Press Briefing: Previewing U.S.- EU Summit

This transcript is from a CSIS press briefing hosted on October 13, 2023.

Paige Montfort: Thank you so much. Thank you, everyone, for dialing in this morning or afternoon, depending on where you’re dialing in from. As our operator kindly introduced, my name is Paige Montfort. I am the media relations manager here at the Center for Strategic and International Studies in Washington, D.C.

And thank you all so much for joining us today for this briefing, where we’re going to preview the upcoming U.S.-EU summit, which will take place on October 20th at the White House. I am joined by experts who are going to discuss their expectations for this meeting, in cooperation between the United States and the European Union more broadly. They’re going to talk about all the different key agenda items, such as support for Ukraine, global clean energy, economy, supply chains and economic resilience, critical and emerging technologies, and more.

So now I want to introduce my colleagues in the order in which they’ll be speaking. So they’re each going to give some opening remarks and analysis and then we’ll open it up to Q&A from everyone that’s on the call. And then afterwards, as we always do, we will publish a transcript. It’ll be sent to everyone who RSVPed directly by email, and also published to CSIS.org. So without further ado, I’m now going to introduce my colleagues in the order in which they will be speaking.

So first, we have Max Bergmann. He’s the director of our Europe, Russia, and Eurasia Program, and the Stuart Center in Euro-Atlantic and Northern European Studies here at CSIS. And following Max, we will hear from Federico Steinberg, who will talk about the state of bilateral relations. He’s a visiting fellow with our Europe, Russia, and Eurasia program. And then finally, we’ll hear from Emily Benson. Emily is the director of our project on trade and technology and also a senior fellow in our Scholl Chair in International Business here at CSIS. And she will follow up at the end of our group of remarks.

So thank you all so much, again, for dialing in. I will hand it over to Max to get us started.

Max Bergmann: Thanks, Paige. And thanks, everyone, for joining. I thought what I do is sort of give a brief sort of overview of U.S.-EU relations, and sort of maybe outline why I think the EU is increasingly important to Washington and why the summit is therefore really important in kind of the broader geopolitical landscape.

Now, the history of U.S.-EU relations, I won’t go super deep into it, but the U.S.-EU relationship has actually not been all that close. There has been, you know, frankly, a lot of tension in U.S.-EU relations. And that’s largely because Europe sort of evolved – the EU evolved as an economic community, then evolving into the EU, the political and economic union. But the engagement between the U.S. and the EU has often been fights over trade issues, chlorinated chickens. I found a quote from John Kennedy where I think then having to engage with the European economic community said, you know, it’s the grand alliance going to founder on chickens, right?

So you had these really tedious discussions on trade issues which, you know, American presidents used to engaging in sort of big geopolitical conversations generally found these discussions somewhat boring. During the Trump administration there were no U.S.-EU summits. And then, you know, during the Obama administration, he sort of famously skipped – or infamously skipped it here in Europe – the 2010 U.S.-EU summit and did not attend because it was sort of seen as not really mattering and I think that has really shifted.

This was – of course, this was the second U.S.-EU summit of the Biden administration. The first one happened in June of last year when President Obama – President Biden attended along with NATO summit, you know, sort of squeezed together.

But what has sort of shifted, I would say, is a few things. One is I think the EU has become a more – has evolved and I think we in Washington sort of oftentimes look on Europe as sort of the old continent that – where nothing really changes. But actually the EU has evolved over the last 20 years in a way that I think Washington has finally come around to appreciate and that has sort of – it’s basically because when the EU enlarged and created a common currency it gained continental scale and so its single market – the EU single market of 450 million people and its economy is equivalent in size of the United States and China. So the EU economically is really significant.

The second area is that the EU has survived a whole cascade of crises in, you know, following – beginning with the 2008 economic crisis, which led to the Greek euro crisis, then migration crisis, then Brexit, then COVID, and now Ukraine. And in each of these crises, which then I think people at the time thought this would threaten the EU, actually made the EU stronger because the solution to all of these crises was essentially more Europe; was not for less European involvement but, in fact, for more. And I think that has made the EU a more powerful actor and a stronger and more resilient actor.

