Laconic Latvian looks to reset US-EU trade relations

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It has fallen to a technocratic, deadpan former Latvian prime minister to reset the world’s biggest economic relationship.

In a speech last week, the EU’s new trade chief-designate Valdis Dombrovskis said he had already spoken to U.S. Trade Representative Robert Lighthizer and cast himself as a transatlantic peacemaker — even as Washington and Brussels are set to collide over aeroplane subsidies and digital taxes. Dombrovskis will find he has his work cut out though, regardless of who is in the White House after November’s U.S. election.

“We are living in a time of extraordinary challenges and difficulties. This is a time for keeping our friends close and remembering the alliances that really count,” Dombrovskis said.

He admitted in the same speech, however, that “ongoing disputes” would make that task of reviving the transatlantic partnership difficult. “Leaving things unresolved for too long is never a good option, because, as the famous Latvian writer Reinis Kaudzīte said: ‘A rusty nail is difficult to pull out.'”

And there are quite a few rusty nails to extract.

One former U.S. trade official said the “biggest challenge” facing Dombrovskis in the U.S.-EU trade relationship is the settlement of the Boeing-Airbus dispute, since the EU is set to learn within weeks what level of retaliatory duties it can impose on the United States.

While the EU has proposed a digital services tax — something Washington views as a protectionist assault on its Big Tech giants — the U.S. has mainly been negotiating with finance ministers from the leading European states.

But that fight could escalate over the coming year, EU officials and lawmakers said, as Washington has threatened retaliation if the EU passes Europe-wide legislation on a digital tax.

Leading the digital tax fight

With new trade powers that come on top of his oversight over digital taxation, Dombrovskis will be the EU’s super-commissioner to take on America’s digital giants.

The Commission’s entire trade defense, tariff and taxation arsenal will be either in his direct portfolio or that of commissioners under his oversight, the Commission confirmed.

Dombrovskis will work “hand in hand in particular with Commissioner [Paolo] Gentiloni on taxation issues,” said a spokesman for Commission President Ursula von der Leyen.

This oversight role on taxes is important because it will allow Dombrovskis to coordinate not just when and how to propose the EU’s plans for a digital tax, but also to prepare countermoves and trade retaliation if the U.S. decides to strike with tariffs, as it has threatened to do.

Indeed, the EU is already preparing a law to allow Brussels to hit back against U.S. tariffs by imposing sanctions on the intellectual property of companies such as Amazon, Google and Facebook — rather than tariffs on whisky and motorbikes. The idea is that these digital giants will be less inclined to start a trade war, and more willing to compromise on a tax, if Brussels can credibly threaten that a trade war would hit them directly.

Asked whether Brussels had bundled these powers with an eye toward the U.S., von der Leyen’s spokesman sought to downplay the changes.

“There is no shift. Digital taxation remains in the portfolio of Commissioner Gentiloni under the supervision of Executive Vice President Valdis Dombrovskis,” said the spokesman.

‘Stiff’ personality

Trade officials on both sides of the Atlantic worried that Dombrovskis’ personality will make it harder for the EU side to win sympathy for its plan.

Dombrovskis has a “very different personal style” than his clubbable predecessor Phil Hogan and it’s hard to see how he will get along with his American counterpart, U.S. Trade Representative Lighthizer, said another former U.S. trade official.

The official said that in meetings, Dombrovskis tended to be “stiff” and stuck to his talking points, often reading directly from them. Part of that could be because he is not completely proficient in English, “although he is getting better on that front,”  that second former U.S. official added.

As Latvia’s former finance minister, he ascended to the job of prime minister in 2009 as the country turned to an expert to solve the country’s economic and budgetary crisis.

He is consistently described as a “technocrat” whose speeches are well-prepared and “monotonous” or even “lethargic,” but who some say can also show a sense of “very dry wit.”

Paolo De Castro, a lawmaker in the European Parliament’s trade committee, said “flexibility” is essential when negotiating with personalities like Donald Trump or Boris Johnson, adding he “hope[s]” Dombrovskis may reveal some qualities “we [don’t] know yet.”

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His colleague Bernd Lange, chair of Parliament’s trade committee, said he “would sometimes wish for a little more energy and initiative, but we will certainly discuss that together.”

Dombrovskis has so far kept a low profile in his appearances in the U.S. as the Commission’s executive vice president. That means he is known by fellow technocrats in the U.S. administration, but he is not yet known well by influential politicians, such as the Senate Finance Committee Chairman Chuck Grassley.

“Senator Grassley has never met him, so there’s not much we could add at this point,” said his spokesman Michael Zona.

Despite these apparent handicaps, Dombrovskis “should not be underestimated,” and might even prove to be a more effective trade commissioner than his predecessor, the second former U.S. trade official said.

He added that Dombrovskis’ role as a vice president meant he “may be much better positioned” than Hogan to “sell” the rest of the Commission, and its president, on any trade deal with the United States.

Aaron Lorenzo contributed reporting.

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