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Wilbur Ross Just Breathed Life into the Free Trade Deal with Europe

Wilbur Ross Just Breathed Life into the Free Trade Deal with Europe

Soon after President Donald Trump took office, his top trade advisor, Peter Navarro, pledged to kill the Transatlantic Trade and Investment Partnership (TTIP), a potential free trade deal between the United States and Europe. Now, five months into his presidency, Trump’s Commerce Secretary, Wilbur Ross, has brought it back from the dead.

Speaking to CNBC late Tuesday, Ross said that the deal was still viable. After referencing the Trans Pacific Partnership, a massive 12-nation trade deal from which Trump promptly withdrew, Ross pointedly said, “we did not withdraw from TTIP.”

“The EU is one of our largest trading partners, and any negotiations legally must be conducted at the EU level and not with individual nations,” Ross continued. (That clarifying remark, while stating the obvious, may have been directed at Ross’s colleagues in the administration: Gary Cohn, Trump’s chief economic adviser, was under the impression last week in Europe that different EU states have different tariffs with the United States. They don’t.)

“Thus, it makes sense to continue TTIP negotiations and to work towards a solution that increases overall trade while reducing our trade deficit,” Ross said.

Ross’s verbal resuscitation of TTIP comes after Trump met with his European counterparts at the G-7 in Italy. German chancellor Angela Merkel has repeatedly explained to Trump that the bilateral trade deals he prefers are not possible with European nations, as the EU trades as one bloc. Trump insists bilateral deals are the best way for the United States to secure preferential trade terms, which he seeks in order to reduce trade imbalances. (Of course, the administration’s focus on bilateral trade deficits gives a skewed view of the overall trade situation, but trade deficits have been a concern of Trump’s for decades.)

This is a recognition that Europe legally has to negotiate as one entity, said Gary Hufbauer, a trade expert at the Peterson Institute for International Economics. “Maybe it’s something Trump can advertise as progress.”

Still, just because Ross is breathing new hope into the pact, Hufbauer does not expect the two sides to come to any sweeping agreement. Instead, he said he expects a series of smaller deals that would leave unaddressed much more controversial issues like Europe’s steep tariffs on foreign cars. He said he expects them to concentrate on areas where agreement is close, like the removal of customs duties on industrial products.

Trump, for his part, has hardly been friendly with many European leaders, including Merkel. Earlier this week, he unleashed a series of tweets accusing Berlin of “unfair” trade practices that benefit Germans at the expense of Americans. He’s also railed against the U.S. trade deficit with the EU, which in 2016 was $146.3 billion. The majority of that imbalance is with Germany. Many economists believe Germany’s massive trade surplus — not just with the United States, but pretty much everybody — is bad for the global economy. But it isn’t life-or-death for the U.S. economy.

Whether Europe is willing to play ball with Ross is unknown — and news of the trade pact’s revival may come as something of a shock. As recently as last week, German Economics Minister Brigitte Zypries told a German newspaper, “It is not likely the U.S. will resume negotiations over TTIP.” The pact is also wildly unpopular among the French and German populaces.

And Europe’s own bandwidth for trade negotiations promises to be a little bit more strained in years to come: Brussels will have to negotiate on what terms Brexit Britain will have access to the now-27 nation bloc.

That means any revived TTIP will probably be small fry, avoiding precisely the huge contentious issues that do irritate both sides.

“Ross wanted to show a bit of an olive branch,” Hufbauer said. “What they can get done may not go to the issues that irritate Trump and Ross, like reducing the trade deficit.”

Photo credit: Aaron P. Bernstein/Getty Images