Is Biarritz good for biz? EU-US trade hangs in balance at G7

As world leaders gather in France’s Basque Country, European negotiators are set to dig in their heels against Trump.

A view shows the Hotel du Palais summit venue ahead of the G7 Summit in the French coastal resort of Biarritz
The Hotel du Palais will play host to tense dialogue at the G7 Summit in the French coastal resort of Biarritz [Regis Duvignau/Reuters]

French President Emmanuel Macron will welcome United States President Donald Trump to the seaside resort town of Biarritz this weekend for a Group of Seven (G7) meeting.

But the centrist leader of France looks to lead Europe’s defensive strategy against a trade-heavy White House agenda that has pushed the continent into a variety of uncomfortable disagreements.

Four key economic areas could drive an even bigger wedge into the transatlantic alliance, as the 45th G7 summit gets underway on Saturday: agriculture, automobiles, energy and tech.

And a soaring trade imbalance has overshadowed the rich relationship between the most developed economies in the West.

Europe and the US enjoy historic cosiness that has been upended – to be fair – not just by Trump but by real differences of opinion on climate change, the cost of military security and sanctions against Iran.

The talks beginning on August 24 could pit allies against each other, in an era when the business upper hand is privileged over diplomatic niceties. Trump has treated his European counterparts as frenemies, bargaining for a better deal more often than he highlights common cause.

Tensions at Biarritz could foment with European Union governments pushing back against aggressive US stances on key trade topics, including a French digital tax and illegal aircraft subsidies.

Agriculture: US wants market access

Europe has been loath to open up its agricultural sector, which has been a major sticking point in trade talks with the US. Although Brussels says the issue is not even on the table, Washington has increased its share of Europe’s agricultural exports each year for the last half-decade.

While Germany sends a relatively low 2.7 percent of its food and beverage exports to the US, France is much more reliant on American consumption. Trump could take advantage of the potential for a gulf between Paris and Berlin on farm goods.

With relatively pro-US stances, the United Kingdom and Italy – which have an even larger percentage of agricultural exports going to the US than France does – may not be so sympathetic to the host nation’s point of view. Meanwhile, US officials have said they will not sign a trade accord with Europe that does not include market access for agriculture.

Of Europe’s five biggest economies, Spain has the highest share of agricultural imports from the US, though the figure is still well under five percent. Meanwhile, a beef pact earlier this month raised hopes for a broader agreement.

Automobiles: EU faces possible tariffs

As discussions continue on a wider trade framework, the Trump administration has postponed until November a decision on whether to slap tariffs on European car imports.

Every year, around $50bn in European automobiles are sold to the US. In the last decade, China has begun to import almost as many autos as the US.

With German automakers, China already exceeds US purchases from Volkswagen, Daimler, BMW and Audi. Of Volkswagen’s exports, 38.8 percent go to China, while just 5.9 percent go to the US. However, the US is still the destination for 15.7 percent of Daimler exports and 14.3 percent of BMW’s overseas sales.

Even so, Germany relies on industrial exports, with car production at the core of its economy.

Energy: US exporters eye Europe

With the Nord Stream 2 natural gas pipeline set to open by the end of next year, Trump has said Germany is “captive to Russia” and even threatened to sanction the project.

The UK, France, Germany, Italy and Spain have combined annual imports of oil and other energy sources that total more than $150bn. Last year, the share imported from the US reached a historic high of $18.4bn.

Even though Russia’s share of European energy imports is significantly higher, Europe has lessened its reliance on Moscow for fuel. Trump could continue to tout US natural gas as a better solution for energy importers on the other side of the Atlantic Ocean.

Tech: China surpasses US dominance

Europe is struggling to remain neutral during the US-China trade war that hinges on technology. But clearly, Germany is one of the countries shunning US attempts to sideline Chinese telecoms giant Huawei.

As Silicon Valley remains the world’s biggest high-tech innovation hub, the US has reacted unfavourably to French moves to tax social media platform Facebook and e-commerce behemoth Amazon.

In 2003, China overtook the US as a source for European technology imports, but it was not until last year that Europe began exporting more tech goods to China than to the US.

Source: Al Jazeera