Repairing the transatlantic link key for Swedish presidency
While talks are still ongoing between the EU and the US on the US Inflation Reduction Act (IRA), hopes of successfully avoiding a trade conflict are waning. Promoting and improving transatlantic trade relations will be an important but challenging task for Sweden’s EU presidency.
While it is encouraging that the United States has introduced legislation in support of climate objectives, the IRA’s domestic content requirements for electric cars and their batteries suggest that the motives behind the legislation are also protectionist in nature. In our view, these measures are discriminatory and violate the World Trade Organization (WTO) rule on national treatment.
The actions of the US are worrying, not least since it cannot be emphasised enough how important the transatlantic link is – both for the EU and for Sweden.
A good and healthy relationship between the EU and the US is central to security policy. It is also key to combating climate change. On top of that, from a Swedish perspective, the US is Sweden’s third largest trading partner after Norway and Germany, and trade with the US has increased in recent years.
Within the EU, potential subsidies are now being discussed to counter the effects of the IRA on European companies. However, it is of the utmost priority that trade relations between the EU and the US do not deteriorate and develop into a trade war. In our recent conversations with US Congress officials, with trade authorities and other US trade representatives, we hear a clear desire to try to resolve the conflict and continue the dialogue. Swedish trade stakeholders unanimously share this desire.
Sweden will seek to promote and improve transatlantic trade relations
As President of the Council of the European Union in the first six months of 2023, Sweden will seek to promote and improve transatlantic trade relations. Since 2021, the EU-US Trade and Technology Council (TTC) has been the main platform for economic cooperation between the EU and the US. The next TTC meeting is expected to be held in Sweden this spring. It is important that concrete progress is achieved. In parallel with the TTC process, it is important that we continue to argue that deepened economic integration between the EU and the US should once more be allowed to outweigh inward-oriented domestic interests.
What should the EU do if the US continues on the path it has staked out?
We are in a new era in which US trade policy is changing course; distancing itself from its successful and historic strategies to date. Sweden, and the EU, must respond to this new situation and act accordingly.
The EU needs to expand its trade policy plans. We can hope that the US remains the trading partner it has long been but we can no longer count on this being the case.
We need to spread our risks and find new opportunities for international trade.
It is therefore important that the EU completes its ongoing negotiations on free trade agreements such as those with Australia, India, Indonesia, and Kenya and that it implements the agreement with Mercosur (Argentina, Brazil, Paraguay and Uruguay) that has already been negotiated, and its updated agreements with Chile and Mexico.
Furthermore, the EU should strive to use existing agreements to better link up EU trade with the countries around the Pacific and the free trade area of the CPTTP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which numbers eleven countries including Canada, Mexico, Japan, and Singapore.
For as long as the US is not open to new initiatives to open up trade, the EU must increase its efforts to find new openings for trade that bring competitiveness, prosperity, security, and sustainability for us and for other countries. That said, it is hoped that despite present challenges, Sweden’s EU presidency will contribute to maintaining and improving EU-US trade relations, retaining a hope that it will be possible to return to the idea of creating a Transatlantic free trade zone in the not too distant future.
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