The clock is ticking for the U.S. to resolve outstanding trade negotiations with the European Union (EU) on retaliatory tariffs associated with the Boeing and Airbus dispute. U.S. Trade Representative Katherine Tai recently committed to resolving this matter, but the U.S. has until July to either conclude or extend the negotiations or re-elevate the tariffs. Failure to do so has enormous implications not just for the parties directly involved, but for food and agricultural stakeholders who have been caught in the crossfire of this international dispute.
Despite broad support to reset and stabilize the transatlantic trade relationship, the EU continues to work under the surface to keep the trade imbalance as stacked as possible, which is largely impacting food and agricultural trade.
There is no denying American tastes for European food and beverage imports. Whether spirits or cheeses, American consumers have demonstrated they will pay top dollar for European products, spending $15.8 billion on food and agricultural imports in 2019, and $28.8 billion in 2018 before the tariff dispute kicked in. Meanwhile, European rules are so overbearing and bureaucratic that the U.S. has consistently exported only about $10 billion of food and agricultural products to the EU annually – a large sum but hardly comparable to the EU’s ballooning food and agricultural exports to the U.S. without the retaliation in effect.
The European Commission draws on many tools to keep its imports in check, particularly dairy imports. Geographical indications (GIs) policies target cheese imports, their skim milk powder (SMP) intervention program builds stocks that make SMP imports uncompetitive, and the list goes on. The most recent tool being used to maintain the trade imbalance, even throughout the Boeing and Airbus negotiations, appears to be its import certificates.
Already known for some of the longest and most technically complicated food and agricultural import certificates in the world, the EU has now decided to treat the U.S. and other countries as high animal health risk although we have minimal animal diseases. This means the European Commission will now require several additional assurances for dairy imports, such as veterinarian oversight and tracking the location of individual milk cows prior to milking. These kinds of requirements far exceed the World Organization for Animal Health’s recommendations, and neither U.S. dairy producers nor U.S. government officials are positioned to be able to meet the tightened requirements anytime soon.
Arguing about cheese and milk sales might sound trivial, but the supply chains for these products are complex, interwoven, and global. And while the European Commission wants to restrict dairy imports to further protect its producers from external products, the knock-on effects of these requirements implicates a wide range of U.S. exports – anything from processed products with dairy ingredients, to products that are trans-shipped through the EU, to U.S. military shipments bound for U.S. military bases in the EU, and any other global U.S. animal product ingredients that are processed in other countries before being onward exported to the EU. There are even circumstances in which the U.S. is known to be the sole global supplier of certain ingredients used in European processing, which will be cut off should the certificate requirements go forward.
As the European Commission indifferently revises its certificate requirements to levels far beyond what international standard-setting bodies advise, they may not realize or care about the significant economic damage it inflicts on itself and global trading partners. Some conservative estimates indicate at least half a billion dollars in impacted products, many of which are even produced in the EU with U.S. inputs. This is only a glimpse of the damage done, as these estimates are from the EU’s new dairy requirements.
It is time to see a real reset of the transatlantic trade relationship – one that is not just a façade for another European trade barrier that hurts both European and American producers alike. Food and agricultural products may not have originally been part of the Boeing and Airbus dispute, but we are part of it now.
The U.S. government and European Commission must show their food and agricultural stakeholders, who have been battered by this dispute, their earnestness to truly reset the relationship across all sectors. And while much work remains to truly reset the relationship from the U.S. dairy perspective, the most urgent and easy way to start the process is by both governments uniting to resolve the import certificate concerns at the highest levels before finalizing the outstanding Boeing and Airbus retaliatory tariffs in July.
It is time to ensure the EU is negotiating in good faith. Both sides must adopt a more coordinated, strategic, and thoughtful approach towards the global dairy supply chain’s interdependence that clearly already exists for many stakeholders. Without this critical adjustment, U.S. dairy and EU dairy users will not see a reset of transatlantic trade relations through the lifting of the Boeing and Airbus retaliation. Instead, they will see U.S. dairy exports to the EU flatline while the down-chain impact ripples catastrophically across the EU and globally for years to come.
Becky Rasdall is a Vice President, Trade Policy and International Affairs at the International Dairy Foods Association.