European Union Expands Trade Talks
Europe and the United States aren’t just separated physically by 3,000 miles of ocean. Often, the divides are economic, political, social, and cultural. Put it this way, Paris, France, is a very different place to Paris, Texas.
There is also a widening gap to be bridged between these two economic superpowers on trade matters. Indeed, it is striking how the US’s and the EU’s trade policies are moving in different directions. President Trump’s first act was to pull the US out of the Trans-Pacific Partnership. He has also shown his disliking for the existing NATFA text. Meanwhile, the EU is negotiating and signing free trade agreements like they’re going out of fashion.
Given rising concerns about a looming trade war (perhaps it has already begun?), the signing of an FTA between the EU and Japan flew in under the radar somewhat last week, even though this is one of Europe’s most significant bilateral trade agreements to date. But that’s far from the only item on the EU’s negotiating agenda.
Last month, it launched trade talks with both Australia and New Zealand, and negotiations are already underway with several other key economies, including with the Mercosur trade bloc (Argentina, Brazil, Paraguay, Uruguay, and Venezuela, although the latter is currently suspended), with Singapore, and with Mexico (to update the existing FTA). Furthermore, last month, the EU and Vietnam agreed on the final text of a new free trade agreement that will eliminate 99 percent of taxes on cross-border trade, while 2016 saw the EU-Canada FTA sealed amid great fanfare.
The merits or drawbacks of either policy could be debated at great length, so intricate is the global trading framework. However, it is clear that, for businesses, tariffs are a major concern, so much so that iconic motorbike manufacturer Harley Davidson is shifting production in order to mitigate against them. And surely it won’t be the only manufacturer that will re-examine its supply chain in the coming months and years, depending on how long any trade war rolls on, especially if they are importers of metallic components. So, just as BEPS has forced multinational companies to rethink where and how they are structured and where and how they operate, perhaps global trade policy will be the next major area of concern at board level. Perhaps the WTO will become the new OECD.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look