President Trump’s upcoming trade talks with the European Union have hit an apparent impasse before they have even been scheduled.
Trump administration officials maintain that the talks will include the EU’s agricultural subsidies and barriers to trade. EU officials say their agriculture policies are off the table.
The negotiations are meant to cover a broad swath of issues in addition to agriculture. By drawing such a clear line on the issue, the administration may have limited its ability to maneuver, observers believe.
“Farm state senators and congressmen are adamant that some agriculture has to be part of the deal,” said Gary Hufbauer, senior fellow at the Petersen Institute for International Economics. “This puts a real bind on U.S. Trade Representative Robert Lighthizer.”
Dave Salmonsen, senior director of government relations for the American Farm Bureau Federation, suggested that he was optimistic that the U.S. could still strike a deal with the EU on agriculture matters, arguing that the “overall climate” heading into the talks is “different this time” compared to past talks. The administration has been forceful in its demands, Salmonsen noted, and the EU is at a disadvantage because it is roiled by separate problems, such as the United Kingdom’s struggle to exit the union.
The White House cannot come out of the talks empty-handed, he added. “You’re not going to get a lot of support in Congress for anything that comes down the line unless it addresses these long-standing ag issues,” such as tariffs, barriers to biotech crops, and labeling.
Processed food exports from the U.S. to the EU totaled $3.2 billion last year, making the continent the third-largest market for the industry after Canada and Mexico. Those products face tariffs averaging 14.6 percent, according to the Grocery Manufacturers Association. That figure accounts only for the direct taxes. Navigating EU regulations is far more damaging to the industry’s bottom line.
The EU’s so-called nontariff barriers include regulations regarding the use of pesticide, hormones, and biotechnology, such as genetically modified organisms or products that use them. The U.S. agriculture industry argues that the rules are a means for protecting the EU industries from competition.
Furthermore, the EU prevents nonmember countries from labeling cheeses as, for example, Parmesan or Asiago when they do not come from the specific regions where the cheeses originated, so U.S. products bearing those names cannot be sold in the EU regardless of their quality.
Such policies are squarely in the administration’s sights. In the negotiating objectives issued by the U.S. Trade Representative’s Office in January, the administration said it would “secure comprehensive market access for U.S. agricultural goods in the EU by reducing or eliminating tariffs” and eliminating the nontariff barriers.
Yet EU Trade Commissioner Cecilia Malmstrom told reporters in Washington in January following a meeting with Lighthizer that she would not yield on those points. “We have made very clear agriculture will not be included,” she said. She has repeated the comment on several other occasions.
Her comments may explain why the Trump administration, after months of putting the proposal aside, is now looking again at instituting tariffs on automobiles and auto parts. Those tariffs were shelved last year following an agreement by the U.S. and the EU to launch new talks. The administration may need the threat of those tariffs to wring preliminary concessions out of the EU.
“I think the president’s inclined to do it,” Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters following a meeting with the White House in mid-January.
Jean-Luc Demarty, director general for trade in the European Commission, responded that the EU would hit back with tariffs on $23 billion worth of U.S. goods if the auto tariffs went into effect.
It’s not clear how much the EU can budge on the agriculture issue, as its tariffs and barriers are important to its domestic industries and popular with voters, too. “One of the challenges for both sides is we are not just negotiating with each other but with our own domestic interest groups and legislative bodies that want to see negotiations go a certain way,” said Bryan Riley, trade policy analyst with the National Taxpayers Union.
Hufbauer notes that Malmstrom, despite her title, does not actually have the authority to strike a deal on her own under the EU’s rules. “Before she can negotiate agriculture, Malmstrom would have to have approval from a heavy majority of the member states,” he said. “My guess is that, if she really pushed, she could get some wiggle room, provided that concessions were staged over a very long period — say, 20 years.”
The last time the U.S. and the EU tried to strike a trade deal — the Transatlantic Trade and Investment Partnership talks held during the Obama administration — the talks sputtered out, with agriculture issues seen as a main culprit.
“It’s the same issues and the same reluctance by the EU,” Salmonsen said. “We’re kind of where we always are.”
