MNI POLICY: Trump May Extend EU Auto Tariff Probe For Leverage

Wider Trade Talks With EU Complicated By Aircraft Subsidies

By Brooke Migdon

     WASHINGTON (MNI) - U.S. President Donald Trump will miss a deadline next

week on the investigation of cars imported from the European Union to keep his

leverage in broader trade talks, former officials told MNI.

     Trump has until Nov. 13 to respond to results of the Commerce Department's 

automobile probe under a clause known as Section 232 covering national security.

     The White House is "jockeying for position" and the statute's hazy language

allows the president to take any actions deemed necessary, said Bernd Janzen, a

former attorney in the Office of the Chief Counsel for Import Administration.

That could allow Trump to call for an extended review following the deadline. 

"It may be more powerful to keep the card of the threat of tariffs than to

actually use it," said Janzen, now a partner at Washington-based law firm Akin

Gump specializing in Section 232. "So long as there is the threat of tariffs,

the EU is going to be nervous about what might happen, and I think that

translates into leverage for the White House."

     Originally designed as a Cold War safeguard, Section 232 of the Trade

Expansion Act of 1962 has served alternative purposes including economic ones.

Although a statutory timeline exists for investigations, the scope of the

inquiries and the executive branch's interpretation of security can be broad.

Trump used the clause to put tariffs on steel and aluminum from longtime

military ally Canada and Mexico when renegotiating NAFTA.

     --'SIGNIFICANT BARRIERS'

After receiving the results of the investigation in February, Trump wrote in a

presidential proclamation in May that foreign markets impose "significant

barriers to automotive imports from the United States," referencing the EU and

Japan. 

But the proclamation was drafted before the U.S. struck a preliminary deal with

Japan, the USMCA was signed and KORUS was renegotiated. That likely places

Japan, Mexico, Canada and Korea outside the investigation.

"Section 232 is becoming a U.S.-EU issue," said Jeremie Cohen-Setton, a research

fellow at the Peterson Institute for International Economics.

Cohen-Setton said the trade relationship between the U.S. and Europe is often

"underemphasized" by the Trump administration, which has focused more on China.

"There are already many obstacles toward reaching a deal with the EU," the

lawyer Janzen said, noting considerable discord over agriculture. "Without the

232 auto investigation, I'm skeptical that there can be any broader trade deal

with the EU reached quickly." 

--AIRCRAFT DISPUTE

     The U.S. also imposed $7.5 billion of tariffs on European imports last

month, following a ruling on a 15-year-old World Trade Organization dispute over

the EU's illegal subsidies to aircraft supplier Airbus.

EU trade chief Cecilia Malmstrom said the EU will move forward with tariffs when

the WTO decides on a similar dispute over U.S. subsidies to Boeing. European

Commission President Jean-Claude Juncker said last year the EU would "respond in

kind" if the U.S. imposed car tariffs.

Cohen-Setton doesn't see the EU responding ahead of the president's 232

decision, no matter how long that may take. "It's in a wait-and-see mode until a

decision is made on autos," he said.

The EU shouldn't hold its breath, according to Gary Hufbauer, a former U.S.

Treasury official and trade expert at the Peterson Institute for International

Economics.

     --ELECTION FOOTBALL 

Hufbauer said the president will likely "keep the tariff option alive" into 2020

as the U.S. enters a presidential election year. 

"An election year is always an inauspicious time for an agreement," he said.

"And the complexities of the U.S. political situation are not favorable to an

agreement."

U.S. Secretary of Commerce Wilbur Ross said Sunday during an interview with

Bloomberg Television the administration has held conversations with individual

European, Japanese and Korean automakers which should determine the nature of

the president's decision. 

He said the administration's "hope" is those negotiations will "bear enough

fruit" for the U.S. to abandon or only partially enforce Section 232 tariffs on

imported automobiles and parts.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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