Joe Biden also used his European summit trip to improve the relationship between the USA and the EU again. For this, the US President had an offer in his luggage: a deal with which his government is initially withdrawing the punitive tariffs on steel and aluminum introduced by the predecessor in office Donald Trump.
The agreement between the EU and the USA, which was promoted on the European side by Valdis Dombrovskis, Vice President of the European Commission who is also responsible for trade issues, does not fulfill all the wishes of the Europeans: The USA has not abolished the tariffs, but only suspended for a quota of steel negotiated with the EU.
In future, the EU will be able to import 4.4 million tons of steel into the USA without punitive tariffs; This is Biden’s concession to the constituencies where steel producers are at home.
Nevertheless, Dombrovskis has negotiated the quotas so generously that the traded quantities from before the Corona crisis are covered. However, there is not much growth in it and there is a risk that the line will be torn in the post-corona boom.
For Commission President Ursula von der Leyen, who presented the agreement with Biden at the G20 summit in Rome, the result is still a success – and could be decisive in the long term for her ambitious European Green Deal.
Because the two sides have also agreed that they want to work together in the future to promote sustainable steel production worldwide. By that they mean: economically and ecologically sustainable.
For example, producers who manufacture steel at dumping prices are to be made more difficult in future to sell steel and steel products to the EU and the USA. This project is clearly directed against China. Brussels and Washington accuse the country of dumping steel on the world market.
Keep dirty steel out of the markets
State-subsidized producers from China are responsible for overcapacities on the global steel market, which also make life difficult for European producers.
The frustration is not new. However, the second part of the announcement caused an aha effect: Brussels and Washington want to jointly promote more climate-friendly steel in the future and keep dirtier steel out of their markets.
This agreement could be the cornerstone for a climate club between the EU, the US and other countries that will decarbonise their industries and collectively keep dirty products outside the club.
The EU and the USA will work in the World Trade Organization (WTO) for an international steel and aluminum agreement. It should also be open to other countries and not only combat overcapacities, but also regulate how the countries involved can protect the competitiveness of their domestic industries with ambitious climate protection policies without causing trade disputes.
“This is a very encouraging step,” says Gabriel Felbermayr, who has been Director of the Austrian Institute for Economic Research (WIFO) since October. “Such a plurilateral agreement could become the core of a climate club in which the participating countries deal with different climate policies in a cooperative manner and avoid trade disputes.”
Other economists, such as the scientific advisory board of the Federal Ministry of Economics and the Brussels think tank Bruegel, have long been calling for the EU to join forces with other economies such as the USA, Great Britain and, ideally, China and Russia to form a climate club. Before the general election, the federal government also announced that it wanted to form an international climate club.
Climate free trade area would help local producers
Especially in steel and aluminum production, where a lot of CO₂ is generated, strict climate protection can quickly become a threat for local producers and jobs. If climate rules in the EU become stricter or energy prices rise, domestic production becomes more expensive.
Companies that produce dirtier but cheaper abroad can then undercut European suppliers both on their home and world markets.
A climate free trade area, on the other hand, could ensure that European producers, with their higher energy costs and stricter environmental regulations, remain competitive on their home market and on the other connected markets. Subsidies for sales outside the club are also conceivable.
Bernd Lange, the chairman of the trade committee in the European Parliament, warns, however, that such an agreement must not become protectionism painted in green. “Worldwide unfair and CO2-to reduce intensive steel production is correct, “says the SPD politician. “But we have to be careful that we don’t build an anti-coalition here that is directed against individual states. That is why it has to happen within the framework of the WTO and be open to all states. “
The climate club would also promote a core project of the European Green Deal: the so-called CO2-Border adjustment, which is affectionately abbreviated to CBAM in Brussels and which von der Leyen announced when she took office two years ago.
This tax at the EU’s external border is intended to make imported products from a few categories that are more harmful to the climate overseas than in Europe, more expensive at the borders of the EU.
Critics of the project welcome the basic idea, but warn of considerable bureaucracy and possible trade conflicts. In addition, it is hardly possible to design a corresponding regulation in such a way that it is WTO-compliant. A climate club within the WTO that imposes such a border adjustment on its external borders could dispel these concerns.
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