But I think the second big factor is China, right. So what is geopolitical competition between the U.S. and China – you know, what are the major issues? Well, of course, there’ s the military security dimension. There, the EU does not have as significant a role. But on trade and technology and all these economic issues the power in Europe that actually has the – you know, has the control is in Brussels, not really in Paris or Berlin or other capitals.

And so this has meant engaging with Brussels is critical to actually trying to sort of set the rules of the road on the green transition, on tech policy, and then also on things like sanctions. So, you know, who was the actor that the U.S. was engaging with in the lead up to Russia’s invasion? Well, it was the European Union because the EU as a protector of the single market does sanctions for the European Union.

So that has made the EU increasingly important. So this new era of geopolitical competition, which is a geoeconomic competition, has meant that the EU actually has a really important role to play. It is, in fact, probably the main lead driver on China policy with Berlin and Paris and everyone else sort of, you know, shaping that. But Brussels has the competencies, as they would say in EU speak.

And then I think the other issue is Ukraine and here we now see sort of an evolving – you know, the EU stepping up and responding. The EU is doing training missions for Ukrainian soldiers, has trained more than 10,000 Ukrainians. It is providing a billion – the EU itself, not just its member states, is providing billions of dollars of aid and now for the EU for the first time is actually buying ammunition.

So this sort of taboo that the EU couldn’t buy weapons has, I would say, effectively been broken under some legal, you know, questions of whether the EU is actually buying weapons. But, effectively, that’s what’s happening. And, of course, the EU is leading on sanctions. And then you have the EU and Von der Leyen actually leading on EU enlargement, which is then reviving probably one of the EU’s most successful policies, which has been dormant. And this is all of critical importance to the United States.

So I think that’s sort of a broader context and I think what has begun to happen here in Washington is a recognition of this. So the U.S.-EU Trade and Technology Council, which was I think initiated by the Biden administration, is a recognition that Europe matters on China, that the EU matters on China, and that there’s a real need to develop more – you know, a stronger partnership or a real relationship with the EU. You know, Von der Leyen has come for, you know, Oval Office visits. That’s, you know, a real rarity. She was here in the spring to talk IRA – the Inflation Reduction Act – and other issues. I know that her chief of staff has a very, you know, good engagement with the White House and Jake Sullivan. And all of this is, you know, fairly unprecedented. Actually, I won’t caveat it: All of this is unprecedented. And what’s begun to happen is that the answer to the age-old Kissinger quip of when he wants to call Europe he doesn’t know who to call is sort of being answered, and that’s being answered by the president and the White House calling Ursula von der Leyen. And so there’s a really strong partnership there.

Now, one thing I would note is that, you know, Charles Michel, who’s the president of the European Council, is also coming, so the EU has two presidents. And you know, I think our Europe-based audience will know this, but the two presidents are effectively – the way I would describe it is Ursula von der Leyen is in charge of the kind of administration for the federal aspects of the European – of the European Commission, so essentially the federal government, which in Europe’s case is very weak; and then Charles Michel is sort of the – oversees sort of the European Council, which is, you know, of all – includes all the member states. And he is technically the more senior figure, although I think it’s pretty clear that Washington knows that to get stuff done that they need to engage the European Commission, and so have engaged Von der Leyen. So I think the big sort of question coming out of this is, is this sort of the beginning of, I would say, a new strategic partnership or special relationship between the U.S. and EU?

And maybe just one final point before I turn it to Federico is I don’t think this is just sort of a – you know, on the Democratic side of the aisle. I think there’s also growing recognition on the Republican side of the aisle that the EU is increasingly important. The kind of earlier, you know, of sort of a generation ago concerns about EU sort of multilateralism have sort of gone away. Wanting Europe to act more as Europe has become something that I think is in – has sort of been embraced by both parties.

The one major hangup has been on security policy, where U.S. – or, EU-NATO kind of bureaucratic rivalry and U.S. opposition to the EU sort of becoming more of a defense actor remains sort of an ongoing sort of underlying strain in the relationship.

But I’ve gone on for long enough. Let me turn it over to Federico.

