FT premium subscribers can click here to receive Trade Secrets by email.
Hello from Washington, where the humid summer has turned swiftly into a rainy, grey and curiously London-like September. Our August hiatus has seen both the Democratic and Republican conventions come and go, while in trade news, Taiwan eased its restrictions on US pork and beef imports, the EU dropped tariffs on American lobsters and the US reinstated tariffs on Canadian aluminium. Oh, and EU trade commissioner Phil Hogan resigned.
Our main piece today is on where Hogan’s “golfgate” departure leaves the US-EU trade relationship. Our person in the news is Piyush Goyal, while our chart of the day looks at electric vehicle competition in China.
Lobsters were ‘just the beginning’
“I often say that being Irish in this city is probably one of the best nationalities you can have, because everybody likes you, even if they don’t like what you say.” So says one Washington-based European diplomat of the recently departed EU trade commissioner Phil Hogan. (Said diplomat was not himself Irish, in case you were wondering).
The shortlived adventures of the Irish trade commissioner in America were felled by his love of golf parties in the midst of a global pandemic. His departure has left many in Washington nonplussed. He leaves his job at a time when the US and EU seemed to be making progress on improving what had been an acrimonious trade relationship. It sounds small, but late last month the EU agreed to waive tariffs on imported US lobster. In exchange, the US said it would halve tariffs on a range of EU manufactured products, including glassware and ceramics, disposable lighters and some prepared meals containing fish.
Few in Washington thought that the lobster deal meant much in and of itself — although the congressional representatives for Maine, where lobsters live, were delighted. But everyone agreed that this was the first positive piece of news for the transatlantic trade relationship for quite some time. In fact, it marked the first negotiated tariff reduction between the two sides in more than 20 years. In an orchestrated joint statement, US trade representative Bob Lighthizer and Hogan vowed that lobsters were “just the beginning”. The spin is not worthless.
Former EU trade commissioner Phil Hogan was seen by the US as more deal-minded than his predecessor © Stephanie Lecocq/EPA
The closest big prize on the horizon is a resolution to the long-running Boeing-Airbus battle. As a result of a World Trade Organization ruling that the EU had failed to eradicate illegal support for Airbus aircraft, Washington has been able to levy tariffs of up to 100 per cent on $7.5bn of European goods. The ruling on how far the EU can retaliate against the US for its own state support to Boeing is expected later this month, and is likely to prompt either an escalation of the transatlantic tariff war, or an incentive for the two sides to sit down and reach an agreement.
Things seem, then, at a bit of a juncture, and it is unclear what comes next. Hogan had not really achieved much during his time in Washington, but he had seemed to click with Lighthizer. Both men, says one diplomat, “spoke the language of toughness”. A former Trump trade official says that the pair, in many ways, “had similar personalities”. While they clashed in early meetings, Lighthizer and his team came to the view that Hogan was more deal-minded than his predecessor.
While the European Commission must now come up with a new trade commissioner, the question of who might fit the bill is a tricky one. The Airbus/Boeing talks are likely to need dealing with soon, and so the new commissioner might need to speak the language of Lighthizer. But the length of Lighthizer’s remaining tenure is in doubt. With a presidential election just around the corner, Lighthizer potentially has only a few months of power left, and Trump’s trade policy might give way to Joe Biden’s. Rufus Yerxa, president of the National Foreign Trade Council, says that a Biden administration might give the new commissioner a better shot at rapprochement, given Biden’s desire to work more with traditional allies.
Either way, unfortunately for Dublin, the next European trade commissioner may not come from their land. Ursula von der Leyen, the commission president, has already reiterated that she’s free to allocate the trade portfolio to any of her commissioners, with Didier Reynders, currently the EU commissioner for justice and a former foreign, trade and finance minister of Belgium, reportedly one of the options. Europeans should hope Lighthizer and his team find Belgians as charming as the Irish.
Investors are pumping billions of dollars into China’s electric vehicle start-ups as they seek to turn out the next Tesla, creating a window of opportunity for Beijing to forge a national champion in the industry, write Christian Shepherd and Peter Campbell. But some analysts fear the boom may be premature, pointing to bottlenecks in China’s charging infrastructure and a crowded market with intensifying competition from both the California-based EV company and traditional carmakers.
Person in the news
Piyush Goyal has indicated that a trade deal with the US could be signed before the election © Anindito Mukherjee/Bloomberg
Who is it?
Piyush Goyal, India’s trade minister
Why is he in the news?
Goyal has signalled that enough progress has been made in the thorny trade talks between the US and India that a trade deal could be signed before the election, or soon afterwards. “Ambassador Lighthizer and I agreed that we can look (to) finalising before the election, but otherwise soon after the election. The entire package is nearly ready and can be finalised at any time,” his office tweeted on Tuesday.
Why Trump no longer talks about the trade deficit with China — as the US president shifts his language after failing to achieve a core 2016 campaign promise.
China is cracking down on waste to ensure food security: since the trade war with the US broke out, the country has made great efforts to reduce its reliance on imported soyabeans.
Opening shots have been fired in what is shaping up to be a long-running battle between Australia and Big Tech, following a proposal which aims to force Google and Facebook to pay for news content.
The best trade stories from the Nikkei Asian Review
Intel is preparing to release a new line of laptop CPUs that it hopes will drive revenue growth into 2021, but the company is struggling to maintain its — and America’s — leadership in chip manufacturing against Asian rivals.
Japan, India and Australia agreed on Tuesday to launch an initiative to achieve supply chain resilience in the Indo-Pacific region, in an apparent bid to reduce trade dependence on China — a big trading partner for all three nations.