* But US and EU agricultural protectionism remains a scandal — harming consumers in the advanced sector with severe food price inflation and farmers in the developing sector whose price-depressed products are blocked from sale to US and EU consumers;
* A US-EU dispute remains over the EU’s discriminatory plans for the US tech giants;
* Meanwhile, a group of Democratic Party moderates, the New Democrat Coalition, is calling for lifting the Section 232 aluminum and steel tariffs on the UK, Japan, and other US allies.
The December 27th, 2021 trade report with L.C.
The US took an important step to ease trade tensions with the EU and to show respect for the WTO. It announced at the December 20th WTO Dispute Settlement Body meeting that it will accept the panel ruling that sided with the EU against US countervailing duties on Spanish ripe olives and allow the panel report to be adopted without appealing it. The DSB then proceeded to adopt the report, ending the dispute.
The US said, according to the WTO, “Although disappointed with some of the panel’s findings, the US has decided to allow the report to be adopted in light of all the circumstances, including the overall quality of the panel report and the US desire to work with the EU to resolve this dispute.”
This was an unanticipated move by the US. Washington had been strongly defending its olive duties, which the EU charged violated the WTO Agreement on Subsidies & Countervailing Measures, the WTO Anti-Dumping Agreement, and the GATT 1994.
Appelate Body still non-functional
Thus the panel ruling was a high-profile loss for the US and another case where the WTO ruled against US unfair trade duties. A string of such rulings – especially at the appellate level – is largely responsible for US anger at the WTO and its dispute settlement system. Accepting the negative panel report was a change.
The ruling was, however, mixed – although it found fault with the US countervailing duties, it didn’t agree with the EU that the anti-dumping duties were WTO-inconsistent. The mixed nature of the ruling made it easier for the US to accept it
Had the US appealed, it would have sent the ruling “into the void” since there isn’t a functioning Appellate Body, and the US hasn’t signed onto the Multi-Party Interim Appeal arbitration arrangement (MPIA), as the EU has, to settle disputes in the AB’s absence.
New trade fight avoided
Thus, an appeal would have opened a new and contentious trade fight with Brussels. That could have been particularly bruising since the recent changes made by the EU to its trade defense system enable it to impose retaliatory duties without WTO authorization in cases where a trading partner lost a WTO panel ruling and appealed it into the void — while blocking the operation of the Appellate Body (a provision aimed at the US).
So this was a climb-down by the Biden administration in a case where it could have engaged in escalation.
The US must now comply with the panel’s recommendations and cut its CVDs, which range up to 27%, though the AD duties, which range up to about 25%, can stay. This is a disappointment to the US olive growers who petitioned for the duties in 2017. Spain is the largest producer of olives and a big competitor in the US market.
The EU had been particularly alarmed when the CVDs were imposed because it feared that this was a first step in the US challenging European agricultural subsidies more generally – that is, it feared a broader challenge to the EU’s Common Agricultural Policy. But the US is also vulnerable to charges that it subsidizes farmers in violation of WTO rules, and years ago it lost a case brought by Brazil against its cotton subsidies.
When will the real issue be addressed?
But the real issue is the unconscionable agricultural protectionism and subsidies practiced by the US and EU – to the harm of developing sector farmers and advanced sector consumers. “Tariffs are the largest source of global economic costs generated from agricultural policy distortions. Efforts to further reduce global market-distorting policies within the WTO have largely stalled,” a USDA publication admits. Advanced sector agricultural protection, by denying developing sector farmers access to what should be their major market, creates a glut of farm products on world markets, drastically lowering prices that developing sector farmers receive.
Do your children complain of the inedible lunches served in public school cafeterias? A “must read” 2018 op ed in the Washington Post tells the back story:
“The tie between farm subsidies and protectionism began during the Great Depression. Both Presidents Herbert Hoover and Franklin D. Roosevelt wanted the government to raise the prices of farm goods to bolster suffering farmers, but they knew high prices would attract more imports from abroad. Their solution was to tie their new subsidies to new restrictions on farm imports.
“In other words, early farm protectionism safeguarded the handouts.