Federico Steinberg: Thank you very much. Good morning, everyone. Thank you, Max. This was a great introduction, so I’m going to build into some of the issues you mentioned and add a bit more on the economics and some aspects of this tension in some of the elements, and talk about strategic autonomy in the European Union, which is relatively new.

So basically, as Max said, this summit comes at a very good moment in the Trans-Atlantic relation. And here, I think that the key factor to emphasize is that the Russian invasion of Ukraine has a solidified and improved dramatically, I would say, the U.S.-EU relation, and has united this – you know, the West, if you want to call it that way. But it has also separated a bit the West from the rest much more than was the case before. Not only with China, of course, but the countries from what we sometimes call the Global South, right?

So at this particular point, and given this very good chemistry that Max mentioned between Ursula von der Leyen and President Biden, it’s also very – it’s really important to maintain the cooperation and to also deliver concrete results. I’m going to mention some of those, but we can also go into them into the Q&A, because of this need to remain together in the support for Ukraine, now with the situation in Israel and Gaza also being much more complicated. And, of course, with the overall rivalry with China, in which the European Union has been aligned in itself with the U.S. position, but still maintain some different points of view that I’ll explain.

Also, let me say two things about the economic context, because this summit comes in a moment in which the global economy is slowing down after the post-COVID rebound. And it is slowing down with less intensity than what we thought a year ago. So the good news is that there’s no recession. There’s a recession in Germany, but there’s no recession overall in Europe. And there’s no recession, of course, in the United States. But inflation, it’s not under control yet. And interest rates are going to stay quite high for a while. This rhetoric of higher for longer is what economists discussed, particularly at the IMF summit in Marrakech these last days.

So basically, all in all, it’s really important to reinforce dialogue, cooperation, and even some of the trade elements that are complicated, and also the energy cooperation in the context of the possibility of higher oil prices due to the situation in the Middle East, so that we can avert a more dramatic economic slowdown that would affect more Europe than the United States because of issues that have to do with the more – the higher dependence on energy and overall, less capacity to engage in industrial policy, like the U.S. is doing with the cheap tax, or the IRA, or the infrastructure bill. That’s another thing I’ll mention in more detail.

So, as I said, besides this very good relationship – and, again, I like to point out that the chemistry – the very good chemistry between President Biden and Ursula von der Leyen – is something that it’s very positive for the bilateral relationship. And if it’s likely to continue we’ll see, because we’ll have a change in the European Commission in next July. But basically, I would say, as Max was explaining, that the European Council, which is the member states, really, will sometimes has different points of view about the relationship with the U.S. In particular it’s well known that France tends to have a different take on the way the European Union should or should not align with the U.S., basically on issues that have to do with China. Not so much with Ukraine, I would say.

So pointing out in more detail some of these differences. First, as I said, the position of the European Union regarding the U.S.-China rivalry. It’s kind of uncomfortable. So the United States and China, as we well know, are going into a higher degree of confrontation and rivalry. Ideally, the European companies and leadership would love to continue having the security umbrella of the United States and also export as much as possible to China. But, of course, this has changed. This is no longer possible.

Europe is waking up to the to the problems of economic security that are associated with very high degrees of economic interdependence with China, and of course also with Russia. And an understanding that the European Union, which has also praised the multilateralism, open markets, and increased interdependence, even believed that, that a trend of hyperglobalization, trade with China and Russia would even lead to a change in the political regimes in these countries. And, you know, they have to wake up to the reality that interdependence can be weaponized. And that, of course, Russia and China are not going to change. I mean, politically.

So this means that the EU is in an uncomfortable situation, trying to be a little bit more autonomous. And this is the key word from Central Europe, strategic autonomy. Strategic autonomy, meaning being able to do things independently from others. And that also goes for the United States sometimes. But whenever possible, continue doing things with others, and with allies, and in the multilateral context. And in this sense, the EU would not like to see a decoupling of the European and Chinese economy. They understand that de-risking is important. But there’s an ongoing discussion in Europe as to what extent Europe has to emulate the American outbound investment screening systems and the export controls. Of course, Europe understands that more resilience in supply chains is important.

