EU seeking to resolve trade irritants with US at summit

By Philip Blenkinsop and Andrea Shalal

BRUSSELS/WASHINGTON (Reuters) -The European Union and the United States must find mutually beneficial solutions to help resolve trade disputes, European Council President Charles Michel said on Thursday as U.S. and EU negotiators raced to end long-running disagreements over tariffs and subsidies before a White House meeting on Friday.

U.S. President Joe Biden will host Michel and European Commission chief Ursula von der Leyen on Friday to show unity toward Ukraine, but with trade irritants souring ties.

Michel and von der Leyen are hoping to seal agreements with the United States to end Trump-era tariffs and ease the impact of U.S. green subsidies, but negotiators had failed to make any breakthroughs by Thursday afternoon.

U.S. Trade Representative Katherine Tai met with European Commission Executive Vice President Valdis Dombrovskis on Thursday, and the two countries’ trade negotiators were meeting around the clock.

Michel told reporters it was a critical time for the United States and the EU to “stick together” on shared values and commitment to democracy, especially given the escalating crisis in the Middle East, which threatens to overshadow the long-planned summit.

But he said solutions on the trade front must be mutually beneficial. He declined to predict if the issues at hand could be resolved before the White House meeting on Friday, saying the negotiations were “ongoing.”

The United States has suspended import tariffs on EU steel and aluminium imposed by then-President Donald Trump in 2018, but on condition that both sides agree by the end of this month on measures to address overcapacity in non-market economies, such as China, and promote greener steel.

The transatlantic partners are struggling, with Washington keen that the EU apply the metal tariffs to imports from China and Brussels replying it could not do so before a year-long investigation to comply with World Trade Organization rules.

Bernd Lange, chair of the trade committee of the European Parliament, which may need to approve an agreement, said potential measures to tackle excess capacity should be “based on objective investigations and not on political considerations”.

It is still to be seen if this will end the U.S. tariffs threat or just see an extended suspension.

On sustainable steel, the two sides are trying to reconcile the EU’s carbon border tariff system with a U.S. approach so far to promote a greening of its economy through subsidies.

The United States has proposed forming a largely tariff-free green steel club that would also be open to other allies but with rules on state-owned enterprises that would make it impossible for China to join.

One EU official said the discussions were “fluid”. Another described them as “hard”. A source in Washington described the EU’s position as “unhelpful”, and said it was unclear whether a compromise could be reached.

The European Union is also hoping Friday’s summit will result in a deal to lessen the hit from the U.S. Inflation Reduction Act, which offers consumers tax breaks to buy electric vehicles (EVs) assembled in North America.

The two sides are negotiating an agreement that would allow EVs with EU-sourced critical materials – cobalt, graphite, lithium, manganese and nickel – to qualify for partial tax breaks. Given the EU needs such materials itself for its green transition, the positive impact for the bloc may be limited.