TRADE WARS AND SUPPORT TO FARMERS – TWO DIFFERENT TALES ACCROS THE ATLANTIC

Posted on - Posted by Joao Pacheco

We have written before on the issue, underlining the difference of treatment between farmers in the US and the EU. In the US farmers were twice compensated for the losses that accrue from the trade war with China. In the EU farmers are left on their own after the US retaliation on the Airbus subsidies case, where whereas they were not part and parcel of the dispute, they were still the main target of the sanctions.

Now it is becoming clear the impact of the US compensation packages are having on US farmers. According to a host of economic analysis the US Administration has overcompensated farmers by about the double of the losses incurred. The Administration does not actually dispute that fact, they explain instead that they have made their calculations on gross rather than net trade losses, which miss the fact that the US found to a certain extent alternatives to the losses in the Chinese market.

The result of these compensation packages on farmers’ incomes is big. Across the US, farm income is expected to rise more than 10% this year, and 40% of that income will come from Government subsidies (both from the Farm Bill and the trade compensation packages). It is true that Presidential elections are coming in the US, but the fact is that farmers are looked after when they face collateral damage from trade disputes.

Meanwhile in the EU farmers are facing an expected drop in the CAP subsidies, and total inaction from the Commission to prop up the resilience of the sector.

The US trade sanctions following the Airbus case are already heavily impacting dairy and wine exports to the US. Unfortunately as late as last week the US opened up an internal consultation on whether to increase the additional tariffs to 100% from 25%, and on whether to enlarge the scope of the sanctions including to other agriculture products. Are in particular targeted cheeses (those not yet impacted), bulk olive oil and bulk wine, sparkling wines and whiskies, hams and pasta.

This potentially new round of sanctions is within the US WTO rights, as the first round was well under the maximum amount of additional duties authorized (7.5 bn $), and might be a warning shot against the determination of the EU to apply its own round of sanctions following an expected WTO determination against Boeing subsidies. If both sides do not find an agreement on the aviation subsidies the future is bleak for our exports to the US. Dairy, wine, olive oil will likely be completely blocked, along with other products.

I haven’t even mentioned here the threats to France from the GAFA taxation issue, nor the automotive dispute Damocles sword still hanging over EU-US trade.

Will the Commission go on looking the other way whilst trade sanctions pour on the agriculture sector? Will the gap on the way farmers are treated across the Atlantic go on getting larger?