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Does Europe unfairly tax US imports? A detailed look

Wednesday, March 14, 2018

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WASHINGTON, United States (AFP) — US President Donald Trump claims American exports face unfair duties when they reach European shores. But are they truly at a disadvantage?

THE BASELINE

European Commission officials believe the European Union and United States generally offer reciprocally open access to each other's exports.

American exports to Europe are subject to duties averaging three per cent, close to the 2.4 per cent average the United States imposes on European goods and services, commission officials told AFP.

According to the World Trade Organization, however, in 2016 the US imposed minimum import duties of 3.5 per cent, while the equivalent rate in the European Union was 5.2 per cent.

Trump points to US auto exports to Europe, saying they are taxed at a higher rate than European exports to the United States.

Here, the facts do offer Trump some support: US autos face duties of 10 per cent while European cars are subject to duties of only 2.5 per cent in the United States.

However, within the auto sector, the United States puts a 25 per cent duty on imports of trucks and pickups, significantly higher than the 14 per cent duty similar European products face in America.

Moreover, Trump is targeting German automakers in particular, but these companies manufacture a significant number of autos in the United States itself, including for export to other countries.

For example, BMW says it exported US$10 billion worth of cars last year to 140 countries after manufacturing them at a plant in Spartanburg, South Carolina.

The company claims it has been the biggest US auto exporter by value since 2011.

Fellow German automaker Mercedes-Benz says it produced 286,000 vehicles at its Tuscaloosa, Alabama, plant for export to 135 markets in 2017.

But a trade war risks upending this arrangement.

Volvo CEO Hakan Samuelsson recently warned his company would cut half the 4,000-member workforce at its South Carolina plant if exporting cars from the US was no longer viable.

PROHIBITIVE TARIFFS

About half of products exchanged face no duties at either end. Still, some products face very high, if not prohibitive tariffs.

US administration officials did not answer AFP queries, but European Commission figures indicate US cigarette cartons face import duties of 74.9 per cent. Other goods, and agricultural produce in particular, also see high tariffs, such as carrots at 13.6 per cent.

In the past, the office of the US Trade Representative has denounced the EU's $1,680-per-ton duty on US olive oil exports. US olive oil imports from Europe are taxed at only US$34 per ton.

On the other hand, the United States has a stinging 164 per cent duty on European peanuts while the equivalent US product faces duties of only 1.8 per cent in Europe.

European exports of shoes (48 per cent) and textiles (12 per cent) also face much higher tariffs than similar US goods do on arrival in Europe.

Pointing to a few highly taxed exports, while ignoring the much larger array of goods and services that are subject to lower duties, gives an inaccurate picture of the general tariff situation, European Commission officials told AFP.

NON-TARIFF BARRIERS

In addition to import duties, the US president complained on Twitter of European “barriers”, a reference to non-tariff trade barriers such as phytosanitary conditions that can mean some goods are barred from importation.

Such questions were at the heart of talks to establish the Transatlantic Trade and Investment Partnership, a free trade pact which began in the 2013 Obama era before losing momentum and then ceasing under Trump.

At the time, Washington hoped to use the talks to break European resistance to US imports of agricultural goods such as GMO crops, hormone-treated beef, or chlorine-washed chicken.

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