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Tag: Dumping/Duties

  • Ukraine’s bumper grain exports rile allies in eastern EU

    Ukraine’s bumper grain exports rile allies in eastern EU

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    Ukraine’s farmers played an iconic role in the first weeks of Russia’s invasion, towing away abandoned enemy tanks with their tractors.

    Now, though, their prodigious grain output is causing some of Ukraine’s staunchest allies to waver, as disrupted shipments are redirected onto neighboring markets.

    The most striking is Poland, which has played a leading role so far in supporting Ukraine, acting as the main transit hub for Western weaponry and sending plenty of its own. But grain shipments in the other direction have irked Polish farmers who are being undercut — just months before a national election where the rural vote will be crucial.

    Diplomats are floundering. After a planned Friday meeting between the Polish and Ukrainian agriculture ministers was postponed, the Polish government on Saturday announced a ban on imports of farm products from Ukraine. Hungary late Saturday said it would do the same.

    Ukraine is among the world’s top exporters of wheat and other grains, which are ordinarily shipped to markets as distant as Egypt and Pakistan. Russia’s invasion last year disrupted the main Black Sea export route, and a United Nations-brokered deal to lift the blockade has been only partially effective. In consequence, Ukrainian produce has been diverted to bordering EU countries: Hungary, Poland, Romania and Slovakia.

    At first, those governments supported EU plans to shift the surplus grain. But instead of transiting seamlessly onto global markets, the supply glut has depressed prices in Europe. Farmers have risen up in protest, and Polish Agriculture Minister Henryk Kowalczyk was forced out earlier this month.

    Now, governments’ focus has shifted to restricting Ukrainian imports to protect their own markets. After hosting Ukrainian President Volodymyr Zelenskyy in Warsaw in early April, Polish President Andrzej Duda said resolving the import glut was “a matter of introducing additional restrictions.”

    The following day, Poland suspended imports of Ukrainian grain, saying the idea had come from Kyiv. On Saturday, Polish Prime Minister Mateusz Morawiecki, after an emergency cabinet meeting, said the import ban would cover grain and certain other farm products and would include products intended for other countries. A few hours later, the Hungarian government announced similar measures. Both countries said the bans would last until the end of June.

    The European Commission is seeking further information on the import restrictions from Warsaw and Budapest “to be able to assess the measures,” according to a statement on Sunday. “Trade policy is of EU exclusive competence and, therefore, unilateral actions are not acceptable,” it said.

    While the EU’s free-trade agreement with Ukraine prevents governments from introducing tariffs, they still have plenty of tools available to disrupt shipments.

    Neighboring countries and nearby Bulgaria have stepped up sanitary checks on Ukrainian grain, arguing they are doing so to protect the health of their own citizens. They have also requested financial support from Brussels and have already received more than €50 million from the EU’s agricultural crisis reserve, with more money on the way.

    Restrictions could do further harm to Ukraine’s battered economy, and by extension its war effort. The economy has shrunk by 29.1 percent since the invasion, according to statistics released this month, and agricultural exports are an important source of revenue.

    Cracks in the alliance

    The trade tensions sit at odds with these countries’ political position on Ukraine, which — with the exception of Hungary — has been strongly supportive. Poland has taken in millions of Ukrainian refugees, while weapons and ammunition flow in the opposite direction; Romania has helped transport millions of tons of Ukrainian corn and wheat.

    Volodymyr Zelenskyy and Poland’s Prime Minister, Mateusz Morawiecki | Omar Marques/Getty Images

    Some Western European governments, which had to be goaded by Poland and others into sending heavy weaponry to Kyiv, are quick to point out the change in direction.

    “Curious to see that some of these countries are [always] asking for more on sanctions, more on ammunition, etc. But when it affects them, they turn to Brussels begging for financial support,” said one diplomat from a Western country, speaking on condition of anonymity.

    Some EU countries also oppose the import restrictions for economic reasons. For instance, Spain and the Netherlands are some of the biggest recipients of Ukrainian grain, which they use to supply their livestock industries.

    Politically, though, the Central and Eastern European governments have limited room for maneuver. Poland and Slovakia are both heading into general elections later this year. Bulgaria has had a caretaker government since last year. Romania’s agriculture minister has faced calls to resign, including from a compatriot former EU agriculture commissioner.

