When standards replace subsidies: EU agricultural regulations, protectionism and trade
This article is a live version of our trade secret newsletter.registered Here Send the newsletter directly to your inbox every Monday to Thursday
Hello Brussels, after the decision of the European Union, the trade dispute between the United States and its allies is once again temporarily truce No increase in tariffs In retaliation for the U.S. tariffs on steel and aluminum.Yesterday Washington announced that but Pause now, Imposes digital service tax (DST) tariffs on six countries-Austria, India, Italy, Spain, Turkey, and the United Kingdom. (We wrote this case Here.) Long live, we thought, although it is better to file a lawsuit against the World Trade Organization over DST, rather than act unilaterally.In any case, just like the EU-U.S. treats steel/aluminum and Airbus/Boeing, We now have the opportunity to see how well the negotiation line can be done, in this case, through the broad agreement reached by the OECD on international taxation.Before the G7 finance ministers’ meeting this weekend, there are some promising news in this regard: the EU has already New rules agreed Force multinational companies to disclose where their profits are booked and where they are taxed.
Today’s main article takes a step back from the Brussels debate on the EU’s Common Agricultural Policy Budget and points out that although CAP subsidies have not been a major issue in global trade in the past, the EU agricultural regulations are even more so. Concession waters Focus on trade forecasts for the remainder of 2021.
The cost of green global agriculture in Europe
Not long ago, the renegotiation of the common agricultural policy became the biggest event in Brussels, the Champions League final of the European bureaucracy competition. The result is not only in line with domestic interests. CAP’s price support program, including quotas, large-scale official interventions, and export subsidies, dumped surplus food abroad and distorted the global market.
Okay, the latest CAP talk anchor For another week (don’t panic, they will be back soon), it can be exaggerated to say that the whole world is shaking, celebrating or even noticing. The EU’s agricultural policy is still of global significance, but it is a good example of how nerds like us have been attacking: Trade is now more about standards and regulations than tariffs and subsidies.
If you are worried that the traditional river of cash from taxpayers and consumers to European farmers is drying up, don’t worry. It is still flowing happily, plus high tariffs to discourage low-cost imports.But in the past few decades, one deservedly lost Big case In the World Trade Organization, the EU has done a lot to reduce the distortion of trade caused by these subsidies.
The EU now pays “single farm payments” that are largely unrelated to production—the “green boxes” in the WTO, rather than trade-distorting blue boxes and yellow boxes—instead, often to satisfy the environment and other valuables Goal. Today, the EU generally uses less than 10% WTO allowance Trade-distorting subsidies are in sharp contrast to the United States, which is very likely Far beyond its limits Thanks to Donald Trump for his plan to save American farmers from the consequences of his own stupid trade policy.
So, is the European Union (which happens to be a net food exporter) now a champion of agricultural free trade? If you ask frustrated U.S. agricultural exporters, you won’t. For decades, they have been complaining about EU food safety rules (genetically modified organisms, hormone beef, usually) banning their products, and now a bigger threat has surfaced.
Related to its Green New Deal, the EU is proposing a “From farm to table” strategy Its purpose is to promote practices that benefit the environment, climate, and animal welfare, including restrictions on pesticides, fertilizers, and antibiotics in animal feed. This is the trade perspective: considering that the additional costs will be detrimental to European agriculture and encouraging the transfer of allegedly inhumane and chemically saturated production to foreign countries, there is more and more movement driven by the environment and consumers. activist with European Parliament, Requiring all imported agricultural products to be produced in accordance with EU agricultural standards.
As discussed in trade secrets last week Through the Anglo-Australia agreement, this goes beyond the “sanitary and phytosanitary” standards aimed at food safety, and attempts to export the EU’s “process and production methods” (PPM) to global agriculture. This is quite a big ambition—either a bold moral movement or a protectionist neocolonial imposing, depending on your position.The United States already charges fees from farm to fork like a hormonal bull at the door, claiming to adopt these standards globally Food prices may almost double In the world, it may be slightly exaggerated.
The widespread use of PPM requirements may expose the European Union to the widespread impact of WTO litigation. The European Parliament’s proposal was downgraded to aspiration after being opposed by the European Commission and member states, but in general, it seemed to be the way forward for agricultural policy.
There are some interesting political cross-flows here.This is very common in free trade types (because we have Mentioned before) Claims that European farmers and trade skeptics have formed an evil protectionist alliance. In this case, things are not that simple. Copa-Cogeca, the largest association of European farmers, is satisfied with technologies that most environmental activists oppose (such as certain genetically modified organisms) and is skeptical of many “farm to table”.
What Copa-Cogeca does agree with the type of green is that if their members have to bear the extra cost, they must level the international playing field. But they are more worried that the internationalization of EU regulations may cause resistance and potential lawsuits from trading partners. “We will have to implement this in an already open trading environment,” Pekka Pesonen, secretary general of the association, told Trade Secrets. “We are already trading with these people, and we don’t want them to just copy and paste our new rules. We will have a fight.”
So that’s it. CAP budget negotiations will be completed in some way. But the real action of trade lies in the rules and regulations that follow. The EU can adopt any agricultural standard it wants, but it has to bear the cost, and now that the bureaucratic battle is over, who will eventually pay the price.
We recently have some important data on world trade. The data shows that the surge in transaction volume that began in the second half of last year has continued until the first three months of this year. But what will happen in the rest of the year?
Joanna Konings, senior economist at ING Bank, expects transaction volumes to remain strong. Her expectations are listed in the dotted line below, indicating that trade growth has exceeded the trend from 2016 to 2019. “With the opening up of the economy and the easing of congestion, trade will still be boosted this year despite increased costs and barriers. Although services are still mainly affected by the blockade, there are also imported goods involved in the hotel industry,” Cornings said.
However, after this year, she is less optimistic and expects the growth to fall back to the relatively low level from 2016 to 2019. Chain, China continues to walk on the road of improving manufacturing capacity. When companies face higher household purchase costs, backflow will not happen,” she said. “But in the long run, the reality of new trade barriers may mean that when uncertainty and costs increase significantly, trade cannot be achieved in 2016. Improved on the basis of relatively weak growth in -19. ” Claire Jones
Hosuk Lee-Makiyama of ECIPE says the U.S. and Japan are trying to challenge China dominates 5G By subsidizing “Open RAN” technology Risks make 5G networks fall apart.
On a related topic, the global Boycott Huawei 5G provides new impetus to Beijing’s goal of improving domestic technological capabilities. According to Alexander Brown In the Merics think tank.
Newest report From the Global Trade Alert project stated that Weak FDI Even before it fell sharply in the pandemic, because many governments have made the business environment less welcoming of companies from abroad.
Britain and Australia are Try to finalize Agree in principle Bilateral agreement The two countries reached consensus in the week after the G7 summit in the UK from June 11th to 13th.
Compared with other countries, US ports are slow and inefficient, causing duplication Retention in the supply chainAccording to the vice president of maritime and trade at information provider IHS Markit, Written in the Wall Street Journal.
The United States is working to reduce Lithium imports, Widely used in the manufacture of electric vehicles, but increase domestic production Challenged (right now).
Finally, Nikkei Asia takes a look at what makes TAiwan Semiconductor Manufacturing Co., Ltd., The world’s largest chip maker, went to Arizona, where it broke ground $12 billion in financing this week. ($, Nikkei Index)