US Exporters Upbeat on Trade Talks Despite Conflicts With EU

Farmer John Duffy loads soybeans from his grain bin onto a truck before taking them to a grain elevator in Dwight, Illinois, on June 13, 2018. Scott Olson/Getty Images

WASHINGTON—The United States and the European Union (EU) released their negotiating mandates last month for their bilateral trade talks. Despite sharp differences in goals, both sides have made significant progress in reducing trade barriers in soybeans and energy, boosting hopes for a trade deal this year.

President Donald Trump announced in July last year a “new phase in the relationship” between Washington and Brussels, by striking an agreement “to work together toward zero tariffs, zero nontariff barriers, and zero subsidies on non-auto industrial goods.”

As part of the agreement, the EU promised to import more soybeans and liquefied natural gas (LNG) from the United States. And the EU has started delivering on its commitments.

Since the July 2018 meeting between Trump and European Commission President Jean-Claude Juncker, EU imports of U.S. soybeans has doubled, with volumes jumping to 5.2 million tons from 2.3 million tons during the same period last year.

The United States has become Europe’s main soybean supplier, accounting for 75 percent of EU soybean imports. And recently the European Commission removed another trade barrier by authorizing the use of U.S. soybeans for biofuels.

The EU is a large biodiesel market, and that will boost U.S. soybean exports even further, according to the Iowa Soybean Association.

The United States has been exporting soybeans to the EU, which is mostly used as animal feed. However, the soybean oil byproduct had to be shipped back because Europe didn’t recognize U.S. soybeans for use in biofuels. The new rule has changed that.

Iowa Gov. Kim Reynolds welcomed the EU’s decision, saying that it may serve as a catalyst for successful completion of the trade talks.

“This is great news for our soybean farmers by adding stability with the expansion of targeted global markets like the European Union,” she said in a statement.

Soybeans ranked as the United States’ top agricultural export in 2017. And Iowa is the second largest state in terms of agricultural exports.

“So, when an agreement like this one is approved, it means more jobs and economic growth for our state,” Reynolds said.

EU’s decision is valid until July 1, 2021, but could extend beyond that date, the European Commission said in a statement.

Europe also increased LNG imports from the United States. Since the meeting between Trump and Juncker in July, U.S. LNG exports into Europe have increased by 52 percent, to a total of 4.2 billion cubic meters, according to a report by European Commission.

“We will work to double the transatlantic trade of LNG to at least 8 billion of cubic meters over the next three years,” stated the report.

Agriculture Remains a Sticking Point

The European Commission released its negotiating mandate for its trade talks with the United States on Jan. 18. And a few days before that, the U.S. Trade Representatives (USTR) released the Trump administration’s negotiating objectives for the talks, which marked a sharp contrast with the EU’s mandate. One of the biggest differences between the United States and the EU is agriculture.

According to the document released by the USTR, Washington wants to “secure comprehensive market access for U.S. agricultural goods in the EU by reducing or eliminating tariffs.” It also calls for eliminating “non-tariff barriers that discriminate against U.S. agricultural goods.”

However, the mandate the European Commission received from member states says it would negotiate for a trade agreement that “strictly” focuses on “the removal of tariffs on industrial goods, excluding agricultural products.”

The European Commission has got another mandate to do a second agreement with Washington that would help remove “non-tariff barriers, by making it easier for companies to prove their products meet technical requirements on both sides of the Atlantic.”

It also stresses that the mandate implements the joint statement agreed by Trump and Juncker in July.

“Agriculture will always be a big concern for the United States,” said Marie Kasperek, deputy director of global business and economics program at Atlantic Council.

However, “the EU has already said for so long that agriculture is off the table for them, that it’s a non-starter,” she said.

If Washington insists on including agriculture, she thinks, the negotiations will just die before they even start.

“The United States is currently trying to push its agriculture to China. So that might be a solution from the U.S. side,” she said.