The trade deal concluded between the EU and the United States at the end of July will not bring only disadvantages for Europe, according to a new analysis by the Oesterreichische Nationalbank (OeNB). While the agreement may have negative effects on European producers compared to their U.S. counterparts, it is expected to strengthen their competitiveness relative to companies in third countries such as China, the analysis said. However, the implementation of the agreed investments in the U.S. economy remains uncertain.
The agreement, which sets a tariff rate of 15 percent on almost all products exported to the United States, drew sharp criticism when it was signed in the summer. Although some observers viewed it as a better alternative to a prolonged trade dispute, many experts and industry representatives saw greater disadvantages for the EU—such as a setback for export-oriented industries and an overall negative impact on economic performance.
Disadvantages Compared To U.S. Producers, Advantages Over Third Countries
The National Bank also noted that it is “obvious” the deal will weaken competitiveness against many trading partners. According to the latest blog post, this affects “almost two-thirds of producers of all goods currently traded in the United States,” compared with the U.S. and the United Kingdom, which negotiated a lower tariff rate of 10 percent.
At the same time, competitiveness will improve for producers of about 30 percent of all goods currently sold in the U.S. market—mainly from countries whose products face even higher tariffs than those from the EU, such as China or Switzerland. Despite being a “still very unfavorable trade deal from the starting position,” it nonetheless offers certain opportunities, the OeNB said. Moreover, the EU remains in a better position under this pact than it would have been in the case of an escalation of the trade dispute.
Implementation Risks For Agreed Investments
The National Bank questioned how realistic the planned investments in the U.S. economy actually are. The deal provides for investments by European companies of up to 600 billion U.S. dollars (about 517 billion euros). Such a high volume of investment from the EU to the U.S. in such a short time has never occurred before, the OeNB noted. Furthermore, “the investment projects cited by the European Commission appear to be lower than what the United States expects overall.”
Finally, long-term comparisons show that only about one-quarter of all publicly announced direct investments from the EU to the United States are ever realized. “Whether this part of the agreement will hold remains to be seen,” the OeNB concluded.
