The State of the European Union. The European Parliament faces its most important elections yet

THE STATE OF THE EUROPEAN UNION 104 these divisions be replicated within Europe, or can we make the most of this confrontation by using it as a catalyst to move towards greater integration within the EU? The main areas of conflict within the relationship over the past year are outlined below. America First and trade wars First of all, it is important to recall the back- ground to the current economic conflict be- tween the United States and Europe. The EU is an almost completely unified trade block: along with competition policy, it provides the major pillar of the transatlantic relationship. Despite the current tensions, the United States and Europe remain each other’s most important markets. The combined EU–US market is the largest and richest in the world, representing a third of global GDP and half of total global con- sumption. Commercial sales account for 5.5 tril- lion dollars and generate 15 million jobs on both sides of the Atlantic. There are huge links in foreign direct investment and services: port- folio investment, financial transactions, banks, commerce and the sale of goods and services, investment in R&D and technology flows. The United States’ trade deficit with Europe (146 bil- lion dollars in 2017) fell by 6 per cent compared to 2015, and is now less than half of the coun- try’s deficit with China (376 billion). However, despite this interdependence, at least four events have significantly increased tensions in the relationship between the two partners: – The decision of the US government in spring 2018 to impose tariffs on imports of steel and aluminium, under the pretext of nation- al security, and its refusal to grant the EU a permanent exemption. – The US’ ongoing blocking of new appoint- ments to the WTO Appellate Body, which threatens to paralyse the disputes resolution system. – The imposition of anti-dumping and com- pensatory duties on Spanish ripe olives in 2018, which could have more far-reaching implications for the EU’s common agricul- tural policy. – Threats by the US to impose tariffs of up to 25 per cent on imported cars and car parts, and 10 per cent on aluminium imports. The breach began in March 2018, when President Trump imposed tariffs on steel and alu- minium. The President of the European Commission, Jean-Claude Juncker, promised im- mediate reprisals following the announcement by US Secretary of Commerce, Wilbur Ross. As Germany has by far the largest car industry in the EU, the tariff on automotive imports repre- sented a direct attack on Chancellor Merkel. This issue was therefore a priority for Germany, and the country’s ambassador to the US, Emily Haber, stated that EU officials would require a clear mandate to reach agreement before elections to the European Parliament in May 2019. To calm tensions, on 25 July 2018, Juncker reached agreement with President Trump to avoid further escalation. 1 Both of them agreed, among other things, to work towards zero tar- iffs and reduce non-tariff barriers and subsidies for non-automotive industrial goods. One of the Commission’s concessions was to make a com- mitment to seek to facilitate increased imports of liquefied natural gas from the United States, and to strengthen trade in several other areas, 1  European Commission Statement: Joint US–EU Statement following President Juncker’s visit to the White House, Washington, 25 July 2018. Available at: http://europa.e u/ rapid/press-release_STATEMENT-18-4687_en.htm