US-EU economic relations are poised to bounce back from the COVID-19 pandemic and the tensions caused by the Trump administration, according to a new report by the American Chambers of Commerce.
That could include a reset on transatlantic trade ties. The report, published on Wednesday (24 March), urged the two sides to use a “rare and potentially fleeting opportunity” to strengthen political and economic ties and to relaunch the trade talks which stalled towards the end of the Barack Obama administration.
“Once progress is made on economic recovery and clearing away bilateral irritants, the parties should seek a transatlantic zero tariff agreement that would eliminate all duties on traded goods and services,” the authors argued.
“That effort should exclude sanitary and phytosanitary (SPS) measures and investor-state dispute settlement (ISDS) provisions,” they added.
In February, President Joe Biden announced that “the transatlantic alliance is back,” and has pledged to rebuild relations with the EU.
“At its best, 2021 will be a time to heal,” the report states, referring to the difficulties facing transatlantic relations over the past four years. Talks on a transatlantic trade deal were shelved and the two sides traded tariff wars, while Donald Trump’s government repeatedly blocked appointments to the World Trade Organisation’s Appellate Body.
“The last four years subjected the transatlantic partnership to the ultimate stress test,” the report stated, adding that “in the face of these multiple headwinds, the transatlantic partnership bent. But it did not break.”
Despite difficult political relations between the US and EU leadership, described by the Amcham paper as “four years of tumult, uncertainty, and antagonism,” the European market was still comfortably the US’s largest.
In 2019, US foreign income in Europe hit a record high of $298 billion, while European affiliate income in the US amounted to $134 billion, the second highest annual total on record.
US foreign affiliate sales in Europe of $3.4 trillion in 2019 were greater than total US exports to the world of $2.5 trillion and roughly half of total US foreign affiliate sales globally.
However, the report also underscored the extent of the economic damage caused by the pandemic, which saw US foreign direct investment flows to Europe vanish, from $344 billion in 2019 to roughly $0 in 2020. Meanwhile, FDI inflows from Europe to the US are estimated at $81 billion in 2020 compared to $120 billion in 2019.
The two sides made an early breakthrough during a phone call between Biden and European Commission President Ursula von der Leyen by suspending the tariffs mutually imposed in the context of the Boeing-Airbus dispute.
The EU has also proposed to set up a Trade and Technology Council with US officials to address digital issues and challenges posed by technology giants.
The question of digital taxation remains a point of contention, with EU states looking to press forward with digital levies while the US has stalled talks on a global solution being discussed the Organisation for Economic Cooperation and Development (OECD).
[Edited by Josie Le Blond]