EU and U.S. lay out framework of trade agreement

The European Union and U.S. have issued a joint statement laying out the details of a framework trade agreement that was brokered between European Commission President Ursula von der Leyen and U.S. President Donald Trump in late July. 

The European Commission president says this deal provides security and predictability for the world's largest trading partnership and provides the best possible terms for European Union companies, putting them in a competitive position going forward.

Under the arrangement the baseline tariff rate for European goods headed to the U.S. is set at 15 percent. The bloc had lobbied against such tariffs for months but trade officials say it's the best deal they could get after Washington threatened a base rate tax of 30 percent should no deal have been reached by August 1. 

"Unlike with other trading partners, the 15 percent cap does not come on top of existing most favored nation tariffs," said Maroš Šefčovič, European Commissioner for Trade and Economic Security.

"Where existing tariffs are already 15 percent or higher, no additional tariffs will apply. This means that the EU will benefit from significantly lower effective tariffs compared to other countries, he added." 

Conditions

But the agreement comes with conditions. Tariffs on European cars will only drop from 27.5 percent to 15 percent should the EU drop its duties on American industrial goods. The statement also stipulates that the EU intends to procure $750 billion in U.S. energy by 2028 and invest $600 billion in American strategic sectors in the same timeframe. 

"The America First Trade Agenda has secured the most important trading partner creating a major win for American workers, U.S. industries, and our national security. Tariffs should be one of America's favorite words," said U.S. Commerce Secretary, Howard Lutnick, in a social media post. 

As part of the investment proposal, the EU plans to substantially increase its procurement of American military and defense equipment.

"This commitment reflects a shared strategic priority to deepen transatlantic defence industrial cooperation, strengthen NATO interoperability, and ensure that European allies are equipped with the most advanced and reliable defense technologies available," the two sides wrote in the joint statement.  

The deal has been criticized by a number of European politicians and business leaders who argue it's lopsided. The wine and spirits sector is among those to have failed to secure an exemption from the baseline tariff rate, and sector leaders describe the joint statement as "a missed opportunity."

But EU officials say this joint text is just the first step towards building confidence and a more stable relationship with the goal of securing more tariff exemptions in the future.