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CCCEU Weekly Update Oct 20, 2023 | EU-US Summit: Challenges in Trade Negotiations Amid Global Pressures

CCCEU| Updated: Oct 24, 2023

Editor's Note: Hello from a rainy Brussels! This week's CCCEU Weekly Update brings you the latest developments of interest to both Chinese and European readers. We hope you enjoy your reading and have a relaxing weekend.

▶︎ Focus

The 27th EU-US summit is scheduled to take place in Washington, D.C., on October 20th, 2023. The summit brings together leaders to address a range of pressing issues, from trade disputes to global conflicts. European Commission chief Ursula von der Leyen sets the tone by highlighting that the summit's central concerns will revolve around the Israel-Hamas conflict and ensuring continued support for Ukraine. These global security issues take precedence over trade matters. However, trade negotiations are still on the agenda, though they face significant obstacles.

Trade Tensions

Trade tensions are at the forefront of the summit's agenda. Diplomats initially planned the summit to address and potentially resolve trade disputes that escalated during former US President Donald Trump's administration. Key among these disputes is the matter of steel tariffs.

The United States has suspended import tariffs on EU steel and aluminium imposed by then-President Donald Trump in 2018, but on the condition that both sides agree by the end of this month on measures to address overcapacity in so-called "non-market economies", and promote greener steel.

Negotiators reportedly aim to wrap up a deal by the end of the year. However, on the eve of the summit, negotiators fail to strike a deal, making it unlikely that any breakthrough will be announced during the summit. Instead of a full agreement, the U.S. and EU leaders are expected to announce "significant progress" in the negotiations and express hope for a deal by year-end. This timeline is critical, as U.S. tariffs on European steel and aluminium will be reimposed if no agreement is reached, Politico reported.

Disagreements also persist on the issue of EU demands for the complete removal of tariffs, a demand that the U.S. is unwilling to accept. Tensions also arise regarding Chinese tariffs on critical raw materials, and the U.S. reintroduces the idea of snapback tariffs, a move that causes frustration within the EU delegation.

Another trade-related issue concerns U.S. tax breaks for electric vehicles (EVs) assembled in North America. The negotiators are working to find solutions to reduce the impact on Europe of these new tax incentives. However, sources familiar with the matter suggest that reaching agreements on these trade issues is unlikely during the summit.

The root of the trade troubles lies in differences between the EU and the U.S. on several key fronts:

Steel Tariffs: The U.S. demands that the EU impose steel and aluminium tariffs on Chinese imports. The EU insists on following international trade rules, requiring an investigation to prove China's subsidies.

Green Steel Initiatives: The EU has its own vision for greening the steel industry, and the negotiations aim to reconcile the EU's carbon border adjustment mechanism with the U.S.'s approach to promoting environmentally friendly steel through subsidies.

Critical Minerals: A parallel deal concerning critical minerals is also under discussion. These minerals are essential for EU carmakers, but challenges persist in finding common ground.

In light of these complexities, the comments from news outlets suggest that both the U.S. and the EU are likely to extend their truce on tariffs until after the upcoming elections, during which President Biden seeks to secure support from states involved in steel production, such as Pennsylvania.

EU-US Relations

Despite these trade tensions, the comments highlighted the strong and like-minded partnership between the EU and the U.S. Both entities are deeply committed to a rules-based international order, effective multilateralism, and democratic values. Areas of cooperation between the EU and the U.S. include support for Ukraine, collaboration on the global clean energy economy, secure supply chains, digital infrastructure, artificial intelligence, and economic resilience.

Challenges in the Summit

Although the EU-U.S. summit aims to normalise trade relations, the ongoing global events add a layer of complexity to the discussions. The Israel-Gaza conflict and the risk of a broader regional conflict, including threats from Iran and rocket attacks by Hezbollah in northern Israel, are mentioned as events overshadowing the summit. U.S. President Joe Biden's return from Tel Aviv, where he reaffirms strong support for Israel and announces substantial aid for both Israel and Ukraine, underscores the significance of these global conflicts.

Within the EU delegation, tensions are evident, particularly regarding differing stances on the Israel-Hamas conflict. This creates challenges for presenting a united front during the summit, and open disagreements among EU leaders are noted.


Reuters, Financial Times, Politico, and the Council of the European Union's official website


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▶︎ What are experts talking about?

Scitech sector holds the most promise for peace

Source: China-US Focus

Author: Li Zheng

Oppenheimer, a man often associated with the Manhattan Project and the atomic bomb, is at the centre of a complex historical tale. He was one of the most famous victims of the political smears in the United States known as McCarthyism in the early years of the Cold War. His life was very much shaped by the political, scientific, and engineering developments of his time. In the film, Oppenheimer is presented as being most troubled by the great destructive power of new technologies and worried about the possibility that he had opened Pandora's box that would lead to humanity's destruction.

Today, history seems to be repeating itself. In 2018, then-President Donald Trump launched the China Action Plan, which targeted visiting Chinese scholars and American scholars who had China connections. False accusations have led to injustices and tarnished the reputation of many renowned American scientists. It is therefore regarded by many as the new edition of McCarthyism, named for U.S. Senator Joseph McCarthy, who treated anyone with connections to communism as a traitor in postwar America. As a result of Trump's attacks, China-U.S. scientific and technological relations deteriorated rapidly. Many people believe that the two countries are in a new cold war in science and technology. The film "Oppenheimer" thus seems like a story about historical cycles.


Israel-Hamas war: implications for gas markets

Source: Bruegel 

Author: Agata łoskot-Strachota; Simone Tagliapietra 

The Israel-Hamas war is already hitting gas supplies, most notably in Israel. Following the Hamas attacks, on October 9, Israel's Energy Ministry ordered Chevron, the operator of the Tamar platform 25 kilometres northwest of Gaza, which mostly met domestic needs, to temporarily cease production. On October 10, Israel's government also instructed Chevron to temporarily halt flows through the most important pipeline connecting Israel and Egypt, the East Mediterranean Gas (EMG) pipeline, which links Ashkelon, an Israeli city 13 km north of Gaza, to Arish in the northern Sinai, Egypt.

Israel's energy ministry has also indicated that electric utilities in Israel should seek alternative fuel sources to meet their needs. The share of gas in the country's energy mix is about 40%, up from zero in 2000. This rapid expansion has been driven by the electricity generation sector, previously dominated by coal; gas now provides 70% of Israel's electricity.


Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.