EU-US trade deal: Buying time for EU reforms?

Last weekend, the presidents of the EU and the US met in Scotland to agree on a trade deal to avoid the 30% tariff Donald Trump threatened to impose from August 1st. Rushed by member state governments, Ursula von der Leyen returned with a deal that will see 15% tariffs applied on EU exports to the US while the EU levies 0% tariffs on US imports. In addition, the EU agreed to purchase 700B€ of energy, invest 600B€ in the US and to increase purchases of US weapons. 

The price tag for refusing EU integration

The undersigning Volt Chapters regret that the EU accepted such a lopsided handshake deal putting into question our credibility and legitimacy in trade based on the international order. We question not only the urgency for this deal, but also the outcome considering the 235B$ trade deficit Trump criticized in products is offset by a US surplus and quasi monopolies in tech and financial services of 148B€. A 15% tariff without reciprocity to protect EU domestic industries or equivalent taxation of US service providers was by no means justified.

Volt fears that citizens across Europe will pay a heavy price for national governments hijacking negotiations and refusing for too long to address Europe’s structural weaknesses:

• The EU still has no foreign policy doctrine remaining dependent on US protection and support in the Ukraine war, which Donald Trump is using as leverage in his deal-making.

• Member states preach stronger defense but have not made significant steps to at least joint procurement with a European army and command chain nowhere on the horizon.

• Governments prevent real economic integration leaving our EU market “single in name only”, with our industries less competitive and too fragile to absorb external shocks.

• The Commission was rushed by national governments protecting industries with the sum of unilateral interests a far cry from a unified and forward-looking trade policy

• EU decision-making thus remains woefully inadequate considering a geopolitical reality much different from when the underlying EU treaties have been concluded.

This deal is wakeup call. Mario Draghi pointed out many of these points in his report a year ago. Since then, governments now criticizing the EU for a deal they forced, have neither delegated competences to the EU nor allowed reforms. They keep the EU in its weak state and, empty promises or not, with this deal they are buying time. Volt expects this time to be finally  used for EU reforms and to reduce Europe’s external dependencies.

Creating a European future instead of protecting a national past

Specifically, Volt chapters demand the EU Commission and national governments:

• To treat the EU-US deal separately from the Multiannual Financial Framework (MFF 2028-2035) being negotiated. The upcoming “EU budget” should neither be reduced nor diluted or diverted.

• To not enter into a new energy dependency by purchasing close to the annual US LNG production and triple of current imports but instead focussing on increasing renewables as well as grid and storage capacities.

• To ensure military spending beyond the 2% NATO commitment will be financed on a European level focussing on joint purchases with obligatory and increasing quotas for European defence contractors.

• To advance market integration: the 28th regime, the EU public procurement reform and integrated capital markets can only be steps towards unifying 27 different bureaucracies costing us 7% of productivity according to the Draghi and IMF reports.

• To reduce the monopolies of US service providers by means other than tariffs: an EU public payment provider to rival Visa and Master Card is overdue, as are interoperability requirements for social media platforms, a Buy European and a EU small business act.

• To not exempt any country from Carbon Border Adjustments. We need a level playing field for our industries in Europe and beyond - by demanding other economic blocks to follow suit should they want to continue to trade with the European Union.

• To demand a net positive capital flow into the EU from any public investment in the US. The US does not need development aid. Investments beyond taking over initiatives like USAid or Radio Free Europe must have a verifiable positive impact at home in Europe.

Volt expects these points to be addressed in the upcoming September State of the Union address of Commission President Ursula von der Leyen - not by the usual fluffy marketing, but by concrete steps towards EU treaty reforms aimed to render the European Union a capable geopolitical actor. These should not only include internal reforms but also initiatives to salvage the international order - including a new global economic zone and reform of the WTO.

These reforms require true leadership on a European level and standing up to member state governments to rally them towards finding a role within a stronger European Union instead of overestimating their diminishing geopolitical weight. Volt believes that a strong commitment from member states to honor the Spitzenkandidaten process will be a necessity to break with the practice of Commission Presidents depending on the Council instead of the European people and project. Volt is ready to take over responsibility should national governments continue failing to do so.

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