But this also leads me to the next point in which Europe is a little bit uncomfortable, which is the overall the neo-mercantilist approach of the United States and its economic policy, sometimes associated with parts of Bidenomics. And not the issues that have to do with financing climate change. Europe is very happy that the Biden administration has put a lot of money on the table to accelerate the green transition. But some elements of the IRA are protectionist in nature, are discriminatory, and undermine the World Trade Organization system, which the EU would like to, you know, bring back alive after the years of the Trump administration in which it was basically blocked, especially dispute settlement mechanism.

Here, it’s important to point out that, given that the European Union is not a fiscal union, it cannot really spend in the same way collectively as the U.S. does with the IRA to finance industrial policy, energy transition, or in general if you want global European – or European public goods, because some countries have some deeper pockets than others, and there’s very limited European Union funding because the big budgets are at the national level. The European budget is slightly – up to 1 percent of European GDP, which is relatively small and much smaller than that of the U.S., of course. But that would require a fiscal union, which is in the making but it’s still very complicated to finalize.

And then, of course, one thing that should be mentioned is that the elections in the United States, and also the situation – the current situation in the – in the U.S. House of Representatives with the problems with the speaker are seen in Brussels as a source of preoccupation, precisely because this important and crucial ally, especially when it comes to Ukraine, you know, can be at risk of instability and domestic political instability which will affect Europe, and that calls for some sort of more autonomy or a plan B, which is really complicated to design.

Finally, in terms of specifics of the agreement – and I’m sure Emily will discuss a bit more of this because she’s a great expert on trade and on tech – the two things that might be announced at the summit are two trade agreements – limited trade agreements; nothing like what the European Union would like to see, which would be something broad like the T-TIP, the Transatlantic Trade and Investment Partnership that was negotiated between 2016, until President Trump got to the White House, and then it collapsed. But the two things are a free trade agreement on critical minerals which would be very limited but would allow European cars to benefit – that are sold or imported into the United States to benefit from the tax credit of the Inflation Reduction Act, and also an agreement on so-called GASA, which is an agreement for clean steel and aluminum that would be needed between the EU and the U.S. to avoid that in January the Trump tariffs on steel and aluminum on European exports would be reimposed. This is not likely to happen, and what we can expect is some sort of announcement, maybe of our interim agreement or the basis of an agreement, but as far as I understand, there’s no closed agreement yet because the technical details have to be played out, and this interacts with the European policy of the CBAM, the Carbon Border Adjustment Mechanism, which is basically a green tariff that the European Union has put on the table and established, which is carbon pricing, and then the approach in the U.S. towards climate change has to do more with subsidies and less with taxes. And that’s why it’s kind of difficult to agree on this.

So I’m going to leave it here and happy to answer questions. Thank you.

Emily Benson: Thank you, Federico. And thank you to Max also for teeing up this conversation.

As my colleagues have noted, the world is really facing a poly-crisis moment, to borrow the term that Adam Tooze coined. At the beginning of the pandemic this meant the three Cs, which is climate, COVID, and China. Those all still persist, but we have added complexities in the global system that includes an expanded BRICS, the crisis in Israel and Palestine, U.S. domestic political turmoil that is imperiling aid to Ukraine, and also a more profound shift in our mutual approaches to security, economic governance, and foreign relations. As my colleagues have noted, deepening cooperation between Brussels and Washington is particularly critical amid these competing crises. It’s really important that we become closer. At the same time, differences do exist. Europe has really set the regulatory agenda on things like climate change, artificial intelligence, broader digital governance, but the United States is still providing historic levels of security support to Europe.

Despite some of these differences and the way that we approach the world, I think the upcoming summit will demonstrate both parties’ desire to reaffirm their unity. The world is sort of shifting in this big, unknown direction and it’s very clear that Brussels and Washington are perhaps best suited of any parties to manage this transition together.

Trade and economic security issues are expected to feature very prominently on this agenda. In some ways this represents a departure from previous periods where geopolitics and geoeconomics were sort of separate and the economic and trade bit was a little bit bifurcated from other parts of the agenda.

