Documents considered by the Committee on 27 February 2019 Contents

7Negotiating mandates for EU-US trade talks

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Exiting the EU, Foreign Affairs and International Trade Committees

Document details

(a) Recommendation for a Council Decision authorising the opening of negotiations of an agreement with the US on the elimination of tariffs for industrial goods

(b) Recommendation for a Council Decision authorising the opening of negotiations of an agreement with the US on conformity assessment

Legal base

(a) Articles 207(3), 207(4), 218(3) and 218(4) TFEU, QMV

(b) Articles 207(3), 207(4), 218(3) and 218(4) TFEU, QMV

Department

International Trade

Document Numbers

(a) (40336), 5459/19 + ADD 1, COM(19) 16; (b) (40335), 5461/19 + ADD 1, COM(19) 15

Summary and Committee’s conclusions

7.1The EU and US jointly account for around half of global GDP and a third of global trade flows.52 Whilst negotiations for an ambitious EU-US trade and investment deal (known as the ‘Transatlantic Trade and Investment Partnership’ or ‘TTIP’) stalled in 2016, Commission President Juncker and US President Trump agreed to launch a new phase in EU-US trade relations on 25 July 2018. The EU-US Joint Statement identifies five areas of potential further engagement:

7.2These new, more targeted trade discussions must be considered in the context of escalating trade tensions between these two major trading blocs since 1 June 2018, following the US’s imposition of Section 23253 additional steel and aluminium duties of 25% and 10% on EU imports. While the US claims that these measures are necessary to protect US national security, the EU is treating them as commercial safeguard measures (intended to protect US industry from foreign competition for commercial reasons) and has responded by adopting countermeasures on certain US imports, applying provisional safeguard measures to address the diversion of steel into the EU from other countries and filing a complaint before the World Trade Organisation. The US has also threatened Section 232 measures on cars and car part from the EU. In their Joint Statement, both sides agreed to “refrain from any measures that would go against the spirit of their agreement while work on this joint agenda is ongoing”.

7.3On 18 January 2019, the Commission published two draft negotiating mandates covering a) the elimination of tariffs for industrial goods; and b) conformity assessment between the EU and US. These proposals therefore relate to two of the five areas for engagement identified in the Joint Statement and require the approval by a qualified majority of EU Member States in the Council before talks can begin.

Proposed mandate on the elimination of tariffs on industrial tariffs

7.4Industrial goods are defined as all goods other than those included in Annex 1 of the WTO Agreement on Agriculture.

7.5The negotiating mandate also includes the objective to “reconcile the EU and US’s approaches to rules of origin” (which determine how much of the value of a product must be created locally for trade preferences to apply).

7.6As outlined in the Commission’s report on the progress of trade talks with the US of 30 January 201954 and its explanatory memorandum accompanying the proposed mandate, the Commission states that:

7.7The Commission’s economic analysis of 19 February 2019 estimates that a targeted EU-US agreement eliminating remaining tariffs on industrial goods would increase EU exports to the US by 8% and US exports to the EU by 9% by 2033, corresponding to additional gains of €27 billion and €26 billion in EU and US exports respectively.56

Proposed mandate on conformity assessment

7.8Conformity assessment covers procedures such as testing, inspection and certification and other legislative requirements that need to be met in different markets/countries before a product can be put on sale. Different approaches to conformity assessment can result in lengthy and complex administrative processes and additional costs for businesses.

7.9This proposed mandate focuses on reciprocal commitments on conformity assessments in sectors where obstacles are currently experienced (including machinery, and electrical and electronic) and sectors for which the importing party requires third party conformity assessment.

The Government’s position

7.10In his Explanatory Memorandum of 4 February 2019, the Minister of State for Trade Policy (George Hollingbery MP) states that the proposed mandates “are consistent with the UK’s objectives in trade policy and with relevant wider policy goals” and that the Government will “continue to monitor the progress of negotiations closely”. He further notes that the UK would be “bound” by either agreement that enters into force during an implementation/transition period, but not in the case of a no-deal exit, which would enable the UK “to independently negotiate and implement an agreement with the US”.

7.11The Minister also states that the Government has not prepared a UK impact assessment of either of the proposed negotiating mandates, but “remains committed to giving a wide range of stakeholders the opportunity to engage and contribute to [its] future trade policy and to producing impact assessments, as appropriate”.

