What does the new US Presidency hold for automotive suppliers and other key industries in the EU?
Reboot of climate and trade policies
A new president in the White House is likely to bring a new dynamic to the EU-US relationship and multilateral environment, foremost in the areas of trade and climate change. The US is likely to re-join the Paris Agreement and may try to revive the Iran nuclear deal to set a new tone, but domestic priorities, a divided US congress and clashing EU-US interests will limit the change and slow the pace. More certainty on the conditions of EU-US trade will benefit automotive suppliers, but the future role of China as an integrated part of global manufacturing supply chains will remain under serious scrutiny. We expect the first points of focus in the EU-US relationship to be aerospace subsidies, the regulatory framework for data transfers, and the potential elimination of US tariffs on steel imports from the EU.
New data framework
Legacy disputes in aerospace and legal uncertainty of EU-US data flows will require both sides’ attention early on. The EU and US will need to come to an agreement on aerospace subsidies so that their respective retaliatory tariffs of $7 and $4 billion can be withdrawn. Secondly, they will need to stitch together a new regulatory data protection framework to allow for data flows between the two transatlantic markets, as the European Court of Justice struck down the existing Security Shield in July. Both issues will require technical creativity to bridge differences in market governance philosophies, a process that may benefit from an expectedly more cordial relationship. A Biden administration may show goodwill by lifting its security related tariffs on EU and Japanese steel, while leaving its tariffs on Chinese goods as it is likely to demand further concessions from the Chinese government.
Towards successful international partnerships
The US is more likely to cooperate with the EU and Japan to find common ground for the World Trade Organisation (WTO) reform, and to push China to enhanced market access and protection of intellectual property rights and trade secrets. However, the future of the WTO will remain uncertain as a Biden administration is unlikely to unblock the appellate body until a technical solution is found to limit the court’s reach and ability to consider previous rulings as binding precedents. EU legislative proposals such as a digital service tax or carbon border adjustment mechanism may find a softer reception in public from a Biden administration, but could expect a more coordinated diplomatic counter push. The fact that the Biden administration and a divided US Congress may be unable to effectively legislate on these issues will further complicate this and highlights the fact that the EU and US may continue to move ahead in diverging directions.
In: CLEPA News, Growth & Competitiveness, Trade