    And farmers are a strong constituency. Poland’s right-wing Law & Justice (PiS) party won the last general election in 2019 thanks in large part to rural voters. The Ukrainian grain issue has already cost a Polish agriculture minister his job; the government as a whole will have to tread carefully to avoid the same fate.

    This article has been updated.

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    Bartosz Brzezinski

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  • Ukraine wants to join EU within two years, PM says

    Ukraine wants to join EU within two years, PM says

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    Ukrainian Prime Minister Denys Shmyhal has a tight two-year timetable for securing EU membership that is bound to dominate discussions at this week’s historic EU-Ukraine summit, the first to take place on Ukrainian soil.

    The problem? No one within the EU thinks this is realistic.

    When EU commissioners travel to Kyiv later this week ahead of Friday’s summit with Ukrainian President Volodymyr Zelenskyy and the heads of the European Commission and Council, their main task is likely to involve managing expectations.

    Shmyhal himself is imposing a tough deadline. “We have a very ambitious plan to join the European Union within the next two years,” he told POLITICO. “So we expect that this year, in 2023, we can already have this pre-entry stage of negotiations,” he said.

    This throws down a gauntlet to the EU establishment, which is trying to keep Ukrainian membership as a far more remote concept.

    French President Emmanuel Macron said last year it could be “decades” before Ukraine joins. Even EU leaders, who backed granting Ukraine candidate status at their summit last June, privately admit that the prospect of the country actually joining is quite some years away (and may be one reason they backed the idea in the first place.) After all, candidate countries like Serbia, Turkey and Montenegro have been waiting for many years, since 1999 in Ankara’s case.

    Ukraine is a conundrum for the EU. Many argue that Brussels has a particular responsibility to Kyiv. It was, after all, Ukrainians’ fury at the decision of President Viktor Yanukovych to pull out of a political and economic association agreement with the EU at Russia’s behest that triggered the Maidan uprising of 2014 and set the stage for war. As European Commission President Ursula von der Leyen put it: Ukraine is “the only country where people got shot because they wrapped themselves in a European flag.”

    Ukraine’s close allies in the EU such as Poland and the Baltic countries strongly support Kyiv’s membership push, seeing it as a democracy resisting an aggressor. Many of the EU old guard are far more wary, however, as Ukraine — a global agricultural superpower — could dilute their own powers and perks. Ukraine and Poland — with a combined population of 80 million — could team up to rival Germany as a political force in the European Council and some argue Kyiv would be an excessive drain on the EU budget.  

    Short-term deliverables

    Friday’s summit in Kyiv — the first EU meeting of its kind to take place in an active war zone — will be about striking the right balance.

    Though EU national leaders will not be in attendance, European Council officials have been busy liaising with EU member states about the final communiqué.

    Some countries are insisting the statement should not stray far from the language used at the June European Council — emphasizing that while the future of Ukraine lies within the European Union, aspirant countries need to meet specific criteria. “Expectation is quite high in Kyiv, but there is a need to fulfill all the conditions that the Commission has set out. It’s a merit-based process,” said one senior EU official.

    Ukraine is a conundrum for the EU. Many argue that Brussels has a particular responsibility to Kyiv | Sergei Supinsky/AFP via Getty Images

    Still, progress is expected when Zelenskyy meets with von der Leyen and European Council President Charles Michel.

    Shmyhal told POLITICO he hopes Ukraine can achieve a “substantial leap forward” on Friday, particularly in specific areas — an agreement on a visa-free regime for industrial goods; the suspension of customs duties on Ukrainian exports for another year; and “active progress” on joining the SEPA (Single Euro Payments Area) payments scheme and the inclusion of Ukraine into the EU’s mobile roaming area.  

    “We expect progress and acceleration on our path towards signing these agreements,” he said.

    Anti-corruption campaign

    The hot topic — and one of the central question marks over Ukraine’s EU accession — will be Ukraine’s struggle against corruption. The deputy infrastructure minister was fired and deputy foreign minister stepped down this month over scandals related to war profiteering in public contracts.

