Washington Insider-- Thursday

EU Eyes New Tariff Hit On US

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

Sen. Grassley Expects No Additional SRE Actions Ahead of Election

Additional decisions by the Trump administration on waivers under the Renewable Fuel Standard (RFS) are not likely to be made before the November 3 elections, according to Sen. Chuck Grassley, R-Iowa.

The issue of small refinery exemptions (SREs) has gained in focus in the wake of the 10th Circuit Court ruling that in order to qualify for these waivers, refiners had to have requested them on an annual basis since 2011.

"I think the president showed his pro-ethanol credentials by what he said about the 'gap waivers,' and that was a big win for biofuels from President Trump," Grassley said in a call with reporters.

EPA data shows that there are still 17 of the gap-year SRE requests pending for the 2011-2018 compliance years, and now another 33 requests pending for the 2019 and 2020 compliance years combined.

USTR Requests Section 201 Investigation on Blueberries

The Office of the U.S. Trade Representative (USTR) has requested that an investigation on imports of blueberries are hurting U.S. growers be launched by the U.S. International Trade Commission (ITC).

USTR Robert Lighthizer said the request was being made under Section 201 of the Trade Act of 1974 and was among steps the administration is taking to “support American producers of seasonal and perishable agricultural commodities.”

Depending on the outcome, the investigation could result in “safeguard” tariffs being put in place on blueberry imports. The administration held two listening sessions earlier this year relative to fresh produce issues and said in a report issued September 1 that it would request the ITC initiate the Section 201 investigation on blueberries.

Typically, Section 201 investigations are triggered by a domestic industry, as this request by USTR marks only the second time in 25 years that USTR has requested such an investigation.

USTR said that 98% of total U.S. blueberry imports came from five countries since 2014 and that the value of those imports has more than doubled since 2014.

Washington Insider: EU Eyes New Tariff Hit On US

The transatlantic trade conflict isn't showing signs of winding down any time soon – and a new ruling from the World Trade Organization could mean that a fresh round of retaliatory tariffs could jeopardize economic recoveries in both the U.S. and the European Union.

Bloomberg is reporting this week that the WTO gave the EU authority to impose tariffs on $4 billion of U.S. exports over illegal government aid provided to Boeing Co. The EU previously said it would act on the levies immediately to counteract $7.5 billion of tariffs Washington placed on European goods in a separate case involving Toulouse, France-based Airbus SE.

The judgment comes at a delicate moment, with the U.S. presidential election just over a month away and as the U.S. and the EU struggle to recover from coronavirus-induced recessions. The EU tariffs will target coal producers, farmers and fisheries, in addition to aircraft makers, all politically important industries for the President and his Republican allies in Congress.

If the two sides can't resolve the tit-for-tat aircraft dispute, “we will have another tariff fight on our hands, with consumers and producers on both sides caught in the middle and paying the price,” said Simon Lester, an associate director at the Cato Institute.

A key question now is whether the EU will move quickly to trigger its tariffs against the U.S. or await the outcome of the Nov. 3 election. If the EU immediately triggers the new tariffs it could provoke the Trump administration, which claims it has already brought its Boeing subsidies into compliance.

If the EU waits until after the election, there's the possibility that Brussels could find a more amenable negotiating partner in Joe Biden, the Democratic nominee, whose advisers have pledged to seek a swift end to Trump's “artificial trade war” with Europe.

The WTO ruling, about a third of what the EU requested, is the latest twist in the 16-year Boeing-Airbus conflict. And it represents just one of several sources of friction in the trade relationship between the EU and the U.S.

The most recent troubles started in 2018 when the administration invoked national-security considerations to impose tariffs on steel and aluminum from Europe. As a U.S. military ally, the EU was infuriated and promptly retaliated with levies on U.S. goods including iconic brands such as Harley-Davidson Inc. motorcycles and Levi Strauss & Co. jeans.

While both the EU and U.S. say they want to reach a settlement to the aircraft dispute, the Trump administration has rejected all of Brussels' previous overtures.

The sheer number of pending disagreements between the EU and the U.S. means that a dispute could escalate quickly into a broader trade war, Bloomberg says. Earlier this month, the president renewed a threat to hit European cars with levies, a move that would draw immediate retaliation from the bloc.

The Boeing case comes less than a year after the WTO hit the U.S. with a record $7.5 billion retaliation award in response to the EU's illegal subsidies to Airbus SE. The U.S. has since levied 15% duties on Airbus aircraft and 25% tariffs on a range of European consumer exports, such as Scotch and French wine.

A large ruling in the Boeing case would allow the EU to retaliate over the Airbus tariffs and would also give the bloc more leverage in negotiating a settlement to the dispute. It would also allow the EU to capitalize on the delicate political situation in the U.S. as this fall's election campaigns go into full swing.

“The ongoing implementation of tariffs and trade disputes appear to be contributing factors in the slowing of global economic growth, particularly in Europe and China,” St. Louis-based Arch Resources Inc.'s management wrote in its annual report in February.

The proposed tariffs could also target about $700 million worth of U.S. seafood exports to the EU, which would impact Louisiana fishermen represented by Republican House Minority Whip Steve Scalise, R., La.

While it's still possible that the EU and U.S. could reach a negotiated settlement that avoids a tit-for-tat tariff escalation, that prospect looks increasingly remote.

U.S. Trade Representative Robert Lighthizer said he's seeking two things: A pledge from Europe to end its subsidies to Airbus and monetary compensation. “It is going to require commitments not to do it again but also paying back some element of the subsidy,” Lighthizer said in a Chatham House event in July.

In July the governments of France and Spain revised the terms of their launch aid loans to Airbus to make them compatible with WTO rules. The Trump administration has already rejected the move as insufficient and alleged the EU's subsidy regime remains illegal.

If the U.S. and the EU are unable to reach a settlement, the bloc's newly designated trade chief has pledged to resort to targeted levies. “We will if we will have to, but our preference would be to have an agreement with the U.S. in between where they also withdraw their tariffs,” EU trade chief Valdis Dombrovskis told Bloomberg earlier this month.

So, we will see. While this dispute certainly is likely to attract U.S. attention there seems to be no real willingness to move toward settlement. Because these trade policy wars often seem to have the potential to spread quickly and widely, the policies proposed and implemented should be watched closely as they emerge, Washington Insider believes.

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