Washington Insider-- Wednesday

EU to Impose New Tariffs on US Products

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

Rep. Peterson Puts Support Behind Davis to Head Ag Panel

House Ag Committee Chairman Collin Peterson, D-Minn., defeated in his bid for another term in office, has thrown his support behind Rep. David Scott, D-Ga., to be the next leader of the panel.

Noting he firmly believes in the seniority system for choosing the leaders of committees, Peterson said in a letter to Davis, “You have remained a permanent member of the Ag Committee since coming to Congress, where you have worked tirelessly to protect our nutrition program safety net, fought for our 1890 Institutions, and other HBCUs, ensuring opportunities and assistance for minority students who want to get involved in agriculture-related fields, and make sure that there is an adequate safety net for our specialty crop, commodity crop and livestock producers.”

While noting that the two “haven't always agreed on every issue,” Peterson said they have been able to work together “to find a path forward on those issues over the years.”

Peterson said he followed Rep. Kika de la Garza, D-Texas, the first Hispanic panel leader and “it will be another important milestone to have the first African-American Chair.”

Rep. Jim Costa, D-Calif., is also seeking support of Democratic members of the panel to become the Chair.

RFS, SRE Decisions Still Pending

EPA's initial proposed levels for the Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) landed at the Office of Management and Budget (OMB) in mid-May and they are still showing as being under review.

EPA Administrator Andrew Wheeler had signaled the proposed levels were being revised in the wake of the COVID-19 situation. That discussion is still ongoing, Wheeler told AgriTalk November 2.

“The problem is trying to figure out what the markets are going to do,” Wheeler said, including what the Department of Energy projects on driving miles. EPA and DOE are looking at this year's data, he noted, pointing out that with COVID it is difficult to determine where levels should be as the agency wants to set “realistic numbers,” Wheeler said, noting most of the focus is on advanced biofuel levels. “That's an active conversation between us and the Department of Energy, but we're looking at all government data, trying to figure out what the right numbers are.”

He largely deflected a question on the situation for 2022, the last year covered by the current RFS authority, stating, “We're trying to make sure we get the 2021 [RFS levels] set in time.” But Wheeler pointed out relative to 2022 that they have not really started working on that yet but did note that actions by California to go with all-electric vehicles are issues that have to be considered ahead.

The reference to getting the 2021 RFS levels set in time is relative to the statutory deadline of finalizing the levels by November 30. That has been a focal point by the administration of meeting that deadline in past years.

As for the small refinery exemptions (SREs) that have been a hot-button issue, Wheeler signaled DOE has not yet sent back their recommendations on the 17 remaining gap-year requests and EPA cannot make decisions on those. Plus, the Supreme Court has been asked to assess the 10th Circuit Court decision and Wheeler signaled he did not want to make decisions only to have the court order a different decision.


Washington Insider: EU to Impose New Tariffs on US Products

The New York Times – and others – are reporting this week that the European Union said Monday that it would begin imposing sweeping tariffs on around $4 billion worth of American aircraft, food, drinks and other products beginning Tuesday. The action was authorized by the World Trade Organization last month in retaliation for “years of illegal subsidies given to Boeing.”

The decision, which stems from a 16-year-old dispute, comes after the U.S. administration last year decided to impose tariffs on as much as $7.5 billion in European exports annually in retaliation for illegal subsidies given to the European airplane maker Airbus, Boeing's main rival.

European officials, however, say they are hoping for a settlement between the two countries that would end to the tit-for-tat tariffs once and for all, perhaps even before President Donald Trump leaves office on Jan. 20 to make way for president-elect Joe Biden, according to a European Union official.

The European tariffs include a 15 percent tax on large civilian aircraft and 25 percent on products including chocolate, frozen orange juice, tomato ketchup, rum and vodka, video game consoles and exercise equipment. Last year, the United States imposed tariffs on European planes, wine, cheese and other items.

It remains to be seen if the European tariffs will encourage the United States to negotiate — or if they further inflame a trans-Atlantic trade spat where the Trump administration has vowed not to bend. Last month, Trump threatened retaliation if the European Union went ahead with its levies.