    “We need a reformed Ukraine,” said one senior EU official centrally involved in preparations for the summit. “We cannot have the same Ukraine as before the war.”

    Shmyhal insisted that the Zelenskyy government is taking corruption seriously. “We have a zero-tolerance approach to corruption,” he said, pointing to the “lightning speed” with which officials were removed this month. “Unfortunately, corruption was not born yesterday, but we are certain that we will uproot corruption,” he said, openly saying that it’s key to the country’s EU accession path.

    He also said the government was poised to revise its recent legislation on the country’s Constitutional Court to meet the demands of both the European Commission and the Venice Commission, an advisory body of the Council of Europe. Changes could come as early as this week, ahead of the summit, Shmyhal said.

    Though Ukraine has announced a reform of the Constitutional Court, particularly on how judges are appointed, the Venice Commission still has concerns about the powers and composition of the advisory group of experts, the body which selects candidates for the court. The goal is to avoid political interference.

    Shmyhal said these questions will be addressed. “We are holding consultations with the European Commission to see that all issued conclusions may be incorporated into the text,” he told POLITICO.

    Nonetheless, the symbolic power of this week’s summit is expected to send a strong message to Moscow about Ukraine’s European aspirations.

    European Council President Michel used his surprise visit to Kyiv this month to reassure Ukraine that EU membership will be a reality for Ukraine, telling the Ukrainian Rada (parliament) that he dreams that one day a Ukrainian will hold his job as president of the European Council.

    “Ukraine is the EU and the EU is Ukraine,” he said. “We must spare no effort to turn this promise into reality as fast as we can.”

    The key question for Ukrainians after Friday’s meeting will be how fast the rhetoric and promises can become a reality.

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    Suzanne Lynch

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  • Thierry Breton: Brussels’ bulldozer digs in against US

    Thierry Breton: Brussels’ bulldozer digs in against US

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    Thierry Breton is winning the war of ideas in Brussels.

    The ex-CEO is a political whirlwind with a gigantic portfolio as internal market chief, the backing of French President Emmanuel Macron and lots of proposals. He’s been touring European Union capitals to win support for plans to shield Europe’s industry from crippling energy prices, American subsidies and “naive” EU free traders.

    France’s decades-long push for more state intervention is finally finding some echo in Berlin and the 13th floor of the Berlaymont building, occupied by European Commission President Ursula von der Leyen, who largely owes her job to Macron.

    Omnipresent and ebullient, Breton is playing a key role in marshaling industry and political support for sweeping but so far vague plans to boost clean tech, secure key raw materials and overhaul EU checks on government support that he blasts as too slow to help companies.

    “Of course there is resistance; my job is precisely to manage and align everyone,” he told French TV this week of his January meetings with Spanish, Polish and Belgian leaders to flog a forthcoming industrial policy push that could be a turning point in how far European governments will finance companies.

    Time is short. Von der Leyen wants to line up proposals for a February summit. European industry is complaining that it can’t swallow far higher energy prices and tighter regulation for much longer, with at least one announcing a European shutdown and an Asian expansion.

    Breton said governments don’t need convincing on the need for rapid action. But he’s running up against one of Europe’s sacred cows — EU state aid rules run by Executive Vice President Margrethe Vestager that curb government support with lengthy checks to make sure companies don’t get unfair help. She’s also under intense pressure to preserve a “level playing field” as smaller countries worry about German and French financial firepower.

    The French internal market commissioner’s bullish style often sees him act as if he’s got a role in subsidies. In the fall, he sent a letter to EU countries asking them to send views on emergency state aid rules to the internal market department, which is under his supervision, two EU officials recalled. 

    In a meeting with European diplomats, a Commission representative had to correct it, the EU officials said, asking capitals to make sure the input goes instead to the competition department overseen by Vestager. 

    Europe First

    While Breton doesn’t like to be called a protectionist, his latest mission has been to protect Europe from its transatlantic friend.

    As early as September, one Commission official said, the Frenchman was mandated by Europe’s industry to speak out against U.S. President Joe Biden’s Inflation Reduction Act, which provides tax credits for U.S.-made electric cars and support to American battery supply chains.

