WEBVTT - Commissioner Valdis Dombrovskis Talks EU Trade Strategy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, keeping an eye on

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<v Speaker 1>everything that's been going on in the currency space. Here

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<v Speaker 1>on this Monday, as we welcome our audiences across all

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<v Speaker 1>of our Bloomberg television and radio platforms, a special conversation

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<v Speaker 1>starts right now with Valdez Dombroskis. He's the Commissioner for

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<v Speaker 1>Economy and Productivity for the European Commission, effectively the man

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<v Speaker 1>in charge and overseeing that trade block's economic policy. Great

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<v Speaker 1>to have you here, a Valdis you are here in

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<v Speaker 1>the United States at the New York Stock Exchange. Last

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<v Speaker 1>week you were down in Washington for the IMFN World

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<v Speaker 1>Bank meetings. I know there was a big message delivered

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<v Speaker 1>by our US counterparts with regards to trade and with

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<v Speaker 1>regards to the geopolitical conditions. I am curious about what

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<v Speaker 1>message you brought to the table for your US counterparts.

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<v Speaker 1>What did you tell them?

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<v Speaker 2>Good afternoon. Well, the main message is that we continue

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<v Speaker 2>to engage with United States. We see United States as

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<v Speaker 2>our strategic ally and we have largest trade and investment

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<v Speaker 2>relationship in the world. So we are willing to invest

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<v Speaker 2>in this relationship, continue our cooperation, including finding negotiated solution.

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<v Speaker 2>As regards trade and tariffs.

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<v Speaker 1>Are there active negotiations at the high level between the

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<v Speaker 1>EU and the United States.

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<v Speaker 2>Well, indeed, negotiations are ongoing. Also last week I was

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<v Speaker 2>meeting Scott Vesant in Washington and we were also patching

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<v Speaker 2>up on these issues. But I would say there's also

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<v Speaker 2>still lots of ground to cover.

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<v Speaker 3>So what happens when you see somebody like Georgia Maloney

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<v Speaker 3>of Italy acting like she's been given a mandate to

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<v Speaker 3>make some kind of a deal with the United States.

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<v Speaker 3>Can you stop that from happening or do you lean

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<v Speaker 3>into it and say, well, if Italy can leave the negotiations,

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<v Speaker 3>maybe we'll get somewhere.

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<v Speaker 2>Well, first of all, it's clear that also individual EU

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<v Speaker 2>member states like Italy and others are having the bar

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<v Speaker 2>lateral relationships with US and continues their engagement at the

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<v Speaker 2>same time. As regards specifically trade, trade, external trade is

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<v Speaker 2>exclusive competence of European Unions, so negotiated by European Commission

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<v Speaker 2>on behalf of EU member states, and all EU member

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<v Speaker 2>states know it and respecting, so there's no issues there.

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<v Speaker 3>There has been some suggestion that Europe and China are talking,

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<v Speaker 3>and I think the idea is that perhaps you might

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<v Speaker 3>agree to something in order to pressure the United States.

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<v Speaker 3>Is that or has that been happening?

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<v Speaker 2>Well as regards these US and China, well, first of all,

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<v Speaker 2>we note that basically right now the US market is

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<v Speaker 2>close to Chinese goods, so tariffs are approhibitively high. And

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<v Speaker 2>as the question is what is going to happen with

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<v Speaker 2>all those goods which are not now reaching US market,

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<v Speaker 2>where they are going? Are they going, for example, to

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<v Speaker 2>the EU market? So our message to our Chinese counterparts

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<v Speaker 2>is that it's important also that China shows restraints that

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<v Speaker 2>it does not put all this now our capacity of

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<v Speaker 2>goods to other markets, including EU, because then we will

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<v Speaker 2>have to react to how to close our market to

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<v Speaker 2>protect protect our economy, our companies, and that will lead

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<v Speaker 2>even to further global economic fragmentation. And it's in everyone's

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<v Speaker 2>interest actually to preserve multilateral rules based trading system.

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<v Speaker 1>But we have a White House here in the United

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<v Speaker 1>States all this that is not pursuing a multilateral rules

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<v Speaker 1>based system. I mean, that is very clear. So how

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<v Speaker 1>do you negotiate a deal with the United States and

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<v Speaker 1>potentially at the same time negotiate a deal if necessary

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<v Speaker 1>with China.

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<v Speaker 2>Well, that's exactly the point where we think that at

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<v Speaker 2>the end of the day, sticking to the rules following

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<v Speaker 2>multilateralism is going to be better for everyone. Right now, obviously,

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<v Speaker 2>it's the fact that Trump administration has put those tariffs,

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<v Speaker 2>including on European Union, so we are willing to negotiate.

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<v Speaker 2>By the way, we have suspended our first set of

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<v Speaker 2>contact tariffs, which already decided, because we also suspended them

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<v Speaker 2>for ninety days to give those negotiations a chance, and

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<v Speaker 2>we do hope to find a negotiated solution for our.

