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Malmström: TTIP to remain “in a freezer for quite some time”

The European Commission along with the EU member states expects the EU-US negotiations on the Transatlantic Trade and Investment Partnership (TTIP) agreement to remain “in a freezer for quite some time” after the election of Donald Trump, a staunch opponent of big regional free trade agreements, as the new US President on 8 November.

“We should be realistic. I don’t think we will see any resumption of TTIP negotiations in quite some time,” EU Trade Commissioner Cecilia Malmström told a press conference following the Trade Council on 11 November in Brussels.

On her way to the meeting, Malmström expressed doubt that holding a new round of the EU-US talks under the outgoing Obama administration would make sense. “Probably not,” she added.

The statement came shortly after Republican leaders in the US Congress closed doors on the Obama administration’s hope to ratify the Trans-Pacific Partnership (TPP) deal during the so-called lame duck period in the Congress, i.e. between the election of Trump and his formal takeover on 20 January 2017.

However, Malmström said that technical talks would continue with the current administration with the aim of “safeguarding some of the progress” achieved until now “so that when we resume negotiations we don’t need to start from the beginning.”

“We will be ready to resume negotiations when the new US administration feels that they are ready. The ball is in their court,” Malmström said.

The wait and see approach results from the lack of clear indication on how President-elect Trump wants to proceed with the TTIP negotiations. “He has not one single time in his election campaign or before mentioned TTIP, so we don’t know what he thinks about TTIP,” Malmström said.

Indeed in the run-up to his election, Trump focused on TPP and the US free trade agreement with Canada and Mexico (NAFTA). During his first debate, in late September, he cited the latter agreement as “one of the worst things that ever happened to the manufacturing industry.” Trump has also said numerous times that he intends to renegotiate or even withdraw from NAFTA if Canada and Mexico refuse to renegotiate it. On top of this, Trump said he would impose tariffs of “15 percent to 35 percent” on the US companies that choose to export jobs to countries like China or Mexico.

Trump’s aggressive anti-free trade rhetoric hit also the World Trade Organisation (WTO). In an interview with NBC in July, when asked about the conformity of his plans to levy tariffs on Chinese goods or to use tariffs to bring factories back from Mexico with WTO rules, Trump threatened to renegotiate or even withdraw the US from the Geneva-based organisation if the first option is not successfully pursued.

“It doesn’t matter. Then we’re going to renegotiate or we’re going to pull out (of the WTO). These trade deals are a disaster, the World Trade Organisation is a disaster,” Trump said.

This statement sharply contradicts with his “7 Point Plan To Re-build the American Economy by Fighting for Free Trade,” which he presented during the campaign. Point six of the paper says the WTO will help Trump administration achieve this goal. He pledged to “instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO.” “China’s unfair subsidy behaviour is prohibited by the terms of its entrance to the WTO,” reads the plan.

Although sounding like science-fiction from the geo-political point of view, a threat of pulling the US out from the WTO can be unilaterally carried out by Trump due to his constitutional power over foreign policy, according to the CATO Institute. The Washington-based think-tank warns, however, that this could “push the US back into the world of Great Depression.”

“Withdrawal from the WTO would lead to the unrevealing of tariff negotiations and the reversion of rates to the MFN level of any pre-existing agreement, conceivably all the way back to the Smooth-Hawley rates that were in effect in 1934 when the Reciprocal Trade Agreements Act launched the series of negotiated tariff reductions that brought rates to their current levels over the past 82 years,” the CATO paper reads.

Post-campaign reality check

A question arises whether President-elect Trump will indeed intend to carry out his campaign threats and if so, what will it mean for the EU-US trade relations.

Many trade experts admit it is hard to judge at this stage based on Trump’s incoherent earlier statements.

“Trump doesn’t have a coherent trade policy. Therefore, it is impossible to predict what his election means for EU-US trade relations in particular”, Thomas Streinz, Fellow at the Institute for International Law and Justice at New York University School of Law said in a short comment sent to this website.

“Trump presidency might see an increase of trade litigation” as suggested in his “7 Point Plan To Rebuild the American Economy by Fighting for Free Trade,” warns Andrés Delgado Senior Research Fellow at Max Plack Institute Luxembourg.

“The question will be whether the US will take the same approach in relation to the EU and some of the thorny parts of their trade relations like airline subsidies or agricultural products,” Delgado told this website.

Joris Larik, Assistant Professor at Leiden University and Senior Researcher at The Hague Institute for Global Justice hints that Trump’s aggressive trade policy might trigger retaliation from China and other countries affected.

“I don’t really see how President Trump intends to bring back all these manufacturing sector jobs without protectionist measures which the EU and others will contest at the WTO,” Larik said in a short comment sent to this website.

But some trade experts expect Trump to backtrack on his most extreme plans.

“Hopefully the blustery rhetoric was an electoral tactic (it worked after all) and it will likely mean a rebalancing of trade relations. Where that balance lies is of course an open question but likely not as drastic as it seems right now,” Marcus Wagner, Associate Professor at Warwick Law School told this website.

“During the Trump campaign I noticed a shift of emphasis from pulling out of trade agreements to renegotiating them. I think the main US trading partners should and will react pragmatically to such demands,” Rob Howse, Professor at NYU Law School told EU Trade Insights.

“President Trump has a long to-do list now. No candidate ever had to break more campaign promises than him,” David Kleimann, Researcher at the European University Institute said in a short comment sent to this website.

But Holger Hestermeyer, Shell Reader in International Dispute Resolution at King’s College London argues that Trump might have gone too far during his campaign, reaching a point of no return.

“The Trump campaign did not offer a coherent, realistic strategy on trade. The Trump presidency is accordingly facing a steep learning curve. But even if it is willing to abandon some of its wilder promises, it might yet find itself locked into its own rhetoric,” Hestermeyer said.

Unlike many, he does not, however, reckon that TTIP, which remained off Trump’s radar during the campaign, is dead.

“As to TTIP I do not believe it is dead. But it will be frozen until further notice,” Hestermeyer said.

But Andreas Dür, Professor at the University of Salzburg disagrees.

“There is no longer even the slimmest chance of TTIP being successfully concluded,” he said in his short reaction sent to EU Trade Insights.

Similarly sceptical is Bryan Mercurio, Professor at the Chinese University of Hong Kong (CUHK).

“He’ll have to backtrack on some things, and Congress will not allow him to proceed on others. But as to TTIP he will give European countries another excuse to kill the deal. I’m not sure either candidate was capable of unfreezing the deal. I can’t blame Trump if that deal never successfully concludes,” Mercurio said.

Finally, the UK might be a potential winner of the Trump election.

“I think the biggest features of the Trump campaign has been its erratic and often contradictory nature. Even on trade, where his rhetoric has been highly critical of existing trade arrangements, he has spoken of putting the UK first ‘in the queue’ of trade talks,” Gabriel Siles-Brügge, Associate Professor at the University of Warwick told this website.

Next steps

During the transition period from Obama to Trump presidency, the new Secretary of Commerce and the new USTR Trade Representative will be appointed to replace Penny Pritzker and Michael Froman, respectively. It is expected that the new trade department will need some six months from the day of takeover on 20 January 2017 to become fully operational.

By Joanna Sopinska (Hermine Donceel also contributed to this article)