    U.S President Joe Biden gives remarks during an event celebrating the passage of the Inflation Reduction Act on September 13, 2022 | Anna Moneymaker/Getty Images

    His Paris-backed campaign charged ahead while EU officials and diplomats tiptoed around the subject. Some within the Commission headquarters found his bad cop routine helpful in keeping pressure on the U.S. 

    “He’s been constructive, though clearly disruptive,” said Tyson Barker, head of the technology and global affairs program at the German Council of Foreign Relations.

    The Frenchman has even pitched himself as the bloc’s “sheriff” against Silicon Valley giants, warning billionaire Elon Musk that an overhaul of the Twitter social network can only go so far since “in Europe, the bird will fly by our rules.”

    “Big Tech companies only understand balances of power,” said Cédric O, a former French digital minister who worked with Breton during the French EU Council presidency. “When [Breton and Musk] see each other, it necessarily remains cordial, but Breton shows his teeth and rightly so. It’s his job.”

    Breton can even surprise his own services, according to two EU officials. In May, the Commission’s department responsible for digital policy — DG CONNECT — was caught off guard when Breton announced in the press that he would unveil plans by year-end to make sure that technology giants forked out for telecoms networks. 

    In so doing, Breton — who was CEO of France Télécom in the early 2000s — resurrected a long-dormant and fractious policy debate that had been put to rest almost a decade ago, when erstwhile Digital Commissioner Neelie Kroes ordered Europe’s telecoms operators to “adapt or die” rather than seek money from content providers.

    After Breton’s commitments, the Commission’s services were soon scrambling to develop some sort of a coherent policy program to deliver on the Frenchman’s comments. A consultation is scheduled for early this year. 

    Carte blanche

    Breton is a rare creature in the halls of the Berlaymont, where policy is hatched slowly after extensive consultation. To a former CEO with a broad remit — his portfolio runs from the expanse of space to the tiniest of microchips — rapid reaction matters more than treading on toes or singing from the hymn sheet. This often sees him floating ideas and then pulling back.

    Last year he alarmed environmentalists by raising the prospect of a U-turn on the EU’s polluting car ban. He wagged his finger at German Chancellor Olaf Scholz for a solo trip to China. He called for nuclear energy to be considered green. He has pushed out grand projects — such as industrial alliances on batteries and cloud, or a cyber shield — that he doesn’t always follow up on.

    He’s even pushed forward a multibillion-euro EU communication satellite program dubbed Iris², a favorite of French aerospace companies, that will see the bloc build a rival to Musk’s space-based Starlink broadband constellation.

    “It’s clear that he’s been given more free rein than others,” said one EU official. “He has von der Leyen’s ear,” the official added, noting that Breton enjoys “privileged access” to the Commission president — who may be mindful that she’ll need French support for a second term.

    According to an official, Breton “has von der Leyen’s ear” and enjoys “privileged access” to the Commission president | Valeria Mongeli/AFP via Getty Images

    Indeed, Breton’s massive role was partly designed as a counterweight to a German president.

    “There is a criticism of von der Leyen for being too German,” explained Sébastien Maillard, director of the Jacques Delors Institute think tank. “There may inevitably be a division of roles between them — [where Breton is] a counterbalance.”

    He’s been called an “unguided missile,” but more often than not, the Frenchman has Paris’ backing when going off script. His October op-ed with Italian colleague Paolo Gentiloni, which called for greater European financial solidarity, was part of France’s agenda, according to one high-ranking Commission official.

    “When he went out in the press with Gentiloni against Scholz’s €200 billion, he was clearly doing the job for Macron,” the official said. 

    His November call for a rethink on the 2035 car engine ban came just after a week after critical green legislation had been finalized by Commission Executive Vice President Frans Timmermans and jarred with the EU’s own position at the COP 27 climate summit in Indonesia. But it aped the position of French auto industry captains, such as Stellantis CEO Carlos Tavares and Renault’s Luca de Meo, who wanted Brussels to slam the brakes on the climate drive.

    Breton had not coordinated his car comments with colleagues in advance, according to two Commission officials.

    Less than 10 days later, French Prime Minister Elisabeth Borne echoed caution about the “extremely ambitious” engine ban and warned that pivoting to electric car manufacturing was daunting.