As Federico mentioned, one of the main headline topics is likely to be this ongoing negotiation on the Global Arrangement on Sustainable Steel and Aluminum. There have been various pieces that have been leaking out recently about the status of negotiations. The parties had initially intended to conclude something concrete by October 31st. It looks like that deadline has been extended to the beginning of the new year. However, the European Union has recently indicated that it would come closer to the United States in efforts to combat Chinese nonmarket economic practices. This is overcapacity of steel and aluminum. In order to come closer to the U.S., Brussels is willing to apply a 10 percent tariff on aluminum from China and a 25 percent tariff on steel products that more closely mirrors the U.S. approach.

What’s interesting here is that from the outset the primary purpose of GASA negotiations from the United States has been to establish a joint mechanism for combating overcapacity. For the European Union, a primary motivation has been the removal of these Trump-era tariffs but also to figure out a way to reward the trade of comparatively greener goods. So this is in part a solution to efforts to accelerate decarbonization.

What’s interesting – just an anecdote – is that in Brussels they tend to say this is the GSA, the Global Steel Arrangement; in Wahington, they say the Global Arrangement on Sustainable Steel and Aluminum. So the Americans are trying to make this look greener than I think the Europeans would give credit for.

One thing that’s also very interesting about the GASA is that in a lot of ways this new approach to economic security, to the way that we go about governing trade, is contained in GASA. This is in some ways a very early test case of whether or not the Sullivan doctrine can succeed, if we can actually move in lockstep with these diverging goals at the end of the day – climate, China, overcapacity, tariff reduction. If we can shoehorn all of those into one trade agreement that produces concrete outcomes, that will be a tremendous success for both Brussels and Washington.

Federico hinted at this as well. I think what we’re likely to see at the upcoming summit next week is at least interim outcomes on this critical minerals bilateral between Brussels and Washington. Washington has already concluded something similar with Tokyo. I would anticipate that the substance at least of an interim agreement would look somewhat similar to that. That does not preclude both parties from hammering out additional details over time. I think we’ll also see some movement on the GASA front, although those are unlikely to satisfy the desires of the trade wonks in the room to see something very concrete and meaningful.

Moving forward both into this summit and after, the United States and EU will have to reconcile a couple of major differences in their approaches.

This is whether or not de-risking will either slow the transition or if it can coexist with decarbonization. This is where GASA will really prove its usefulness.

Another outstanding question in the trade relationship is whether tariff reductions and market-access concessions still hold utility. Under the previous and particularly this administration, there’s been a reluctance to pursue what some would think of as traditional trade features. And if the GASA can actually achieve through tariff reductions an accelerated decarbonization timeline, then that suggests that the United States may begin considering tariff reductions in other areas.

I think a third outstanding question in the transatlantic relationship is how both parties will be able to leverage the private sector in this new geoeconomic era. The United States and European Union have been very effective in communicating to the private sector the dangers of this new environment, the prioritization of economic security in global trade relations. But I think the next step is to secure additional buy-in from the private sector in order to really continue down this path, and that remains, of course, an area where they will both have to cooperate very closely.

My last closing comment is that expectations of the transatlantic alliance have perhaps never been grander, larger in scope. We’re really asking a lot of Brussels and Washington. We’re asking them to define green commodities. We’re asking them to engage in a very close security partnership that they haven’t done in decades. And we’re asking them to essentially set this agenda and anticipate that other countries will join over time. We have to remember we’re two years into the Biden administration. The TTC is still relatively new. There are plenty of opportunities to deepen cooperation, but what’s immediately clear is that they’ve already been very successful in establishing and following through on their desire for increased unity. So I do anticipate a historic show of unity at this upcoming summit. Both sides are moving closer together on hard security, economic security, and, of course, trade and climate. And so I’m curious to see how successful this summit will be, and then what follows in the coming months.

Ms. Montfort: Great. Thank you so much, Emily. And thank you, Federico and Max.

I would like to now open it up to questions from the audience. So I will turn it back over to AT&T to let you all know how to queue to see if we have any questions.

Operator: (Gives queuing instructions.)

Give us just a moment for our first question. And we can go to George Condon with National Journal. Please go ahead.

Q: Great. Thanks for doing this.

