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Week in Brussels: Section 232 talks, EP CBAM work, Morocco fumble

Under-the-radar but important trade policy news for you in this Week in Brussels column. By Rob Francis and a little bit of extra input from Iana Dreyer.

Section 232 talks with US continue as Commission eyes temporary solution

Only two days before the Commission’s self-set deadline to finalise negotiations with the United States to find a satisfactory way out of Trump-era Section 232 tariffs on steel and aluminium, negotiations are still ongoing.

At this week’s Trade Policy Committee meeting with EU member states, the Commission was optimistic that a deal would be reached but stressed that negotiations were continuing.

Failure to reach agreement would result in a doubling of the EU retaliatory tariffs on around 200 US products from 1 December.

The Commission has set itself the deadline of 1 November to reach a deal, given the time required to draft a Decision to stop the clock on these tariff increases.

The EU executive said during Thursday’s meeting that it expects an agreement, were it to be reached, to be temporary in nature and WTO-compatible, adding that it would likely not involve all transatlantic trade tariffs disappearing.

Many in Brussels are expecting some form of tariff rate quota to replace the tariffs.

EUROFER, the European steel association, is calling for separate tariff rate quotas for each product and for each EU member state.

When contacted by Borderlex today for comment, the Commission said that it could not “pre-empt the solution at this stage.”

The US administration continues to face strong lobbying from its own industry which wants to see the tariffs, enacted for national security reasons, to continue. Both sides acknowledge that the recent rapprochement in transatlantic relations in recent months has made a deal on Section 232 more likely.

Key dates to watch out for include the Council meeting on 5 November, when the member states’ permanent representatives are scheduled to discuss the deal reached, and the FAC (Trade) Council on 11 November in Brussels, which will feature an exchange of views with US Trade Representative Katherine Tai.

Parliament slowly gearing into CBAM activity

This week there were finally signs that the European Parliament will begin discussing the European Commission’s proposal  for a carbon border adjustment mechanism, which was published in July.

On 9 November the Parliament’s Committee on International Trade will hold an exchange of views, led by the committee’s rapporteur Karin Karlsbro, a Swedish europarliamentarian from the liberal Renew Europe group.

Whilst INTA has exclusive competences with regard to the WTO dimension of the proposal compatibility, overall lead for the file lies with the Parliament’s Committee on Environment.

During a stakeholder meeting this week, the rapporteur for the CBAM in ENVI, Dutch centre-left MEP Mohammed Chahim, said that his colleagues are aiming to adopt their position in first reading in the July plenary.

Given that the CBAM is due to begin operating from 1 January 2023, albeit in an initial transition period, this timing puts a lot of pressure on the parliament reaching a deal with the Council in the second half of 2022, with industry having little time to prepare.

Morocco/Western Saharan ECJ court ruling leaves Council, Commission fumbling

One month after the European Court of Justice annulled a recently revised 2013 trade agreement with Morocco on trade in agriculture and fisheries products because it applied to Western Sahara without the Sahraoui people’s consent, European institutions give no signs of having an idea what is the way forward.

Morocco’s occupation of the contested territory is not internationally recognised – despite the Trump administration’s move to do so to gain Rabat’s support in matters related to Israel. The EU wants to offer Sahraouis the opportunity to benefit from duty-free trade under the Moroccan agreement, but critics say this favours Moroccan businesses and fishing boats.

A meeting at INTA on Monday discussing the court ruling with the Commission revealed just that: a big fumbling.

Apart from explaining the technicalities of the agreement and the Court rulings, there was no indication of what EU institutions will actually now do.

“We do attach great importance to the rulings”, are the only type of generalities from a DG Trade head of unit which MEPs were served during the meeting.

The expectation is that the Council, under prodding by France and Spain, will appeal the decision. But member states are deeply divided over this matter.

An appeal must be lodged at the latest two months after the ruling. Such a step would allow the deal to continue to operate until a final decision is taken on this matter.

“The Council now finds itself caught between its political desires and legal obligations, with no realistic way forward. As the Court indicated, the only legal basis for EU relations with Western Sahara is to obtain the consent of the Western Sahara people as represented by Polisario. While legally straightforward, EU and member state officials have continuously ruled out such a possibility given the deep anger this would provoke in Rabat,” explained ECFR think tank Senior Fellow Hugh Lovatt.

“Rather than continuing to work hand in hand with Morocco to delay the inevitable, the Council would do well to confront reality, no matter how bruising,” argues Lovatt.

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