Washington Insider-- Thursday

WTO to Allow More Tariffs on US Products

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

Pilgrim's Pride Announces Plea Agreement In Broiler/Chicken Sales Case

Pilgrim's Pride announced late Tuesday that they have entered into a plea agreement with the Department of Justice Antitrust Division relative to the investigation of U.S. poultry companies regarding the sale of broiler chicken products.

Pilgrim's Pride agreed to a fine of $110.5 million for “restraint of competition that affected three contracts for the sale of chicken products to one customer in the United States,” the firm said in a release announcing the agreement. Pilgrim's Pride would not face any further charges in the matter provided it complies with the terms and provisions of the agreement.

“Pilgrim's is committed to fair and honest competition in compliance with U.S. antitrust laws,” said Fabio Sandri, Pilgrim's CEO. “We are encouraged that today's agreement concludes the Antitrust Division's investigation into Pilgrim's, providing certainty regarding this matter to our team members, suppliers, customers and shareholders.”

FSA Reminds Producers ARC/PLC Signup for 2021 Started This Week

Signup for the Ag Risk Coverage (ARC) and Price Loss Coverage (PLC) programs for the 2021 crop year started Tuesday, October, 13, USDA's Farm Service Agency said.

Signup for the programs ends March 15, 2021.

Options include electing coverage and enrolling in crop-by-crop ARC-Count or PLC, or the ARC-Individual for the entire farm. Election changes for 2021 are optional, FSA noted.

For the 2022 and 2023 crop years, producers will be able to make a new election during those signups.

While enrollment started for the 2021 ARC/PLC programs, USDA has begun processing payments under the ARC-County and PLC program on covered commodities that triggered payments for 2019 crops. Those payments total $5 billion.

Under PLC, payments were triggered for the following commodities: barley, canola, chickpeas (small and large), corn, dry peas, grain sorghum, lentils, peanuts, seed cotton and wheat. Oats and soybeans did not trigger payments for the 2019 crop year.


Washington Insider: WTO to Allow More Tariffs on US Products

The New York Times and others are reporting this week that the WTO on Tuesday gave the European Union permission to impose tariffs on $4 billion worth of American products annually. The award is in retaliation for illegal subsidies given to the U.S. plane maker Boeing. The Times said the decision “could result in levies on American airplanes, agricultural products and other goods.”

The finding, which stems from a 16-year fight, follows a parallel case that the United States brought against Europe over subsidies to its largest plane maker, Airbus. Last year, the U.S. imposed tariffs on European planes, wine, cheese and other products with WTO permission. The decision affected up to $7.5 billion of European exports annually.

It remains to be seen whether the new tariffs will persuade the United States and Europe to come to a negotiated settlement – or merely inflame relations and result in higher costs on businesses and consumers on both sides of the Atlantic, the Times said.

The European Union has repeatedly appealed to the United States to remove its tariffs, but American officials say Europe has not taken the necessary actions to stop its Airbus subsidies.

The tariffs will not go into effect immediately. The EU needs to request authorization from the WTO to actually impose the levies, which it can do at an Oct. 26 meeting or it could request an earlier session which would require 10 days' notice. The European Commission last year issued a preliminary list of American products that it could choose to tax, including aircraft, chemicals, citrus fruit, frozen fish and ketchup.

The tariffs, when American companies are reeling from the coronavirus pandemic, would be especially painful for Boeing, which is already struggling from a pair of devastating crises. Both Boeing and Airbus had earlier announced plans to cut more than 10 percent of its global work force amid a steep decline in travel, which forced airlines to delay and scale back plans to buy planes. Both Boeing and Airbus plan to cut more than 30,000 jobs in all.

Boeing also is still struggling with fallout from the 737 Max, a star of the company's fleet, which has been grounded worldwide since March 2019 after two crashes killed 346 people. In January, the company estimated that the grounding, which could be lifted in the coming months, would cost it more than $18 billion. The company is also contending with quality concerns related to the 787 Dreamliner, a wide-body jet designed for long-distance flights.

So far this year, Boeing customers have canceled 438 orders for the Max, with hundreds more orders removed from its books because of the low likelihood that they will be fulfilled, the company said Tuesday. After accounting for new sales and cancellations, Boeing has lost a net 381 orders for the year.

The WTO decision on Tuesday focused on a Washington State tax break provided to Boeing and worth about $100 million a year. Lawmakers there repealed the tax break this year with Boeing's support, but the WTO said the subsidy had nevertheless harmed Airbus between 2012 and 2015. Airbus contends that Boeing continues to receive other preferential tax treatment from the state.

“Airbus did not start this dispute, and we do not wish to continue the harm to the customers and suppliers of the aviation industry and to all other sectors impacted,” Guillaume Faury, the company's chief executive, said. “It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic.”

Boeing said it was “disappointed” that Airbus and the European Union had pursued the tariffs even after the tax break's repeal – but said the company hoped that both would focus “on good-faith efforts to resolve this long-running dispute.” The European Union had asked the WTO to authorize more than $8.5 billion in annual tariffs, while the United States said they should not exceed $412 million.

U.S. Trade Representative Robert Lighthizer said “the United States is determined to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to U.S. aerospace workers and businesses.”

Valdis Dombrovskis, the European Commissioner for Trade, said that he has been “engaging with my American counterpart, Ambassador Lighthizer, and it is my hope that the U.S. will now drop the tariffs imposed on EU exports last year,” he said. “If it does not happen, we will be forced to exercise our rights and impose similar tariffs.”

Ole Moehr, an associate director at the Atlantic Council's GeoEconomics Center, said that, in the short run, there were likely to be more barriers to trade than before, but that the ruling might ultimately “open the door for a trans-Atlantic trade détente.”

“Both sides are waiting until the election is settled to re-engage and depending on the outcome we could see a ratcheting up of tensions before any potential deepening of trade ties,” Moehr said. “The Airbus-Boeing dispute is one of the keys to the entire trade relationship and today's decision, combined with the recession triggered by the pandemic, may change the calculus over the long term.”

So, we will see. These very large trade disputes have the potential to affect trade far beyond the products that are the immediate focus – and, once again, both sides are deeply dug in regarding this particular fight, as they are on others. The U.S.-EU trade relationship will likely involve additional conflicts producers should watch closely as they emerge in the coming months, Washington Insider believes.

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