EU -U.S. Beef Battle Seems Over — Sort Of

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“But in the murky world of trade politics and negotiations things are never what they seem”

The long-festering trade war over beef exports between the European Union and the U.S. seems to be coming to a faltering end – at least for the U.S. An agreement on the issue was recently announced by the two antagonists and that precedent will surely affect any Canadian/EU resolution on the same trade issue.

On the surface it would appear that the EU won the battle, being that hormone-treated beef will still not be allowed to be exported to the EU even under the new agreement. The Americans even agreed to drop their retaliatory tariffs against select European imports.

This issue goes back to 1985 when the EU used hormones as a non-tariff trade barrier to keep North American beef out of their market. The EU lost every WTO trade challenge but still persisted in its import ban even after it had to pay retaliatory tariffs.

One does wonder why the U.S. has seemed to give up the battle after all this time, particularly since Americans rarely lose trade wars. Perhaps the new Obama administration was just trying to curry favour with the EU by giving in on this issue as a sign of goodwill. It would probably be no big deal for Obama to sacrifice cattle producer interests since that sector traditionally voted Republican anyway.

But in the murky world of trade politics and negotiations things are never what they seem. To try to unravel the reasons behind the rationale for this apparent American capitulation, I spoke with Ted Haney of the Canada Beef Export Federation, a long-time master of the mysterious world of international beef trade marketing and scheming.

According to Ted it came down to a simple matter of the EU removing its 20 per cent import tariff and substantially increasing the EU beef import quota for U.S. beef. Apparently in recent years the U.S. has shipped some hormone-free beef into the EU and made money even with a 20 per cent tariff. It would reason that they could ship in even more such

beef and make even more money if the 20 per cent tariff were removed. Those clever Yankee traders may have lost the hormone battle but won the trade war by being able to export ever-increasing tonnages of beef into the EU and make good money. Ted said the Americans haven’t changed their position on hormone beef but this is a way to get around that roadblock.

Ted noted for the EU it was never really a hormone issue but it was a convenient excuse to keep out more competitive North American beef. But the beef market has changed in the EU. Back in 1985 and subsequent years the EU produced mountains of surplus beef under their subsidy schemes. All that has changed and now the EU is a net importer of beef. The need to keep out competition from North America is no longer as important, hence the willingness of the EU to drop its tariff and increase beef import quota tonnages.

But what of Canadian beef exports to the EU? Ted says the U.S. deal sets a precedent and the wheels are in motion for a similar EU deal for Canadian beef. In the past there have also been some hormone-free Canadian beef exports to the EU, so the logistics are understood. Clearly less tariff and more economies of scale would make increased Canadian exports to the EU economically feasible.

By sheer coincidence Canada and the EU have just begun formal discussions on a free trade agreement. One would expect that the beef trade issue would be part of that discussion. Would those discussions result in an even better deal than what the U.S. achieved? Perhaps but not likely. Beef remains the most highly politicized commodity in the world and is used as a lever in trade negotiations. Hence even though the discussions are about a free trade agreement – we have learned the hard way that there never really is free trade when it comes to beef.

So it would seem an intransigent trade issue has been resolved (or soon will be) to everyone’s satisfaction – well sort of. Each side maintains its rigid position on hormones and one side gets to increase exports of a product that other side now needs.

It just took 25 years, that’s all.

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