“These government actions turned American farmers, once the most ardent free traders in the world, into an impediment to free trade. During the Depression, farmers began growing crops for low-quality government surplus programs instead of for sale abroad. Farm products plummeted from constituting almost a half of American exports to a quarter in two decades.
“These policies redirected American farm surpluses into infamous ‘government cheese’ or corn meal handouts to schools, depending on what crop was overproduced in any particular year.”
The EU’s Common Agricultural Policy (CAP) is, if anything, even more damaging to European consumers and taxpayers, as well as the African and Asian farmers impeded from access to EU markets. France and Germany are the major beneficiaries. The CAP is a raw deal for the newer EU members from Eastern Europe. Some Polish leaders have now had it with the EU for multiple reasons.
US-EU dispute looms over treatment of US tech giants
As the US and EU move to settle or smooth over an array of long-simmering trade disputes, there is one arena where clashes are likely to intensify – the operations of the US tech giants. The EU has long been aiming to hobble the small group of US companies at the top of current technology, led by Alphabet/Google, Amazon, Apple, Meta/Facebook, and Microsoft.
The European Commission has had limited success in bringing anti-trust, tax, privacy and similar cases before the European Court of Justice. While it appears that the serious fight over digital services taxes (DSTs) was resolved by the recent OECD international tax agreement, the big US companies continue to be concerned.
Last spring’s National Trade Estimates report – USTR’s annual report on foreign trade barriers – had many pages critical of the EU’s “Digital Trade Barriers.” The report warned that a number of EU measures imposed or planned could raise significant barriers to US services exports, that is, barriers to foreign operations of the major online platforms and related companies. These included the GDPR (data protection and privacy), DSA (digital services act), DMA (digital markets act), and TERREG (content regulation).
In Washington, Democratic and Republican administrations and legislators all tend to side with the giant US corporations against the EU in this clash – even as they otherwise may themselves be highly critical of the corporations for their own political and economic reasons, such as wanting to raise their taxes, control their content, and/or curb them for their alleged anti-competitive behavior.
Earlier this month Commerce Secretary Gina Raimondo warned of the EU’s pending DSA and DMA. “We have serious concerns that these proposals will disproportionately impact US-based tech firms and their ability to adequately serve EU customers and uphold security and privacy standards,” she said. But meanwhile a group of eight US tech companies that are not in the top revenue tier are expressing support for the EU’s proposed moves.
New Democrat Coalition calls for Section 232 settlement with allies
Pressure on the Biden administration to reach a settlement with Japan and the UK over the Section 232 steel and aluminum tariffs continues to intensify. On December 21st, fourteen centrist Democrats – members of the moderate New Democrat Coalition and its Trade Task Force, led by its co-chairs Ron Kind (D-WI), Lizzie Fletcher (D-TX), and New Democratic Coalition (NDC) Chair Suzan DelBene (D-WA) – wrote to US Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo urging them to quickly end the Section 232 tariffs on US allies. “Working with the UK, Japan, and other close trading partners to end the harmful tariffs will help lower costs for Americans, reduce inflationary pressures, and provide a path forward for better coordination to address global overcapacity challenges,” the congressmen said.
The letter concludes, “We continue to share your belief that a multilateral approach is needed to counter the market distortions in the steel and aluminum industries stemming mainly from China. The [Trump] go-it-alone approach… through an indiscriminate use of the Section 232 authorities has failed to stem overcapacity… and has weakened our own allies…. Instead, we should build on the progress made with the EU by taking steps toward removing steel and aluminum tariffs on our closest trading partners, while also working in tandem with our allies toward more effectively countering China’s abuses.”
L.C. reports on trade matters for business as well as Founders Broadsheet.
Note to readers from the editor: We regret to announce that this will be the final weekly trade report. While it’s had a small but appreciative audience — whom we deeply thank, along with our invaluable columnist L.C. — the editor’s health is not what it was. Future issues will therefore be occasional, with an article on ancient climate likely the next offering. Subscribers will be duly informed when any new issue becomes available.
Leave a Reply