Why Ukraine tariffs cause friction in EU-US talks

Good morning and welcome to Europe Express.

Many capitals will be taking half of the week off thanks to public holidays, but not the EU’s doughty trade ministers, who are gathering in Prague for an informal council today. We’ll examine why lifting tariffs on Ukrainian imports is adding to the pile of disagreements between the EU and the US.

Speaking of US customs, Halloween was the most discussed topic in Romania yesterday, as Twitter’s new owner Elon Musk was reported in local media to have rented the so-called Dracula castle in Transylvania for a star-studded party.

We’ll also hear from the EU’s cohesion commissioner, Elisa Ferreira, who is no big fan of having structural funds used as a stop-gap every time the bloc faces a crisis.

Awkward lunch

Military and financial aid has been the focus so far when it comes to US support for Ukraine. But on trade, notably on tariffs, the EU is keen to point out that Washington has been less generous, writes Andy Bounds in Prague.

EU trade ministers gather in the Czech capital today to discuss prolonging the suspension of tariffs, and some will have questions for Katherine Tai, the US trade representative, who is joining them for lunch. After all, many in the US are quick to criticise Europe’s smaller contribution to arming Kyiv and paying its bills.

The EU suspended all tariffs and quotas from June 2022 until June 2023. The US, however, has removed only anti-dumping duties on steel. Commission officials have been urging the US to follow the EU’s lead for months. But the Biden administration fears being attacked by Republicans for allowing cheap imports to threaten American jobs, EU diplomats say.

“The EU is trying to get the US on board with a tariff waiver,” said one diplomat. With the midterm elections taking place next week, it is unlikely to see any movement from the Biden administration at this point.

Tai signed a G7 trade ministers’ statement promising “potential further trade-related steps to aid the Ukrainian economy” but has done nothing since.

The EU, meanwhile, will consider at today’s informal meeting how to extend its suspension, especially as Ukraine is now in negotiations to join the bloc.

“The question is whether we keep prolonging them or start to talk about something more permanent,” said one senior EU diplomat.

The diplomat admitted issues such as agriculture were sensitive — French chicken farmers have complained of an increase in Ukrainian imports — so a decision would fall to the Swedish presidency of the EU, in the first half of next year.

Johan Forssell, Stockholm’s new trade minister, told the Financial Times that Ukraine would be a top priority.

“In Sweden we feel very strongly about Ukraine. We believe all available instruments should be used [to support it].” He said he would listen to others’ views as an “honest broker” but added: “We are very much pro-trade.”

Chart du jour: Tracking thieves

This FT investigation into the illicit grain trade out of occupied Ukraine reveals a complex shadow operation managed by private companies and arms of the Russian state itself.

Count Elon?

While Twitter users were grappling with Elon Musk’s acquisition of the platform, Romanian media, tourists and local businesses went into overdrive yesterday when it was reported that the Chief Twit may have been the host of a billionaire’s Halloween party in Transylvania, write Marton Dunai in Budapest and Valentina Pop in Brussels.

Never mind that the links between the Bran castle and the fictional character of Bram Stoker’s novel Dracula are tenuous at best. Or that Halloween is a very recent cultural import to a country that has its own traditions when it comes to the deceased (or, indeed, the undead/vampires).

The castle was most certainly the site of a costume party with international stars, but whether Musk was there or not remains a mystery. A lawyer for Musk contacted last night declined to comment.

Guests who posted videos on social media and made brief statements to television crews posted outside the castle kept mum on who hosted the party.

The manager of the castle, Alexandru Prișcu, told ProTV broadcaster that guest lists were confidential and “it wouldn’t be the first time when big names come here without us knowing . . . Elon Musk would be unbelievable, not just for Bran castle but also for Romania.”

A giant “welcome Elon Musk” balloon was spotted on the makeshift helipad and a four-hour traffic jam had formed as onlookers, service providers and guests started arriving at the party. Greenpeace also chimed in with a message projected on to the castle’s facade, reading “SOS Carpathian Forest. Tweet that, Elon!”

Europe Express was able to confirm that longtime Musk associate and billionaire tech investor Peter Thiel was present, as well as his husband. So was Swedish actress Julia Sandstrom, who posted about her trip to the castle on Instagram, including descriptions of being shuttled from Bucharest to Bran by helicopter and having dressed up as a vampire.

Cohesion fighter

The EU’s cohesion funds, intended for long-term investments in poorer regions of the single market, must not be “killed” by unexpected crises, warns the commissioner in charge of the policy, writes Alice Hancock in Brussels.

Earlier this month the commission announced that €40bn from the 2014-2020 cohesion funds would be put forward to shore up small businesses and households struggling with their energy bills. This follows a pattern of cohesion money being used during the Covid-19 pandemic (€23bn) and to help countries that took in Ukrainian refugees earlier this year (€10bn).

Elisa Ferreira, the Portuguese commissioner who oversees cohesion funding, told Europe Express that it was the “right question” to ask if the financing mechanism, designed to boost the economies of poorer parts of the EU, should continue to be tapped to provide money during crises.

She argued that the bloc would need to reassess the overall size of the EU budget if there were further such crises or if lower-income countries — for example Ukraine or countries in the western Balkans — were admitted to the union.

“The European budget does not encompass anti-cyclical or anti-crisis margin because it is very, very constrained,” she said,

Since the commission announced it might withhold funds from Hungary over issues such as corruption in awarding public contracts, all eyes have been on its policy towards Poland, which is also accused of rule of law violations such as compromising the independence of its judiciary.

Ferreira said that “each country is a different situation” and that Poland’s funds would be disbursed on a case-by-case basis so long as each application complied with conditions on transparency, human rights and environmental law.

Poland’s overall investment proposal, which amounts to €76.5bn for projects including renewable power and healthcare, was approved by the commission in June. But Ferreira warned, “we have got to make sure that all the requirements are fulfilled before the money is transferred”.

What to watch this week

1. Trade ministers meet for an informal council in Prague today

2. Denmark holds general elections tomorrow

3. Italian PM Giorgia Meloni meets top EU officials in Brussels on Thursday

4. Western Balkan summit takes place in Berlin on Thursday

5. German chancellor Olaf Scholz visits China at the end of the week

Notable, Quotable

The UN-brokered deal brought a ray of hope — now this hope is shattered again

• Pulling the plug: President Vladimir Putin’s decision to suspend a deal that unblocked the passage of millions of tonnes of grain via southern Ukraine will lead to a fresh jump in price, with “catastrophic consequences” for poorer nations.

• Mink election: Denmark’s ruling Social Democrats have urged voters to look past their botched handling of a mass cull of farmed mink at the height of the Covid-19 pandemic, ahead of general elections tomorrow.