New EU leaders face an immediate threat of US 100% trade tariffs

New EU leaders face an immediate threat of US 100% trade tariffs
Ursula von der Leyen

The start of any European Commission brings with it a sense of hope, a sense of new beginnings and new possibilities and a feeling curiosity in the face of the unknown personalities taking up the lead roles for the 27 countries of Europe.

Of particular interest to the business community will be the new faces who take up the roles of commission president, and for competition and for trade.

Germany’s Ursula von der Leyen, the nominee for the European Commission presidency, could become the darling of business leaders if she follows on her public statements of pushing the EU towards the United States of Europe.

However, Boris Johnson or Jeremy Hunt will not find her any easier to deal with than Jean-Claude Juncker in trying to renegotiate a new Brexit deal. She is on record as saying the UK and the EU would still co-operate on security matters.

However, she won’t allow special treatment for the UK after Brexit, stating: “We want a good partnership with Great Britain in the future. But if we define a special path for GreatBritain, other partners like Norway will demand the same. Rules must be the same for everyone.”

Von der Leyen, if confirmed as president, will need a strong team supporting her, particularly in the competition and trade portfolios. Perhaps most challenging is the replacement of the very successful Competition Commissioner Margrethe Vestager, who has reigned over a period of unprecedented control of major multinational activities in Europe such as Apple and Google which she has fined.

She and her team of 900 researchers are currently doing an in-depth investigation into the tech giants who expand and enter new markets by increasingly disrupting smaller businesses they may have helped foster initially. The primary worry is that cloud companies like Amazon, Google, or Facebook who make it possible for businesses to expand quickly enabling them to target likely customers at low cost, have clear visibility of which companies are expanding on their sites and then introduce their own labelled products, pushing users into seeing and buying the tech giants’ products.

For a number of years fast-growth companies in Ireland as well as internationally have been aware that big tech companies have created a ‘kill zone’ that prevents start-ups from getting past a certain size without being bought or pushed out of business.

Some companies have stated they can escape the kill zone but if they do, they’re likely beholden to the tech giants in other ways. Take for example Chewy the online pet food site which uses Amazon’s cloud for all its online sales. However, Amazon launched its own pet product Wag, after data research which found that pet food was in the top three of voice shopping categories on Amazon’s Alexa device.

Many consumers who have been buying their pet food on Amazon are already prime subscribers, often taking advantage of subscription pricing and automatic ordering. Chewy is inthe classic Hobson’schoice dilemma, as are many Irish start-up companies which increasingly have only an internet model to reach customers — damned if they leave tech giants’ web services and damned if they don’t.

The second most important portfolio on the business agenda is trade. The current incumbent Cecilia Malmstrom has seen the rapid rise of trade wars, regrettably led by the US. All the indicators are that these are unlikely to be resolved in the short-term, particular theUS-China trade dispute, as the Chinese economy is incapable of reacting sufficiently or quickly enough to meet the US demands.

The initial test for the incoming EU trade commissioner will be dealing with the US threat to introduce import duty increases of up to 100% on a list of European dairy products, meats,whiskey, and other beverages, clothing, metals, and kitchen goods as they seek retaliation for EU breaches of WTO state aid rules for Airbus aircraft.

*John Whelan is managing partner at trade expert The Linkage-Partnership with offices in Ireland, Switzerland, and the Netherlands.

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