    Going A-list

    Breton acknowledged himself that he wasn’t Macron’s first choice for the critical EU post, telling POLITICO at a live event that he was a “plan B commissioner.”

    Asked if he was targeting an A-list job for the new Commission mandate in 2024, he said he “may be able to consider a new plan B assignment — if it is a plan B.”

    “He is thinking about the future,” said one EU official. “Look at his LinkedIn posts. He is thinking past the next European elections. He definitely wants to convince Macron to get an expanded portfolio.” 

    Grabbing the Commission’s top job may be tricky, relying on how EU leaders will line up, according to multiple EU and French officials. 

    There are other jobs, including overturning the unwritten law that no French or German candidate can hold the economically powerful competition portfolio. Another option could be becoming Europe’s official digital czar, combining the enforcement powers of the Digital Services Act and the Digital Markets Act into a supranational digital enforcement agency, one EU official said.

    Breton has shrugged off speculation on his long-term plans.

    “All my life, I have been informed of my next potential job 15 minutes before,” he said last month.

    Jakob Hanke Vela, Stuart Lau, Barbara Moens, Camille Gijs and Mark Scott contributed reporting.

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    Laura Kayali, Samuel Stolton and Joshua Posaner

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  • Bitter friends: Inside the summit aiming to heal EU-US trade rift

    Bitter friends: Inside the summit aiming to heal EU-US trade rift

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    The transatlantic reset between Brussels and Washington is on life support.

    After four years of discord and disruption under Donald Trump, hopes were high that Joe Biden’s presidency would usher in a new era of cooperation between Europe and the U.S. after he declared: “America is back.”

    But when senior officials from both sides meet in Washington on Monday for a twice-yearly summit on technology and trade, the mood will be gloomier than at any time since Trump left office.

    The European Union is up in arms over Biden’s plans for hefty subsidies for made-in-America electric cars, claiming these payments, which partly kick in from January 1, are nothing more than outright trade protectionism. 

    At the same time, the U.S. is increasingly frustrated the 27-country bloc won’t be more aggressive in pushing back against China, accusing some European governments of caving in to Beijing’s economic might. 

    Those frictions are expected to overshadow the so-called EU-U.S. Trade and Technology Council (TTC) summit this week. At a time when the Western alliance is seeking to maintain a show of unity and strength in the face of Russian aggression and Chinese authoritarianism, the geopolitical stakes are high. 

    Biden may have helped matters last Thursday, during a joint press conference with French President Emmanuel Macron, by saying he believed the two sides can still resolve some of the concerns the EU has raised. 

    “We’re going to continue to create manufacturing jobs in America but not at the expense of Europe,” Biden said. “We can work out some of the differences that exist, I’m confident.”

    But, as ever, the details will be crucial.

    It is unclear what Biden can do to stop his Buy American subsidies from hurting European car-markers, for example, many of which come from powerful member countries like France and Germany. The TTC summit offers a crucial early opportunity for the two sides to begin to rebuild trust and start to deliver on Biden’s warm rhetoric.

    Judging by the TTC’s record so far, those attending, who will include U.S. Secretary of State Antony Blinken, will have their work cut out.

    More than 20 officials, policymakers and industry and society groups involved in the summit told POLITICO that the lofty expectations for the TTC have yet to deliver concrete results. Almost all of the individuals spoke on the condition of anonymity to discuss sensitive internal deliberations.

    U.S. Secretary of State Antony Blinken will be attending the TTC | Sean Gallup/Getty Images

    Some officials privately accused their counterparts of broken promises, particularly on trade. Others are frustrated at a lack of progress in 10 working groups on topics like helping small businesses to digitize and tackling climate change. 

    “With these kinds of allies, who needs enemies?” said one EU trade diplomat when asked about tensions around upcoming U.S. electric car subsidies. A senior U.S. official working on the summit hit back: “We need the Europeans to play ball on China. So far, we haven’t had much luck.”

    Much of the EU-U.S. friction is down to three letters: IRA.

    Biden’s Inflation Reduction Act, which provides subsidies to “Buy American” when it comes to purchasing electric vehicles, has infuriated officials in Brussels who see it as undermining the multilateral trading system and a direct threat to the bloc’s rival car industry. 

