U.S. EU Near Deal on Digital Regulation, Environmental Policies

The United States and the European Union are nearing an agreement on multiple non-tariff trade disputes, covering areas such as digital regulation, environmental policies, and industrial cooperation. The draft agreement, which has been circulating, includes significant concessions in digital regulation, environmental policy coordination, and expanded areas of industrial cooperation. However, the absence of tariff issues in the draft adds uncertainty to the agreement's prospects.

The draft agreement addresses several long-standing economic pain points for American companies. It includes provisions for dialogue between the U.S. and EU regarding the implementation of the EU's Digital Markets Act, with American companies exempt from enforcement actions during the negotiation period. This exemption would significantly weaken the effectiveness of the EU's landmark digital law, as American companies operate most of the platforms regulated by it.

The draft also includes several environmental policy coordination measures. The EU will delay the implementation of its forestry regulation by one year, although this adjustment appears to be a previously announced decision. Regarding the carbon border adjustment mechanism, the U.S. and EU will coordinate the design and implementation of this tax on the carbon intensity of imported goods, with American products receiving a one-year exemption after the policy's implementation. Additionally, U.S. energy exports to Europe will be exempt from EU methane regulations.

The draft agreement also indicates that the EU will consider measures to encourage the development of the shipping and maritime industries from market economies. The U.S. and EU will also strengthen coordination and cooperation in areas such as defense procurement and critical minerals. However, the draft does not address any tariff measures threatened or already imposed by the U.S. on the EU, including the previously suspended 20% "reciprocal tariffs" and higher tariffs on specific industries such as automobiles and steel. The draft also does not detail the retaliatory tariffs that the EU plans to implement on July 14.

The absence of tariff issues in the draft adds uncertainty to the agreement's prospects. It is unclear whether tariff issues will be resolved in a separate agreement, whether negotiations have stalled, or whether both sides will extend talks beyond the July 9 tariff deadline. Insiders noted that the agreement appears to be nearing finalization, but emphasized that changes could still occur in the coming days and weeks. An EU spokesperson stated that both sides are "engaging in comprehensive and in-depth negotiations" and that "reaching a mutually beneficial solution through negotiations remains our preferred outcome."