I have a couple of related questions, looking just at this meeting. There already was concern among EU leaders about the return of Trump. But now we have threats to the U.S. backing for Ukraine. What is the level of the European concern about the U.S. on Ukraine? Is there anything Biden can say to ease those concerns, given the Republican dysfunction? And then the second question, has the crisis in the Middle East and war overshadowed that concern, and even – and knocked that down a little bit? Or is it still the top thing?

Ms. Montfort: Thank you, George.

Max, would you like to start out?

Mr. Bergmann: Yeah. You know, thank you. Great question.

So I think – look, I think part of – well, what I would say is I think both Washington and Europe have now kind of awoken to the potential implications of the U.S. kind of not being able to provide support for Ukraine. And just to be clear about this, like, you know, if there is no congressional funding, then the basic munitions that are being provided to Ukraine through presidential drawdown authority will stop. There’s a bit of a runway in that funding to the end of the year, but then it’s done. And I think – you know, I think, you know, part of what the Biden administration has done over the last year is reassure Europeans that it will be there. And the presumption in Europe was that U.S. support for Ukraine would at least last until 2025 when, you know, if there was a Trump administration then potentially it would – it would end. And I think we were in some ways too reassuring, and we didn’t probably do enough to raise the concerns, and should have been encouraging Europe to step up and do even more. And let’s be clear, the Europeans are doing a lot.

So I think Ukraine is going to be a major topic, and I really hope the Biden administration gives it to the Europeans straight that, look, if we – if Congress doesn’t – you know, there’s no speaker. If Congress doesn’t pass Ukraine aid, then, you know, Europe is going to have to somehow figure out a way to provide, you know, air interceptors for Ukraine’s air defense to protect Ukrainian cities; that all these things are going to have to – you know, that there is an urgent need for Europe to figure out a way to do more. Now, the problem is there’s limits on what Europe can do because it just has less stuff in its warehouses. So – but that, I think, will be, hopefully, a major topic, and we – and the administration will really encourage stronger collective European action, which it kind of hasn’t done to this point.

And then, as far as Gaza and the tragic events in Israel, I think that will definitely be a topic for conversation. But I think, as you noted and, you know, you can tell from Emily and Federico, there’s a lot on the agenda. I think the Europeans will – you know, this is an area where EU foreign policy is a little bit nebulous. On the one hand, there’s been big – you know, the EU has sort of been speaking out of both sides of its mouth. There’s been a lot of concern that there hasn’t been a clear message coming from Brussels. You had the Hungarian minister – commissioner for EU’s Neighborhood Policy saying that they were going to cut off aid to Palestine and then others saying no, no they’re not. And I think there will be discussion about that, but I think this will be – you know, this is going to be a packed agenda with a lot to discuss and so I don’t think it’ll be – I don’t think Israel-Palestine issues will be all consuming in this summit.

I could be wrong. It could mean that the president is quite distracted of what’s happening. It may mean that the – you know, there’s a(n) effort to forge a joint statement from the U.S. and EU over events in Gaza and Palestine and that may – you know, may suck up a lot of the oxygen.

But my guess is there’s so much else on the agenda that they will – that this will be one of many issues.

Ms. Montfort: Great. Thank you, Max.

And I think we’ll go to our next question.

Operator: (Gives queuing instructions.)

Give me just a moment here. We’ll go to Philip Blenkinsop with Reuters. Please go ahead.

Q: Hello. Philip Blenkinsop with Reuters here. Hopefully, you can hear me.

So I’m sitting in Europe and I just wondered – I wanted to ask about a couple of things that you said – I think it was Emily. You were saying that the EU position is – in respect to the GASA approaching or is moving towards the U.S. position in terms of willing – a willingness to apply the 10 percent tariffs on aluminum and 25 percent on steel, and I just wondered, you know, clearly, the EU is quite particular about – and certain of the member states quite particular about upholding WTO principles. So simply applying those tariffs, you know, would not – would not be in accordance with WTO rules. I just wondered how you would see they might be doing that.