“If they strike back, then we'll strike back harder than they'll strike. They don't want to do it,” Mr. Trump told reporters.

In a statement Monday afternoon, Robert Lighthizer, the U.S. Trade Representative, said the U.S. “is disappointed” by the European decision.

“The alleged subsidy to Boeing was repealed seven months ago,” Lighthizer said, referring to a Washington State tax break that was rescinded last spring. “The EU has long proclaimed its commitment to following WTO rules, but today's announcement shows they do so only when convenient to them.”

Boeing and Airbus have taken steps to remove subsidies and fiscal support that had been deemed illegal by the WTO, opening the door to both sides entering into a negotiated settlement quickly, the Times said.

Boeing said that it was “disappointing and surprising” that the European Union had decided to impose the tariffs, saying that the burden would eventually fall on Europe-based workers, suppliers and customers as well. “Instead of escalating this any further, we hope that Airbus and the EU will take meaningful action to resolve this trade dispute,” the statement said.

At a media briefing in Brussels, Valdis Dombrovskis, executive vice president of the European Commission, called on the United States to come to the table and urged both sides to “drop existing countermeasures with immediate effect so we can quickly put this issue behind us.”

Removing the tariffs “would represent a strong win-win for both sides,” he said, and Peter Altmaier, Germany's federal minister for economic affairs, added that Europe was “ready at any time to talk to the existing or new U.S. administration and withdraw” the tariffs.

Still, the Times concludes that any discussions, should they take place, may not be easy. Both sides say they want to avoid inflaming a trade war, but a stumbling point is a standing demand by the Trump administration that Europe repay previous subsidies received by Airbus, the European official said. The WTO rulings require only that companies halt current illegal financial support – not repay previous subsidies.

And it was not immediately clear whether the Trump administration would be interested in negotiating a settlement before Biden takes office.

In a strongly worded statement last month, Lighthizer argued that the European Union had no lawful basis to impose the tariffs and that any move by Europe to do so would “force a U.S. response,” potentially signaling that the United States could impose more tariffs in an attempt to compel the European Union to bend. He added that the United States was determined to find a resolution to the dispute, but that it was still waiting for the European Union to provide a response to a previous U.S. proposal.

Chris Swonger, the president of the Distilled Spirits Council of the United States, said the tariffs would be a “major blow to the U.S. spirits industry,” which is struggling because of the coronavirus pandemic. The European Union already imposed levies on American whiskey in 2018 as retaliation for Mr. Trump's tariffs on foreign steel and aluminum.

Jim Mulhern, president and CEO of the National Milk Producers Federation, said Europe has often used unjustified trade tactics to limit competition from U.S. agriculture, including dairy. Mulhern delved into the "egregious" tactic of geographical indicators that Europe uses to restrict U.S. cheeses.

“As the U.S. works to hold Europe accountable to its WTO obligations, U.S. retaliatory tariffs against EU dairy products continue to play a key role in bringing Europe to the negotiating table and compelling them to fulfill their trade commitments," Mulhern said. "The EU's restrictive trade policies that have resulted in a one-way flow of agriculture trade, and in particular dairy trade, to Europe is something that both the current and future Administrations need to keep in mind. In fact, the trade deficit between the EU and U.S. continues to widen as the EU uses unjustified trade tactics to erode U.S. market access and limit fair competition."

The United States and Europe have been arguing for more than a decade about the subsidies and other kinds of special financing that the European Union has given Airbus and that the United States has given Boeing.

Both sides have argued that the support amounted to illegal financial aid that allowed each plane maker to sell its products at unfairly low prices around the world, stifling competition and sales.

So, we will see. Observers suggest that the new U.S. administration will look more actively to new international markets, but that such a shift will take time to define and impose. In the meantime, the transition itself appears to be increasingly difficult and slow-moving. Clearly, the shifts involved are likely to be highly important to producers and should be watched closely as they proceed, Washington Insider believes.

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