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Europe Looks for Ally to Check China as Trump and Covid Recede

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(Bloomberg) — With Donald Trump in the rear-view mirror and the continent turning the corner in its Covid vaccination campaign, the European Union is looking past its slate of crises and charting its path in a world profoundly changed by the pandemic. And it’s looking to rekindle an old friendship.

In an overture to President Joe Biden, the EU this week sent the White House a proposed joint statement to smooth over recent conflicts and give a boost to the trans-Atlantic alliance to confront China and Russia.

The blueprint lays out how the two sides can move past trade disputes from the Trump era that have left more than $18 billion in exports subject to tariffs, according to a draft statement prepared for an EU-U.S. summit in Brussels on June 15. The draft argues that shared values and interests will help both sides meet “unprecedented global challenges.”

“We will closely consult and cooperate on the full range of shared challenges and opportunities in the framework of our respective similar multi-faceted approaches to China,” according to the document obtained by Bloomberg. “We stand united in our principled approach towards Russia and we will respond decisively to its repeating pattern of negative behavior and malign activities.”

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The summit will mark Biden’s first trip to Europe as president. The two sides are expected to pledge closer cooperation in fields touching all corners of their economies and take a stand against Russia’s crackdown on civil society, the opposition and independent media — a day before Biden and Russian President Vladimir Putin meet in Geneva.

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America First

Trump’s “America First” approach pitted the allies against one another, with critics saying the trans-Atlantic dispute gave China leverage in dealing with divided, and thereby weakened, adversaries. When the EU and U.S. announced in March that they would temporarily suspend tariffs related to a dispute over illegal aid provided to aircraft makers, they cited the need to focus on unfair competition from the east.

The EU and U.S. said at the time they’d need to address “the trade distortive practices of and challenges posed by new entrants to the sector from non-market economies, such as China.” Both used similar language in a renewed effort to resolve a dispute over steel and aluminum.

After four years of tension, the EU and and the U.S will vow to work together on contentious areas from tax and trade to climate and foreign policy. That would broaden a rapprochement that began shortly after Biden’s inauguration with truces in trade disputes and a re-engagement on climate change.

At the same time, EU-Chinese tension escalated in March when China retaliated against Western sanctions over human rights in the Xinjiang region by announcing measures against 10 individuals and four entities from Europe.

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EU lawmakers backed a resolution this month to withhold ratification of an EU investment agreement with China as long as the “baseless and arbitrary” penalties are in place.

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The EU-U.S. draft, which is subject to change, pledges both sides to “join forces to prevent and peacefully resolve conflicts, uphold the rule of law and international law, and promote human rights for all.”

Officials are working on the wording, according to two people familiar with the matter. A spokeswoman for the White House’s National Security Council declined to comment.

Climate Coordination

There’s also a push to reach a consensus on global tax issues, just as the world’s biggest economies have been debating where to tax firms in the digital era and how to apply a minimum tax rate on multinationals. Group of Seven finance minsters will discuss the issue next week, and European governments are increasingly optimistic of a breakthrough.

The EU and U.S. are also set to pledge closer cooperation to promote cuts in greenhouse-gas emissions, including a faster green transition in the poorest countries and a commitment to reach the goal of $100 billion per year in climate finance.

Discouraging investment in fossil fuels, including coal, and calling for a phase out of unabated coal in energy production is also part of the draft statement, as is a vow to work together on carbon pricing.

Biden embraced the idea of carbon adjustment fees or quotas during his presidential campaign. The Office of the U.S. Trade Representative says “carbon border adjustments” are among several approaches being considered to address greenhouse gas emissions.

The summit will allow Europe and the U.S. “to reaffirm our strong commitment to the international rules based order including by reinforcing multilateral institutions and to strengthen foreign and security policy cooperation for a more democratic, just, peaceful and secure world,” according to the draft.

©2021 Bloomberg L.P.

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