And I also just wanted to ask about critical minerals, which I think was more like Federico. You were saying that if there was a deal – and I think it’s likely to be limited not to all 50 critical minerals, but maybe about five – you were saying that this would allow European cars to benefit from the tax credit. But as far as I understand, wouldn’t it allow critical material – sorry, minerals to be exported to the States to be put in cars built there, because presumably European cars with European critical minerals would not be eligible for benefits because, of course, they’re not actually made in North America.

Ms. Montfort: Thank you so much.

Emily, would you like to start out and then over to Federico?

Ms. Benson: Sure. Thank you.

I think your question about the WTO is a very good one and one that has featured prominently in the negotiations. From the European perspective, various features of GASA fundamentally contravene WTO rules because they regard the Trump application of tariffs as violating the international trade rules.

And so I think part of this is to go back and really seek the removal of rules that they view as violating the WTO. In order for the European Union to apply these tariffs I think what I anticipate from the agreement is that it would not specifically call out China to reduce any impression that these are inherently discriminatory.

I think that the European Union will also have to use the full breadth of its domestic toolkit to pursue investigations that prove that there is injury and that China is actually engaging in overcapacity or nonmarket economic behavior in order to implement the new tariff rates.

But a lot of these details will have to be worked out over time. I think one way around it is that these tariffs would not only apply to China but there would be other commodities from different third countries that would be investigated. But, again, we’ll have to see and I think the devil is in the details when it comes to those specifics.

Dr. Steinberg: Yes, if I may add a bit on this and then go to the critical minerals. The European Union, it’s having – of course, has internal discussion to what extent does it have to always and every time do things super carefully to be in line with WTO regulations, so with its rhetoric on defending multilateralism, but what are the avenues if nobody else is doing that to proceed. And here, maybe an anti-dumping procedure, arguing that other countries, particularly China but also others, are dumping steel and aluminum in the European market produced with different standards. So in terms of the level playing field, as it was the case with CBAM, and also if it’s nondiscriminatory – so if it is effective to everybody else – then it could be WTO-compatible. But again, we will have to look at the details.

And on the critical minerals piece, I think a technicality of the IRA, you have two different sources – I mean, you know, two different elements that they allow American consumers to benefit from the tax credit, which is – goes up to $7,500, but it’s divided in two parts. And one part is about being produced in North America, and therefore exported cars from Europe would never qualify for that. And the second part is that the battery of the car, if it’s imported, is done with minerals or critical minerals that are done with a country with which the United States has a free trade agreement, and the free trade agreement can be a very simple and small free trade agreement. And this is, as Emily mentioned, what the U.S. did with Japan right after the IRA was signed – well, a little bit later, in April – and it’s what the European Union would like to acquire so their cars could benefit from, let’s say, half of the tax credit, $3,750, but not the full 7,500 (dollars).

Let me point out, though, that numbers are showing that exports of electric vehicles from Europe to the United States after the IRA and also after April, when the guidelines from the Treasury were published, have not gone down. They have gone up, particularly used cars but also overall general cars. So the original concern of Europeans about the IRA in the element that had to do with EVs I think at this point is less of an issue. The bigger issue is the overall energy costs in Europe vis-à-vis the U.S. and the lack of capacity of Europe to respond with a federal program of industrial policy.

Ms. Montfort: Great. Thank you, Federico and thank you, Emily.

I’d like to go now to our next question.

Operator: (Gives queuing instructions.)

Next, we’ll go to Kim Mackrael with Wall Street Journal. Please go ahead.

Q: Hi. Thanks a lot. Thanks for doing this.

I have a fairly broad question, I think, just about how you might characterize the state of U.S. and EU relations at this stage. I’m wondering if someone – and I’m not sure who would like to tackle this – but if you could just characterize where you think U.S.-EU relations stand today, a year out from a U.S. election, and to what extent they’ve been challenged over the past year by tensions over what a deal on steel and aluminum might look like, the Inflation Reduction Act, and other, particularly economic, tensions that have arisen. Thanks.

Ms. Montfort: Kim, thank you so much for that question.

Ms. Benson: I’m happy to kick that one off.

Ms. Montfort: Yeah. Go ahead. I was going to say, I think everyone has something to say here. (Laughter.)

