MNI INTERVIEW: EU Should Ditch Deal If US Reneges On Pharma

The EU should walk away from its trade deal with the U.S. if Washington backs out of its commitment to limit pharma products to a 15% tariff ceiling, according to former head of the European Commission's DG TRADE Jean-Luc Demarty. 

“My personal view is that Trump is playing games with the $600bn investment commitment, trying to extort more from us and, if he doesn’t respect the 15% ceiling on pharma and other products, I think the deal would no longer be valid because it would be of no interest for the EU," Demarty told MNI in an interview.

According to Demarty, pharma’s access to the U.S. market is of far greater value to the EU than cars, pointing out that the squeeze put on pharma prices in Europe by social health systems means EU pharmaceutical companies are highly dependent on their U.S. revenues.

"Europe is not only the German car industry," he stressed.

Pharma and semiconductors are currently subject to a U.S. Section 232 national security probe. While the EU has said that its deal with the U.S. would limit tariffs on pharma to 15%, President Trump has continued with threats of much higher tariffs on the sector. 

ENERGY DEAL

Demarty is also sceptical of the EU's commitments to buy USD750bn of U.S. energy products and its USD600bn investment deal. 

“Certainly, we will buy more U.S. energy,” Demarty said, but he doubts the U.S. can deliver as much as USD750bn of energy goods “because of bottlenecks in production, and also for export you need the ports to export both LNG and oil.”

Demarty also believes that the investment deal is "not good for Europe" and, in part, contradicts the Draghi report on EU competitiveness.

RETALIATION

Looking back at the EU's failure to retaliate, he says that this course of action was dictated by Europe's big three leaders early on. 

France, Germany and Italy together conveyed the message to European Commission President Ursula von der Leyen on the margins of the Canada G7 summit in June that she was to engage in negotiations with Trump without the option of retaliation, a move that he believes was “decisive.”

In the final weeks of July, however, the mood among member states had shifted in favour of tougher action, according to Demarty, who recounted that at a meeting of EU ambassadors on the eve of the July 27 Turnberry meeting between Trump and von der Leyen, “it was clear that in the case of a failure of the talks, there was a QMV in favour of triggering the anti-coercion regulation in addition to the EUR93 billion retaliation on goods already decided."

He added that: “If the EU does eventually retaliate against the U.S., then services, maybe also IP and financial services will also need to be targeted, although that will be complicated as we do need some of those.”