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France against EU-US trade talks unless Trump supports climate deal

Key Points
  • The European Union agreed to start trade talks with the United States on industrial goods.
  • France, however, has objected to the decision while Belgium abstained.
  • Despite the French opposition, the European Trade Commissioner Cecilia Malmstrom said she would contact U.S. Trade Representative Robert Lighthizer to see when talks could begin.
U.S. President Donald Trump speaks with French President Emmanuel Macron in Paris, on Nov. 10, 2018.
Christophe Petit-Tesson | AFP | Getty Images

French President Emmanuel Macron has one big issue regarding trade talks with the United States — the White House does not support the latest climate deal.

Earlier this week, the European Union agreed to start trade talks with the United States on industrial goods. France, however, has objected to the decision while Belgium abstained. In Paris, the concern is that there cannot be any agreement over trade while the U.S. refuses to commit to key environmental targets.

"France is opposed to the initiation of any trade negotiations with countries outside the Paris climate agreement," a French official said Monday, explaining why the second largest euro country said no to trade negotiations with Washington.

"It is a question of values. Europe must be exemplary and firm in its defense of the climate," the same official said.

Analysts at Teneo Intelligence said Wednesday that with just a few weeks away from European parliament elections, Macron needs to convince the electorate to vote in his party.

"Macron relies heavily on new, urban, pro-EU middle-class voters...These voters also care for the environment while strongly opposing U.S. President Donald Trump on ideational (sic) grounds," the analysts said in a note.

Despite the French opposition, the European Trade Commissioner Cecilia Malmstrom told reporters Monday that she would now contact U.S. Trade Representative Robert Lighthizer to see when talks could begin.

The U.S., under the Obama Presidency, signed the Paris Climate Agreement in 2016. This committed the world's largest economy to keep the rise in global temperatures "well below" 2C more than pre-industrial levels.

However, President Trump is of the opinion that the deal is "bad" for the United States and in 2017 he notified the other members of his intention to withdraw from the agreement.

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Under the Paris Climate deal, which was adopted in November of 2016, a country can only officially announce its plan to withdraw from the deal after three years of the adoption date – meaning that Trump will have to send the official notification in November of 2019, if he still wants to leave the deal.

After the official notification, there is a one year waiting period before the exit takes effect – thus Washington is not out of the Paris deal, at least, until November of 2020.

The process of re-accession would be more straightforward and could happen within 30 days.

"No one is expecting developments to happen fast," Fredrik Erixon, head of the European Centre for International Political Economy (ECIPE), told CNBC via email about the transatlantic trade talks.

He added that there will be "further turbulence ahead" in these negotiations given that the European negotiating position does not fit the with the U.S. demands.

"I think this is also the reason why most other (countries) have been relaxed about France resisting the mandate to start trade talks," Erixon also said about the general expectation that it will take a long time before any deal can be put together.

However, if an agreement is indeed reached, Macron may not be able to fully block it.

"Legally, a trade deal is decided by qualified majority. Politically, it's always been the principle never to finish a negotiation until all member states are satisfied," Erixon said about the way Europe strikes commerce deals.

Chances of a trade deal

One of the biggest issues in the upcoming talks is that Europe decided to leave agricultural products out of the table — something that President Trump is keen on having.

"They barely take our agricultural products, and yet they can sell Mercedes Benz and they can sell anything they want in our country including their farm products, and it's not fair," Trump said Monday, while threatening to impose tariffs on European carmakers if the EU does not expand its negotiating remit.

One day, the stars may align for an EU-US deal, but, regrettably, I don't think the time is now.
Uri Dadush
Scholar for the think tank Bruegel

Uri Dadush, a Washington-based scholar for the think tank Bruegel, told CNBC: "I believe France and others less prominently visible than France and which are net beneficiaries of the Common Agricultural Policy (Italy, Spain, for example) will veto discussion of agriculture trade reforms."

"This will make it even tougher for the U.S. to accept a deal, and I suspect that President Trump was not adequately briefed or ignored his brief when he agreed with (European Commission) President Juncker to omit agriculture," he added.

Trump unsettled the European Union last year when he decided to slap tariffs on European steel and aluminum. The 28 European countries retaliated immediately, putting duties on denim, peanut butter and other American goods. The EU also took the case to the World Trade Organization (WTO).

To prevent further duties on EU goods, European Commission President Jean-Claude Juncker travelled to Washington a couple of months later. He agreed with President Trump to work together to bring existing tariffs towards zero on non-auto industrial goods; to buy more liquefied natural gas from the U.S. and to find ways to bring their standards closer together.

"One day, the stars may align for an EU-US deal, but, regrettably, I don't think the time is now. If Trump is re-elected, expect a new escalation of tensions between the EU and US, with auto tariffs a real possibility," Dadush said.

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