartered in France, and the country’s winemakers could see a drastic drop-off in U.S. sales if import prices rise in line with the new tariffs later this month.
The country’s finance minister Bruno Le Maire was at pains after meeting with his European counterparts to point out the damaging impacts that have stemmed from the Trump administration’s 15-month confrontation with Beijing.
“We should all be aware that a trade war between China and the US means 0.5 (%) lower growth, less than expected,” he told reporters in Luxembourg.
“This is not in the interest of the United States to add a trade war between the US and Europe to the current trade war between the United States and China.”
And while Le Maire reiterated his insistence that while a settlement would be “wiser” for both sides, in the absence of any compromise, he repeated a now well-worn mantra about potential retaliation: “we won’t have any other choice but to also take measures.”
Across Europe, national finance chiefs have been preparing their budgets, and the uncertainty engendered by these arguments over global trade have made their job that much harder, according to Luxembourg’s Pierre Gramegna. “Most European countries are export champions,” he told CNBC. “So trade issues have a direct impact on how much taxes, how much revenues you will have.”
“It’s a very worrisome situation,” said Martin Helme, Estonia’s finance minister and a self-professed free-trade proponent who sympathizes with some of Washington’s reasoning. “The US-China dispute, well, Europe is a sort of collateral damage,” he explained, adding that the damage to Europe has been “more significant than people actually realize.”
Italy may prove to be the hardest hit of the continent’s major economies, with its annual budget deficits already pushing the limits of European fiscal rules, and its debt pile the largest among EU members.
“Of course we are not happy,” the country’s new finance chief Roberto Gualtieri told CNBC, when asked whether he felt it reasonable that other nations’ previous subsidies to Airbus might lead to American punishment of Italian parmesan and pecorino producers.
“It would be totally unfair to target Italian exports for an issue by the way which on about which Italy is not responsible at all.”
That targeting of individual products, sectors and nations represents the latest politicisation of trade under President Trump, who has long been a critic of multilateral agreements and indeed global institutions like the WTO and IMF.
Spanish olives are among the targeted products, and the country’s acting economy minister Nadia Calvino told CNBC that the possibility of olive growers losing U.S. customers was not conducive to future transatlantic cooperation. “We think that these kind of threats are not contributing to a good atmosphere that should be running our negotiations and our relationship at the international level.”
“The very foundations of the global economic order as we have known it are being questioned,” said Harris Georgiades, the man tasked with managing the finances of tiny Cyprus.
“It’s very easy for anyone to consider how much more significant would be the position of vulnerability we would be in, if we did not have the EU as a common trading bloc.”
“Ha,” laughed Estonia’s Helme when asked about the differences between EU member states when it comes to trade policy. “What makes you think European countries are united on other issues?”