Can Biden and the European Union Resolve Some Long-Standing Disputes?

Stratfor Worldview

Politics, Europe

Brussels is very happy to have Biden in the White House, but that does not mean all problems are automatically resolved.

Joe Biden’s presidency portends greater U.S.-EU coordination on areas like climate change, COVID-19 and human rights. But Washington and Brussels will likely still spar over trade, tech policy and defense spending. On the day of Biden’s Jan. 20 inauguration, European Council President Charles Michel called for a “founding pact” between the United States and the European Union based on five priorities: boosting multilateral cooperation, fighting against COVID-19, tackling climate change, rebuilding the global economy with a digital transformation, and joining forces on security and peace. Also on Jan. 20, the European Union’s chief diplomat, Joseph Borrell, invited Biden’s new Secretary of State, Antony Blinken, to a meeting with EU foreign ministers in Lisbon, Portugal, on March 4-5 to restart cooperation.

• After Biden’s inauguration, European Commission President Ursula von der Leyen, said there was “a new dawn in America” that the European Union had long been waiting for, and that Biden’s election was “resounding proof that, once again, after four long years, Europe has a friend in the White House.”

• Shortly after his inauguration, Biden signed executive orders to rejoin Paris Climate Accord and the World Health Organization (WHO). The European Union, which is supportive of multinational organizations and international deals, had long pushed for both of these actions. 

Now that Biden’s in office, the European Union will seek to scale down its trade disputes with the United States, though some Trump-era tariff hikes on EU products will likely remain in place. The Biden administration will probably refrain from introducing new tariff hikes, and may lift some of the existing ones that its predecessor imposed (such as those on steel and aluminum). But the White House will likely maintain the Trump-era punitive measures that were approved by the World Trade Organization, such as those connected to the Airbus/Boeing dispute. 

• The Trump administration imposed tariff hikes on EU aluminum and steel in May 2018, which has since had a negative impact on Germany and other industrial EU member states. 

• In 2019, the United States imposed about $7.5 billion in tariffs on imports from the European Union, including French and Spanish wine and Greek olives, over a dispute at the WTO regarding subsidies to aircraft maker Airbus. Washington reshuffled some of the products on the tariffs list in 2020.

• In 2020, the European Union imposed roughly $4 billion in tariffs on U.S. goods (including tractors, ketchup and orange juice) over a separate WTO dispute regarding subsidies to aircraft maker Boeing. 

• During its time in office, the Trump administration repeatedly threatened to impose higher tariffs on EU cars, which would particularly damage Germany and the countries along its supply chain, most of which are in Central Europe. Biden, however, is unlikely to continue making such threats. 

The European Union has also pledged to coordinate with the United States on taxing and regulating big tech, though the disproportionate impact of such changes on U.S. companies will still leave room for disputes. Brussels wants the members of the Organisation for Economic Co-operation and Development (OECD) to reach a global agreement to tax digital companies in the countries where they sell their products, along with a global agreement on a minimum corporate tax. But the European Commission has also said it will address these issues alone if a global consensus on such taxes cannot be reached. Countries like France, Italy and Spain have also either already introduced or announced their own digital services taxes (DSTs) for tech companies operating in their markets. In addition, the European Union is planning to introduce regulatory changes to make big tech companies more accountable and transparent, and to prevent and remediate anti-competitive behaviors. Such unilateral actions by Brussels and EU member states will open the door to U.S. retaliation, as most of the companies targeted by these regulations and taxes are American.

• The United States has threatened to impose some $2.4 billion in duties on imports of French products in retaliation against France’s DST, which Washington argues unfairly targets U.S. companies like Google, Facebook, Apple and Amazon since the tax only applies to tech firms that annually generate at least $850 million in global revenue and $28.3 million in French sales.

Other potential areas of conflict between the European Union and the United States include:

• Defense spending: The United States is likely to pressure its European partners to meet NATO’s defense spending targets. 

• Nord Stream 2: Washington has threatened to sanction companies involved in the Russian-backed natural gas pipeline to Germany, which Berlin defends. 

• China: In late December, the European Union reached an investment agreement with China. While the Biden administration has not criticized the deal in the same harsh terms as the Trump administration, officials including National Security Adviser Jake Sullivan warned that Brussels should seek greater coordination with the United States regarding China.

The EU Welcomes Biden, But Some Disputes Will Remain is republished with the permission of Stratfor Worldview, a geopolitical forecasting and intelligence publication from RANE, the Risk Assistance Network + Exchange. As the world's leading geopolitical intelligence platform, Stratfor Worldview brings global events into valuable perspective, empowering businesses, governments and individuals to more confidently navigate their way through an increasingly complex international environment. Stratfor is a RANE (Risk Assistance Network + Exchange) company.

Image: Reuters.