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<v Speaker 1>TV and radio audiences. We're in conversation right now with

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<v Speaker 1>Baldis dombrotskis the EU Economic Affairs Commissioner, live from the

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<v Speaker 1>NYSC and mister Commissioner, I am curious as to what,

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<v Speaker 1>if any demands the US has made with regards to

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<v Speaker 1>what your tariffs or effectively or barriers, if you will,

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<v Speaker 1>would have to be in order to get the United

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<v Speaker 1>States to remove potential tariffs and bury US from that side.

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<v Speaker 1>Is this a conversation about zero for zero in terms

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<v Speaker 1>of tariffs or is there more that they're asking for.

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<v Speaker 2>Well as regards tariffs themselves. It's worth noting that actually,

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<v Speaker 2>well before the recent introduction continued, Yes, I'm hearing you.

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<v Speaker 2>So before the recent introduction of those tariffs, the tariffs

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<v Speaker 2>which EU was putting on US was a trade weighted

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<v Speaker 2>average of one point two percent. US tariffs on the

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<v Speaker 2>EU trade weighted average was one point four percent. So actually,

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<v Speaker 2>we have very low tariffs on each other, and indeed

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<v Speaker 2>one of the offers for EU side was to go

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<v Speaker 2>zero for zero on industrial tariffs. We are also exploring

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<v Speaker 2>possibility to buy more LNG from the United States, to

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<v Speaker 2>cooperate more in area of energy, and are willing to

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<v Speaker 2>explore other areas.

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<v Speaker 1>Does one of those other areas include the bad tax?

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<v Speaker 2>Well, no, Actually, that's the point that we don't think

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<v Speaker 2>it belongs to trade negotiations because our value added tax

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<v Speaker 2>is consumption tax. It's applied equally on both domestically produced

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<v Speaker 2>and imported goods, and as such is not trade distortile.

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<v Speaker 2>It's like similarly, US states have sales taxes, which are

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<v Speaker 2>also consumption taxes, which are not trade distortile, and they

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<v Speaker 2>just do not belong to trade versations.

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<v Speaker 3>Commissioner, the administration has said the first to the table

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<v Speaker 3>will get the best deal. Are you concerned that we'll

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<v Speaker 3>see deals from other large blocks of countries or countries,

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<v Speaker 3>and that you might be a little bit late, that

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<v Speaker 3>you'll get maybe worse of the deal at that point.

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<v Speaker 2>Well, we don't think we are in a race here.

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<v Speaker 2>What's import that to reach agreement on a substance and

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<v Speaker 2>to find mutual acceptable solution.

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<v Speaker 3>Are sticking points right now.

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<v Speaker 2>Well, since those are ongoing negansations, I cannot go into

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<v Speaker 2>much detail. I indicated some of the ideas which we

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<v Speaker 2>are exploring, but as I was also saying, there are

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<v Speaker 2>still quite a bit ground to be covered.

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<v Speaker 1>I am curious a commissioner about the relative strength that

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<v Speaker 1>we've seen over the last few weeks in the euro

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<v Speaker 1>relative to the dollar, and it's got a lot of

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<v Speaker 1>investors questioning whether that's something sustainable. What types of discussions

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<v Speaker 1>have you had with your peers over there in Europe

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<v Speaker 1>about capitalizing or at least for what right now is

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<v Speaker 1>a modest reallocation away from US assets in the European assets.

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<v Speaker 2>Well, first of all, as regards euro exchange rate, European

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<v Speaker 2>Central Bank is not targeting the exchange rates, so exchange

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<v Speaker 2>rate is determined by the markets. And also the level

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<v Speaker 2>we see now is not like historical highs of euro

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<v Speaker 2>we had seen actually also euro at higher levels. But

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<v Speaker 2>in any case, indeed we see interest from investors in

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<v Speaker 2>Euro denominated papers, and there's going to be quite a

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<v Speaker 2>strong supply of these Euro denominated papers in this and

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<v Speaker 2>next year. So there's going to be opportunities for investors

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<v Speaker 2>to invest in Europe. So if investors want predictabilities, they

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<v Speaker 2>want stability, respect for the role of law, Europe is

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<v Speaker 2>a good place to invest.

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<v Speaker 1>Does that include an increase in bond sales, particularly common

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<v Speaker 1>bond sales.

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<v Speaker 2>Well, actually we have a strong pipeline of bond sales

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<v Speaker 2>this year and next. We have close to three hundred

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<v Speaker 2>billion euros of Recovery and Resilience facility bond. Still, we

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<v Speaker 2>recently proposed a new common Borrowing Facility safe facility for

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<v Speaker 2>common procurement of defense equipment for member states. It's another

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<v Speaker 2>one hundred and fifty billion euros if we talk about

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<v Speaker 2>common borrowing. But also Germany has recently announced additional five

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<v Speaker 2>hundred billion euros package to strengthen investment in infrastructure and defense,

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<v Speaker 2>so also other countries. So as you see there, it's

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<v Speaker 2>going to be quite substantial supply also from European side.

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<v Speaker 1>All right, Commissioner, I really appreciate you taking time for us.

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<v Speaker 1>Foudystem brodskis the Commissioner for Economy and Productivity for the

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<v Speaker 1>European Commission.