On Saturday 7 November, five days after American voters went to the polls, Joseph Biden was finally projected by US media to have won enough Electoral College votes to become the next President of the United States, defeating outgoing President Donald Trump. Waves of congratulations immediately came from all over Europe. Many expressed relief that Trump failed to be reelected, given the tense US-EU relationship under his administration. Given the global reach of Dr2 Consultant’s clients, we’ve assessed the impact of the US Election on the US-EU relationship. We are therefore offering an analysis of the repercussions of Democratic candidate Joe Biden’s election on trade, environmental and digital issues.
Trade: a more stable partner but many disputes still to settle
The US-EU trading relationship under Trump’s leadership was highly confrontational. The US President complained countless times about the US trade deficit with the EU. He also intensified a sixteen-year-long tariffs war with the EU over state subsidies granted to Airbus and Boeing, imposing tariffs on European steel and aluminum, as well as on German cars or French wines and cheese, amongst others.
Despite having just raised tariffs in retaliation on about $4 billion worth of US goods, the EU is hoping that Joe Biden’s election will bring an opportunity to fix ongoing disputes, including the Boeing-Airbus feud, as announced by Trade Commissioner Valdis Drombrovskis. EU Trade Ministers also met virtually on Monday, 9 November, to prepare for the “rebooting” of transatlantic relations.
Dr2 Consultants expects the EU to take Joe Biden’s election as an opportunity to re-start the EU-US Free Trade Agreement negotiations, which had died during Obama’s mandate after strong backlash from both sides’ civil societies. Although under Biden’s leadership, negotiations will remain difficult.
Furthermore, Biden’s election might finally allow the World Trade Organization to fill its Secretary General’s seat. Trump’s administration has been blocking the nomination of Ngozi Okonjo-Iweala, former minister of Nigeria, despite her being backed by the majority of WTO members. Although the Democratic Party shares some concern with Republicans over the WTO dispute settlement mechanism, Biden’s proclaimed support of multilateralism could help unlock the situation.
Thanks to Joe Biden’s election, cooperation could also increase on how to deal with China. EU officials hope that cooperation can be found on the protection of emerging technologies, especially 5G networks, to alleviate dependency on Chinese telecom companies. Officials from the Biden campaign have communicated that the future president would be open to cooperating on those topics.
Therefore, although trade relations will not change drastically with Biden’s election, and many disputes remain to be settled, the EU will at least benefit from a more stable and open interlocutor. This will at least result in clearer decisions, which European businesses trading with or involved in the US will benefit from, as they need predictable, transparent, and enforceable trading rules.
Joe Biden – President-elect of the United States of America
Photo license: Gage Skidmore
Environment and climate change: converging goals on emissions
Climate change is one area in which Biden and the EU see eye-to-eye and cooperation will surely increase, benefiting US-EU relationship.
Although the US have left the Paris Agreement on 4 November 2020, as Trump wanted, Joe Biden has vowed to reenter it as soon as he takes office. Biden also made strong commitments during his campaign to reverse the Trump administration’s detrimental environmental actions, including adopting a $2 trillion green stimulus package, with the objective of cutting US emissions to net zero by 2050, similar to the EU’s target. Furthermore, in terms of sustainable finance, Biden has pledged $5 trillion to support the ecological transition, similarly to EU’s $4 trillion commitment to its own transition.
However, to implement his climate agenda domestically, Biden will have to gain approval from Congress, which might prove tricky if the Senate remains controlled by the Republicans.
Still, Biden’s will to implicate the US in climate talks will likely reignite multilateral cooperation on environmental issues. Additionally, aligned EU and US goals in terms of emissions could give European companies an opportunity to export environmental-friendly solutions and expertise.
Digital and Technology: opposition on Digital Taxation will likely remain
The EU has been attempting to adopt a European Digital Tax for several years, and the Commission has expressed determination to present an EU digital tax proposal if global talks fail to reach an agreement by mid-2021.
Currently, there are ongoing negotiations between 137 countries within the Organization for Economic Cooperation and Development (OECD) about an international tax system, which would redefine the way tech companies are taxed. This would notably impact companies providing digital services, allowing countries where they operate and make significant profit to tax them even if they do not have business operations there. The EU Commission supports this approach and will likely not introduce a separate European Digital Tax if a deal is found at the OECD level.
Trump’s administration however has been less than favorable to allowing foreign countries to tax US digital companies. The US policy under Trump was to use trade sanctions to retaliate against countries seeking to tax U.S. tech companies, as it did when France adopted a digital services tax.
During his campaign, Biden has criticized digital tech giants, and proposed a minimum tax on digital companies. This position could raise the hopes that he would support the taxation system negotiated at the OECD level, or that he at least will not threaten countries adopting digital taxes as strongly as Trump did. However, many observers underline that Democrats have always been just as opposed to a global digital services tax as Republicans, and the OECD does not believe that the change of leadership will increase significantly the chances of success of the negotiations. The deadline for an agreement to be found, originally set for the end of 2020, has already been postponed to mid-2021.
If the OECD negotiations do not result in an agreement on a taxation system, Dr2 Consultants expects companies providing digital services to likely face an EU-level tax. Dr2 Consultants helps its client keep track of the different tax initiatives and understand the potential impact of their business.
There will certainly also be a lot of discussions between the EU and the US on other key digital topics, from content regulation to EU-US data flows and the privacy shields talks.
European Commission President Ursula von der Leyen’s twitter thread following Biden’s election summarizes well the EU’s general position regarding Biden’s election: “It is time for a new transatlantic agenda fit for today’s world”, mentioning notably the work to be done on “health, climate, digital [and] reform of the multilateral rules-based system”.
Although Trump’s departure from the White House will likely facilitate communication with the US, the relationship will not go back to the pre-Trump status quo overnight.
Dr2 Consultants continuously monitors the evolution of the US-EU relationship. Should you be interested in further information on how Joe Biden’s election and his agenda could impact your business, you can reach out to Dr2 Consultants at info@dr2consultants.eu or find more information on our website.
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