7.12We note that the Government is strongly supportive of these bilateral trade discussions as a means to finding a constructive resolution to rising EU-US trade tensions.

7.13However, whilst the Minister maintains that “the mandates are consistent with UK interests”, he provides very little detail on their expected coverage/scope, the expected timetable for their adoption, and their Brexit implications.

Scope of the mandates

7.14We ask the Minister to clarify whether the products listed below are a) (likely to be) in or out of scope of the EU’s proposed negotiating mandate on industrial tariffs and b) whether he supports their inclusion (or exclusion) and why:

7.15It is also not clear how or why “the mandate [on conformity assessment] ensures a high level of protection is fully preserved”. We ask the Minister to share his analysis in this regard.

Expected timetable for the negotiations

7.16Whilst the Minister notes the urgency of these trade talks, there appear to be growing divergences in the EU’s and US’s positions. The Commission rejects the inclusion of agriculture (or other areas that might be sensitive for either side), referring to the Joint Statement in which both sides agreed to cover the removal of tariffs, non-tariff barriers and subsidies for “non-auto industrial goods”. However, the negotiating objectives of USTR of January 2019 explicitly include agriculture in the tariff talks, calling into question whether the talks will get off the ground and/or whether this a tactic by the US to allow it to impose Section 232 measures on EU cars and car part imports. What is the Government’s analysis of the reasons for the US’s inclusion of agriculture and how this is likely to impact the negotiations?

Brexit implications

No deal

7.17The Minister states that the UK would be able “to independently negotiate and implement an agreement with the US” in the case of a no-deal scenario. However, the UK’s trade negotiations with each trading bloc cannot be considered in isolation as the outcomes for the future economic partnership between the UK and EU will impact any UK-US deal and vice versa. We ask the Minister to clarify whether the Government would seek to negotiate similar standalone agreements on industrial tariffs and conformity assessment with the US or incorporate them into any wider UK-US trade deal in the event of no deal.

Withdrawal Agreement/negotiated withdrawal

7.18If the agreements enter into force during any transition period (in the case of a negotiated withdrawal), the UK will continue to be bound by the terms of the EU’s international agreements for the duration of the transition/implementation period. However, it is not clear whether the UK will benefit from the rights. We ask the Minister to set out the Government’s position on whether the US would need to agree to the UK continuing to benefit from the terms of the agreements for the duration of the transition/implementation period.

7.19We also ask the Minister to explain whether the UK would seek continuity of the effects of these agreements post-transition/implementation period.

7.20Finally, we note that the Commission recently submitted an economic analysis to the Council and European Parliament on the benefits to EU consumers and producers of eliminating all remaining tariffs between the EU and US across various sectors. If there is a negotiated withdrawal, will the Government conduct a UK-specific impact assessment to consider the full impacts of the agreements on different stakeholders, sectors and regions in the UK during the transition period (and beyond, if the Government intends to replicate them post-transition period)?

7.21We ask the Minister to respond to the above questions within ten working days. In the meantime, we retain the documents under scrutiny and draw our conclusions to the Exiting the EU Committee, International Trade Committee and Foreign Affairs Committee.

Full details of the documents

(a) Recommendation for a Council Decision authorising the opening of negotiations of an agreement with the US on the elimination of tariffs for industrial goods: (40336), 5459/19 + ADD 1, COM(19) 16; (b) Recommendation for a Council Decision authorising the opening of negotiations of an agreement with the US on conformity assessment: (40335), 5461/19 + ADD 1, COM(19) 15.

Previous Committee Reports

None.


53 Section 232 of the Trade Expansion Act of 1962 “authorises the President of the United States, through tariffs or other means, to adjust the imports of goods or materials from other countries if it deems the quantity or circumstances surrounding those imports to threaten national security.”

54 Interim Report on the work of the Executive Working Group dated 30 January 2019.

55 This Section refers to the US Trade Representative’s (USTR) right to apply measures against “foreign acts, policies, and practices that the USTR determines either (1) violates, or is inconsistent with, a trade agreement; or (2) is unjustifiable and burdens or restricts U.S. commerce. The measure sets procedures and timetables for actions based on the type of trade barrier(s) addressed”.




Published: 5 March 2019