Washington Insider -- Monday
EU Ag Chief Focuses on Sticky Trade Issues
Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.
Brazil’s Agriculture Minister Pushing for Duty on US EthanolBrazil Agriculture Minister Blairo Maggi has asked Brazil's foreign trade council to impose tariffs on ethanol imports following a surge in shipments from the U.S., an official said, according to Reuters.
Brazil is the main market for U.S. exports of corn ethanol which have swelled in recent months to fill a gap left by falling domestic output, as cane farmers in the South American country diverted more of their crop to making sugar because of high prices. Ethanol imports from the U.S. increased fivefold to a record 720 million liters in the first quarter — worth $363 million, according to official trade data.
Most of that went to ports in northeastern Brazil, where ethanol producers are leading calls for the imposition of a 20 percent tariff. The Agriculture Ministry's secretary for international relations, Odilson Ribeiro, told Reuters the minister sent the request on Wednesday to the foreign trade chamber, known as Camex, that decides on import and export rules. The seven-minister council is due to meet on Wednesday when the sugar and ethanol industry lobby UNICA hopes the tariff will be approved, though the body has no deadline to decide.
At a meeting on Wednesday, Brazil's sugar cane lobby UNICA pressed Maggi for a 16% tariff. The Brazilian Energy Ministry's biofuels director, Miguel de Oliveira, warned this week the U.S. government would retaliate if Brazil resorted to ethanol tariffs.
China Consumer GMO views May Create Challenge for Soyoil Demand
Consumer views in China are shifting against genetically modified organisms, with some noting this is potentially creating a new challenge for the Chinese soybean crushing industry.
While soybeans are crushed for animal feed, the resulting soyoil is sold to consumers. A Neilson study last year found that 70 percent of Chinese consumers limited or avoided at least some foods or ingredients due to GMOs. A report from Reuters said that 36 percent of all cooking oil sold in China is soyoil, three times to next-highest vegoil.
Soyoil prices are down 18 percent so far in 2017 and crushing firms are searching for non-GMO supplies or switching to alternative oilseeds.
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While the government has launched a campaign to assure consumers GMOs are safe, Reuters indicated the spate of food-safety scares over the years has caused Chinese consumers to be skeptical of government assurances.
Washington Insider: EU Ag Chief Focuses on Sticky Trade Issues
While the United States is heavily focused on defining its trade and economic policies, the European Union is already pushing once again its basic demands for any free trade deal. In a visit last week, the EU Ag Commissioner Phil Hogan took aim at what he called “sticky issues that weren't resolved” in the last go-round—and, he is now pushing for assurances that sticky issues will remain on the agenda if talks on a Transatlantic Trade and Investment Partnership (TTIP) are eventually to resume.
Hogan's visit to the U.S. comes against the backdrop of signs that the U.S. administration may be somewhat more open to taking a second look at the TTIP, which the Obama administration had been negotiating with the European Union. The Trump administration in its early days focused on the UK as a potential free trade agreement partner but recent statements by administration officials suggest that it is now looking more seriously at the EU.
“The European Union is 10 times the size of the UK and 10 times the prize,” Hogan said. “After all, size matters when it comes to trade negotiations, he said.
On TTIP, Hogan said the two sides need to clarify “the prospects of actually concluding the outstanding agenda and the work that has to be done.” The EU has to be assured that the items that are outstanding are actually going to remain on the agenda consistent with the mandate that EU governments approved when the talks started, he said.
Still, he said he “welcomes the remarks made by President Trump and [Commerce] Secretary [Wilbur] Ross that they are anxious to do business with the European Union,” Hogan said.
Sensitive agricultural tariffs and differences on geographical indications (GIs) were among the most hotly contested issues in the earlier talks. GIs protect products such as cheese, hams or sausages in the EU and indicate goods with a geographical origin possessing specific qualities and/or a reputation deriving from this location. Examples include Parmigiano-Reggiano and Asiago cheese.
U.S. officials and agricultural industry officials, however, have fought to restrict or eliminate the use of GIs on many products. “Trade is in a state of flux,” Hogan said. “My message is: Europe is open for business,” he said. “At the appropriate time, I expect that we will be able to speak again about the resurrection of the TTIP when the new administration and their team settle in.”
While the TTIP talk has been on hold, the EU has intensified its free-trade talks with several other countries, including Mexico, Japan and the Mercosur group — Argentina, Brazil, Paraguay and Uruguay. In the past, it has been difficult for the EU to impose its hard-bargaining rules on Latin trading partners, so it will be interesting to see how well these are received in the future.
"It's a matter for the U.S. administration to decide when they're ready,” Hogan said. “There is an indication that maybe [President Trump] might be changing his mind on this,” Hogan said. In the meantime, Europe is going to take advantage of other opportunities.
“We're not going to wait around,” he said. “We have gotten a lot more intensive engagement from Japan, Mexico and Mercosur,” Hogan said when asked whether Trump's America first trade policies are opening up opportunities for Europe. “We have to do our business. The United States has to do its business,” he said.
Still, Ross was quoted by the Financial Times as saying it was “logical” to focus on Europe since it is one of the three big economies in addition to Japan and China that are the sources of our trade deficit outside of the NAFTA countries. Ross made the remarks in an interview one day before he net with European Trade Commissioner Cecilia Malmstroem.
A key factor in the trade outlook is the beginning work on a new U.S. farm bill—plus the fact that the EU is also is pursuing a “modernization and simplification” of its agricultural policy. “In 2018, we will be coming to policy conclusions on both sides of the Atlantic in relation to these matters,” he said.
Hogan said that biotechnology – an issue where the U.S. and EU have been deeply at odds – did not come up in the discussions with lawmakers. However, it is likely that the EU will continue to be unwilling to even consider a workable commercial policy on biotech, or to modify its reliance on a “precautionary” principle that enshrines politics over science in the development of commercial relationships.
There have been several attempts to develop a free trade deal with the EU in decades past. Critics now say that the old Mercantilist instincts and their theories that generated conflicts during the 15th to the mid-18th centuries are sufficiently undiminished to undercut almost any interest in an evenhanded, far-reaching agreement. That characteristic that would seem to bode ill for the development of a new, modern TTIP, Washington Insider believes.
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