Ms. Benson: Yeah. So I think it’s easy to get lost in the details of where we’re not cooperating, but if we zoom out it’s quite clear that we are heading towards a historic cooperative framework between the United States and European Union.

As you look at the European Carbon Border Adjustment Mechanism, for example, although the United States does have some problems and they have a lot of questions about implementation, the CBAM itself has spurred really significant conversations here in Washington about the need to come up with a similar tool here in the United States, which I know would be carried out in close cooperation with the European Union.

Also, zooming out, if you look at the Sullivan doctrine and this new approach to economic security and de-risking, the European Union is actually the one who came up with the term “de-risking,” which the Biden administration has since adopted and utilized quite frequently. The EU in June put forth its Economic Security Strategy, which Germany followed in July with its own German strategy on China. Those actually look quite similar to what’s transpiring in Japan. And so you see this allied coalition emerging to really rewrite the rules of global economic governance together which focuses on the need to prevent the leakage of high-tech items to countries of concern while bolstering supply chain security, having learned very difficult lessons in both the fallout from the Russian invasion of Ukraine but also more emerging geopolitical crises, ongoing pandemic disruptions, and of course accelerating effects of climate change.

So I think overall we are at a historic juncture where the only way forward is deepen the cooperation, and I am optimistic that even in a change of political leadership that there’s a growing recognition in Washington about how close the relationship with Brussels is. That doesn’t mean, however, that the European Commission is not taking the steps it can to make current policy pursuits more durable and also to Trump-proof, if you will, the ongoing success that we’ve witnessed so far in this administration.

Mr. Bergmann: Yeah, maybe I could just add – this is Max Bergmann – that I totally agree with what Emily said. Let me just put it in a broader context that the U.S.-EU relations, what used to be kind of, you know, a very technical, parochial engagement basically between lower-level officials, and then, you know, if there were difficult issues, well, it would be really hard to work through them. And I think one of the things that, you know, Emily and Federico sort of outlined is how hard a lot of these issues are. You know, we both, Europe and the United States, have two very complicated unions, and when we produce laws or regulations, it’s then very hard for us to change them and adapt them to someone else. And so working through a lot of these issues really needs senior-level presidential leadership that basically puts pressure on people lower down the system to say problem-solve, figure things out, and that’s what is happening. And so what we’re seeing is, I think, beginning to really forge a closer bond, and that has, I think, really started because the United States has recognized that the EU is playing a really important role in the world and it has the geoeconomic tools and capacity, and then if we’re not aligned with the EU, then, you know, we’re not shaping the kind of rules of the global road. So I think that sort of geopolitical light bulb has kind of gone off in the heads of many strategists in Washington, and so what we see is continuing – is a real effort to establish that relationship.

Now, there’s still lingering issues on defense and other issues where we are really hung up on EU duplicating NATO, and, you know, we tend to really want to prioritize NATO, and get concerned when the EU is involved in defense issues. Now, that still sort of remains, although that now feels very antiquated and I think will sort of gradually, hopefully, be put in the rearview mirror.

Dr. Steinberg: Yeah, a small comment, maybe. I completely agree with my colleagues. These frictions in the bilateral economic relations that we are discussing have always been there. Think about the Boeing-Airbus case or other things in the last 20, 30 years. But now there’s kind of a more important element of cohesion that has to do with the Russian invasion of Ukraine; and also, I would add, that the cooperation translates also to the G-7, in which the European countries and the United States take a lead with Japan and others that are invited onboard. And the last – Hiroshima Declaration also talks about these new rules for the global economy in this context of geoeconomic competition.

Ms. Montfort: Great. Thank you so much, Federico; thank you, Max; thank you, Emily, for your time.

And thank you to all of those of you who have asked questions and those of you who have dialed to listen in. We really appreciate your time this morning, or afternoon for some of you. And again, we will be publishing a transcript from this press briefing within just a few hours today. It will be published to the CSIS website and also sent to those of you who RSVPed directly for your convenience. So thank you again. Please let me know, Paige Montfort, if you have any further questions or weren’t able to get your question answered today because we ran out of time. Thank you, everyone.

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