    “The expectation the TTC was established to provide a forum for precisely these advanced exchanges with a view to preventing trade frictions before they arise appears to have been severely frustrated,” said David Kleimann, a trade expert at the Bruegel think tank in Brussels. 

    Biden’s room for flexibility is limited. The context for the subsidies and tax breaks is his desire to make good on his promise to create more manufacturing jobs ahead of an expected re-election run in 2024. The U.S. itself is hovering on the edge of a possible recession. 

    In addition, the U.S. trade deficit with the EU hit a record $218 billion in 2021, second only to the U.S. trade deficit with China. The U.S. also ran an auto trade deficit of about $22 billion with European countries, with Germany accounting for the largest share of that. 

    Washington has few, if any, meaningful policy levers at its disposal to calm European anger. During a recent visit to the EU, Katherine Tai, the U.S. trade representative, urged European countries to pass their own subsidies to jumpstart Europe’s electric car production, according to three officials with knowledge of those discussions. 

    “It risks being the elephant in the room,” said Emily Benson, a senior fellow at the Center for Strategic and International Studies, a Washington-based think tank, when asked about the electric car dispute. 

    After a push from Brussels, there were increasing signs on Friday that the TTC could still play a role. In the latest version of the TTC’s draft declaration, obtained by POLITICO, both sides commit to addressing the European concerns over Biden’s subsidies, including via the Trade and Tech Council. Again, though, there was no detail on how Washington could resolve the issue.

    Politicians across Europe are already drawing up plans to fight back against Biden’s subsidies. That may include taking the matter to the World Trade Organization, hitting the U.S. with retaliatory tariffs or passing a “Buy European Act” that would nudge EU consumers and businesses to buy locally made goods and components.

    Officials and business leaders pose for a photo during the TTC in September 2021 | Pool photo by Rebecca Droke/AFP via Getty Images

    Privately, Washington has not been in the mood to give ground. Speaking to POLITICO before Biden met Macron, five U.S. policymakers said the IRA was not aimed at alienating allies, stressing that the green subsidies fit the very climate change goals that Europe has long called on America to adopt. 

    “There’s just a huge amount to be done and more frankly to be done than the market would provide for on its own,” said a senior White House official, who was not authorized to speak on the record. “We think the Inflation Reduction Act is reflective of that type of step, but we also think there is a space here for Europe and others, frankly, to take similar steps.”

    China tensions

    Senior politicians attending the summit are expected to play down tensions this week when they announce a series of joint EU-U.S. projects.

    These include funds for two telecommunications projects in Jamaica and Kenya and the announcement of new rules for how the emerging technology of so-called trustworthy artificial intelligence can develop. There’s also expected to be a plan for more coordination to highlight potential blockages in semiconductor supply chains, according to the draft summit statement obtained by POLITICO. 

    Yet even on an issue like microchips — where both Washington and Brussels have earmarked tens of billions of euros to subsidize local production — geopolitics intervenes.

    For months, U.S. officials have pushed hard for their European counterparts to agree to export controls to stop high-end semiconductor manufacturing equipment being sent to China, according to four officials with knowledge of those discussions. 

    Washington already passed legislation to stop Chinese companies from using such American-made hardware. The White House had been eager for the European Commission to back similar export controls, particularly as the Dutch firm ASML produced equipment crucial for high-end chipmaking worldwide. 

    Yet EU officials preparing for the TTC meeting said such requests had never been made formally to Brussels. The draft summit communiqué makes just a passing reference to China and threats from so-called non-market economies.

    Unlike the U.S., the EU remains divided on how to approach Beijing as some countries like Germany have long-standing economic ties with Chinese businesses that they are reluctant to give up. Without a consensus among EU governments, Brussels has little to offer Washington to help its anti-China push.

    “In theory, the TTC is not about China, but in practice, every discussion with the U.S. is,” said one senior EU official, speaking on the condition of anonymity. “If we talk with Katherine Tai about Burger King, it has an anti-China effect.”

    Gavin Bade, Clea Caulcutt, Samuel Stolton and Camille Gijs contributed reporting.

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    Mark Scott, Barbara Moens and Doug Palmer

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