Washington Insider-- Thursday

US-EU Trade Talks Stagnant, Failing

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Dept. of Justice Files Suit to Block Deere & Co. Purchase of Monsanto Unit

U.S. Dept. of Justice (DOJ) antitrust officials have filed a lawsuit to block the purchase by Deere & Co. of Monsanto's Precision Planting LLC equipment business, charging the purchase would eliminate competition and raise costs for farmers.

The transaction would combine the only two major US providers of high-speed precision planting systems used by farmers, DOJ said, giving the company control of close to 90% of the U.S. market.

"If this deal were allowed to proceed, Deere would dominate the market for high-speed precision planting systems and be able to raise prices and slow innovation at the expense of American farmers who rely on these systems,” said Renata Hesse, the head of the antitrust division.

DOJ further noted the technology will "become the industry standard in the coming years," replacing conventional planters.

Deere and The Climate Corporation, a subsidiary of Monsanto Company, announced in November they had signed a definitive agreement for Deere to acquire the Precision Planting LLC equipment business, and the companies cooperated fully with DOJ’s antitrust review.

In the wake of the suit, the companies said they would fight to keep the deal moving forward. "DOJ’s allegations about the competitive impacts of the transaction are misguided and the companies intend to defend the transaction vigorously against those allegations," the firms said in a release. "Deere has long been focused on helping American farmers become more efficient and productive so that they can remain globally competitive. The proposed acquisition benefits farmers by accelerating the development and delivery of new precision equipment solutions that help farmers increase yield and productivity."

Japan Plans Gov't Insurance for Farmers Affected by TPP

Government-sponsored insurance to protect Japanese farmers against price declines caused by tariff liberalization under the Trans-Pacific Partnership (TPP) pact is being drafted by the Japanese administration, according to a government source cited by Bloomberg BNA.

The policy is being crafted by Prime Minister Shinzo Abe's government and his ruling Liberal Democratic Party (LDP). It would be submitted as legislation during the next regular Diet (parliament) session set for early 2017, the source told Bloomberg BNA. The policy is still in its infancy, but details should be ironed out by the end of the year, the source added.

The new policy would cover all agricultural products and would be an expansion of the existing insurance policy that protects farmers against crop losses due to typhoons, flooding and other natural disasters. TPP insurance would cover roughly 80% of farmers’ income against reductions in crop prices that could occur once tariff reductions kick in under TPP, the source said.

Many Japanese farmers oppose TPP's treatment of agriculture on the belief it will devastate Japan's agricultural sector. At issue are lower tariffs under TPP, especially on "sensitive products" like beef, pork, rice, wheat, dairy products and sugar. It is likely tariffs would be cut further 10 years after TPP implementation.

The new policy is a reflection that Abe is keen not to further alienate the agricultural sector, especially after the LDP lost seats in predominantly agricultural areas in a July election due in part because of wariness over TPP.

Washington Insider: US-EU Trade Talks Stagnant, Failing

The Associated Press is reporting that the French government has specifically called for an end to talks with the United States on forging a sweeping trade deal. It calls the proposals being considered “too friendly to U.S. businesses.”

The charge from French President Francois Hollande surprised few observers. He called the current proposals unbalanced and said they cannot be completed before President Barack Obama leaves office. In what had been billed as a diplomatic speech, Hollande argued that the discussions “cannot result in an agreement by the end of the year.” He also noted that they have bogged down and charged that European Union (EU) positions “have not been respected and the imbalance is obvious."

The Hollande commentary is only the latest blow to the proposed free-trade zone that would encompass half the world's economy, Bloomberg said. There's resistance to any significant trade concessions in terms of either economic or social policies on both sides of the Atlantic. And, the talks have been are complicated by both Britain's planned exit from the 28-nation EU and upcoming presidential elections in the United States and France.

Hollande has not been the only critic of the negotiations. On Sunday, German Economy Minister Sigmar Gabriel said "in my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it."

Politics have been central aspect of the talks from the beginning. The EU has far more interventionist policies than does the United States, and has blocked out large areas of those that are “off the table” including the “precautionary principle” that allows the development of trade policies without any base in science.

Hollande's trade chief, Matthias Fekl, recently accused the American side of offering just "crumbs." He said earlier Tuesday that France will ask the European Commission at a meeting in Slovakia next month to halt talks on the Trans-Atlantic Trade and Investment Partnership.

But, as usual, the EU wants to assess blame for the stagnation of the talks to someone else. Fekl France's secretary of state for foreign trade, told the press that talks could resume if wider EU-U.S. trade relations improved. "We need a clear, clean, definitive halt to negotiations to be able to resume on a good basis," Fekl said on RMC radio, without elaborating on what conditions would be necessary for new talks.

At the same time as French politicians are downplaying the chances of success in the talks, others are disagreeing, Bloomberg says. Chief EU negotiator Ignacio Garcia Bercero played down Gabriel's talk of failure. And in Washington, Matt McAlvanah, Assistant U.S. Trade Representative for Public Affairs, insisted that the "negotiations are in fact making steady progress."

Well, it may be true that there are still reasonable chances for a U.S.-EU deal, but the odds look both negative and very long. The politics of isolationism in the U.S. in this year’s campaign are unusually strong on both sides of the political aisle—although business groups are still pushing hard for Trans-Pacific Partnership (TPP) approval this year.

But, as the UK works to negotiate its exit from the EU, the mood on the continent against concessions seems to be darkening. And, since the EU has much more protectionist policies than does the United States, it probably will be necessary for them to make more concessions than the US to seal an agreement—a development that seems increasingly unlikely.

Thus, while there are still those whistling by the trade graveyard, the outlook for an Atlantic free trade agreement seems both very gloomy and becoming gloomier, a trend producers should watch carefully as it evolves, Washington Insider believes.

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