It was more than two months ago, in early May, when Commerce Secretary Wilbur Ross sat down on a Tuesday morning with Agriculture Secretary Sonny Perdue in his second-floor office suite at USDA headquarters to discuss how they could push the Europeans into lowering trade barriers on U.S. farm commodities.
What Ross wanted were the benefits of a small-scale free trade agreement for U.S. pork, beef, rice and other products that are largely blocked by the 28 European Union countries. The fact that the EU still had a precarious exemption to massive steel and aluminum tariffs that the U.S. imposed on much of the world in March was expected to give U.S. negotiators leverage with the Europeans.
It’s unclear how far Ross got with the the EU delegation because on May 31, the Trump administration yanked away the EU’s exemption and hit the trading bloc with a 25 percent tax on steel and a 10 percent tax on aluminum. The EU retaliated with tariffs of its own, some of which are on U.S. ag commodities.
But now, following a truce declaration last week and pledges to negotiate by President Donald Trump and European Commission President Jean-Claude Juncker, U.S. farmers and ranchers are hopeful that they can get a profitable deal that opens up new markets.
The potential is significant, says American Farm Bureau Federation Senior Director David Salmonsen. As it is now, with all of the EU tariffs and non-tariff barriers, the U.S. exports roughly $12 billion worth of food and ag products yearly to the EU while the Europeans sell about $20 billion to the U.S.
There’s a good chance the U.S. could significantly reduce or even eliminate that trade deficit if the Europeans agreed to lift sanitary and phytosanitary restrictions as well as tariffs, Salmonsen told Agri-Pulse in an interview.
If the Europeans agree to include agriculture in the upcoming talks – that’s still a point of dispute – one of the first issues likely to be tackled is the EU barrier to U.S. beef. Most beef produced in the U.S. comes from cattle treated with growth hormones, which Europe won’t accept despite a 1998 World Trade Organization ruling that the ban is illegal. Instead of retaliating, the U.S. agreed in 2009 to a 45,000-ton quota that lifted all tariffs on U.S. beef so long as it was not produced with hormones.
But that quota proved eventually to be a bad deal because the EU opened it to other exporting countries like Australia, New Zealand, Uruguay and Argentina, drastically shrinking U.S. access.
Before the steel and aluminum tariffs and the EU retaliation, improving U.S. access to Europe’s beef market had become a priority for the Trump administration. The U.S. Trade Representative even held a hearing on potential retaliation in February, last year.
Rice farmers are also hoping for productive U.S.-EU negotiations on ag policy and tariffs.
The USA Rice Federation lamented the fact that the agreement signed last week by Trump and Juncker did not specifically mention agriculture, but the group is still optimistic the promise to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods” means Europe could be reopened to their grain.
"Last week's statement is good news for both parties as the focus shifts to the negotiating table," said Bobby Hanks, chairman of the USA Rice International Trade Policy Committee. "Europe was once a 300,000 metric ton market for the U.S., but that's dropped to around 55,000 tons and the EU's discriminatory import duties on rice keep us at this low level. We were hit again on June 20 when the EU imposed an additional 25 percent duty on imports of U.S. milled and broken rice in response to U.S. actions on steel and aluminum."
Another issue the Farm Bureau’s Salmonsen said the two sides would need to work on is the EU’s slow and cumbersome biotech approval process. For any one approval, both the European Food Safety Authority (EFSA) and a standing committee representing all 28 EU countries must give its consent. That process can take up to four years, according to U.S. industry officials.
But if any of these issues are to be resolved then the EU must first agree to include agriculture in the talks that a European Commission spokeswoman said on Monday are already being prepared.
To U.S. Trade Representative Robert Lighthizer, the answer is clear cut.
“Our view is that we are negotiating about agriculture. Period. That’s part of the process,” he told lawmakers last week in a Senate Appropriations subcommittee hearing.
But not to the Europeans, who appear to be hoping for a quick round of talks that will result in a removal of the U.S. steel and aluminum tariffs and the avoidance of potential new U.S. tariffs on automobiles.
“Agriculture is out of the scope of these discussions," European Commission spokeswoman Mina Andreeva said Friday. "We are not negotiating about agricultural products.”
She said again Monday that agriculture would not be a part of the trade talks. The word "agriculture" does not appear in the joint text, she stressed at a Brussels press conference.
One European Commission official offered an explanation to Agri-Pulse: “If we put agriculture on the table, it would take ages because … of all these issues. The idea is to have a less ambitious agreement.”
That doesn’t work for Salmonsen, though.
“We hear them saying, ‘Oh, we don’t want ag issues.’ We hear that all the time,” he said. “My response is always, ‘If you want to talk, we have to talk agriculture.’”
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