German think tank says Trump has a point about EU tariffs
US President Donald Trump may actually have a point when it comes to unfair taxes on US goods coming into Europe. That is the finding of a new study by a leading German think tank. Where they differ is how to deal with it: The group urges new talks to lower tariffs across the board, instead of engaging in a tit-for-tat escalation in new taxes.The EU has other barriers to commerce besides tariffs. Its so-called experts' right niggling regulations that attack imports in various ways. Fruits and vegetables must meet their esthetic tests to be sold. The EU also has been doing shakedowns on US tech companies such as Google.
“The EU is by no means the paradise for free traders that it likes to think,” said Gabriel Felbermayr, director of the ifo Center for International Economics, a division of the Munich-based ifo Institute. The European Union actually comes off as the bigger offender when compared to the US, he added. The unweighted average EU customs duty is 5.2 percent, versus the US rate of 3.5 percent, according to ifo’s database.
So when Mr. Trump complains of “massive tariffs” he is not that far off the mark in several cases. And he does complain. “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a tax on their cars, which freely pour into the US,” the president tweeted earlier this month. “They make it impossible for our cars (and more) to sell there. Big trade imbalance!”
Cars are a particular sore point. Imports into the US are not quite free, but pay a tariff of only 2.5 percent, compared with the EU tariff of 10 percent on US car imports. Some other examples from the EU include a 17 percent tax on apples and 20 percent on grapes.
Overall, tariffs totaling $5.7 billion were levied on US exports to the EU in 2015. The far greater volume of EU exports into the US were subject to customs duties of just $7.1 billion. This does not even take into account the inhibitory effect of the higher EU tariffs on the volume of US exports.
The US is not blame-free. The lower average level of tariffs masks higher duties that hit particular European products, from 9 percent on chocolate to 20 percent on key milk products, and 25 percent on small trucks.
The disparity dates back a quarter-century to the Uruguay Round of trade talks under the aegis of the General Agreement on Tariffs and Trade (GATT), ifo said in a new study. A lot has changed in the meantime. The EU has grown from 12 members to 28. GATT became the World Trade Organization and enrolled more than 40 new members, including China and Russia. The Doha round of trade talks started in 2001 to take account of these changes, but the talks collapsed as developing economies resisted lowering their own tariffs.