As the negotiations on the EU–US Global Arrangement on Sustainable Steel and Aluminium (GSA) falter, the EU should steel itself ahead of the 2024 US elections, write Brandon Bohrn and Etienne Höra.
The United States and the European Union have reached yet another interim deal to forgo their longstanding dispute over the Trump-era US Section 232 steel and aluminium tariffs through 2025.
This short-term deal is a blow to transatlantic trade relations – because it is no more than a short-term fix, a far cry from the Global Agreement on Sustainable Steel and Aluminum (GSA).
The GSA would have alleviated this bilateral trade irritant and allowed both sides to jointly address unfair trade practices in these critical input materials toward China.
However, even if a deal on GSA had been reached, would both sides be in a different position from now?
As next year’s US election season quickly approaches, the reality is that a potential Republican administration entering office in 2025 could undo this deal in short order – and cause further disruptions to the EU far beyond what occurred during the initial Trump years.
Trump speeches and strategic documents by conservative think tanks scoping a Republican agenda outline an aggressively isolationist trade policy.
Thus, the EU must be prepared for all scenarios, with just 11 months to steel itself and preserve its trade advantages.
Another extension, another blow
In 2021, the Europeans reluctantly agreed to replace the Section 232 tariffs with a quotas-based system, with the understanding that a bigger and better deal would be reached in two years’ time.
No such deal has emerged. A two-month extension was struck at the October EU-US Summit, and yet again, another extension has been (reluctantly) announced through 2025.
The Europeans’ logic is simple: the tariffs, which they view as incompatible with WTO standards, should not be replaced, but rather removed completely. Extending this unbalanced quota-based arrangement, which was meant as an entry ticket for more substantial negotiations, is a bitter pill to swallow.
Transatlantic trade relations seemed to be picking up momentum through fall 2023 as the EU-US Summit neared – and then quickly slowed: Stasis in the negotiation of the GSA must be read as a failure.
What to expect from January 2025
If former president Donald Trump is reelected, Europe would not only say goodbye to the prospects of the GSA but would experience a sharp reversal in transatlantic trade relations, far beyond the simple reintroduction of Section 232 tariffs.
As current plans stand, the US would abandon or severely weaken international trade organizations and pursue an aggressive, unilateral trade policy, particularly towards China. The EU would, in turn, be pressured to fall in line.
The recent U.S.-EU interim quota deal exemplifies the limits of a ‘Europe-friendly’ administration. The erratic nature of a Trump 2.0, characterized by an aggressive, protectionist trade policy rooted in national security, would be unlike anything Europe has experienced thus far.
Transatlantic long game starts now
Considering these risks, policymakers, businesses, and civil society should start future-proofing EU-US trade relations now. As relations become unpredictable, resilience should be built at other levels of society – from chambers of commerce to state and city-level government.
Organized civil society, and especially trade unions, should explore their options for continued cooperation beyond 2025. Recent numbers show that trade unions now have the approval of roughly two in three Americans, they are boosted by prominent successes in the auto industry, and membership is rising rapidly on both sides of the Atlantic.
This is an opportunity to strengthen transatlantic cooperation on issues like global labor standards, and technological disruptions, as well as a fair and inclusive green transition.
By addressing these concerns and bringing stakeholders to the table, decision-makers could strengthen civil society as a pillar of transatlantic resilience. The Stakeholder Dialogues at the Transatlantic Trade and Technology Council (TTC) are a starting point for this exchange.
However, in the case that the TTC is either severely weakened or abolished under a new administration, stakeholders should prepare for a time when the responsibility for this facilitated dialogue falls on them.
Europe must be prepared for all scenarios
President Biden could remain in office after November next year, introducing a new window for the EU and US to push the GSA over the finish line. Even if an administration change occurred, the extent to which the Republican trade agenda could be implemented is unclear.
Nonetheless, Europe should be prepared for worst-case scenarios.
It should move beyond damage control and start by putting its own house in order: What are its vital trade interests, and what are the strengths it can use in its service? The EU should consider “de-risking” by strengthening its relationships with other partners.
At the same time, it should address the more fundamental questions facing its hands-off economic model amid geopolitical tensions and immense investment needs for the green transition, while also tackling long-standing issues in its still fragmented single market.
Within this overall framework, defensive measures have a role to play. The EU should include potential out-of-the-box solutions to bilateral disputes, but also contingency plans for failed negotiations – such as countermeasures under the EU’s new Anti-Coercion Instrument.
The more developed these plans are, the less likely it is that the instrument will need to be used – especially as the next EU Commission may be confronted with the consequences of a U.S. administration change shortly after coming into office next autumn.
If the election indeed fails to go Biden’s way, the current failure of GSA negotiations will be the least of Europeans’ worries. The transatlantic relationship, in trade and beyond, would be placed under severe pressure, and Europe urgently needs to face this reality.
By understanding Republican trade policy objectives, strengthening EU-US relations at other levels of government and society, and preparing for scenarios that could follow in nearly one year’s time, the EU will be better placed to weather the storm that the 2024 US elections could bring.
The clock is ticking.
