Anyone hoping for a quick U.S.-EU trade deal should start adjusting their expectations for a somewhat slower pace, perhaps “glacial.” The negotiations concerning negotiations for a new trade agreement – attempting to reach agreement on what will be discussed in the negotiations, principally which categories of product and service should be included – are off to a good contradictory start, as President Trump demands that the negotiations must include agricultural goods, while EU leaders are ruling them out. If previous experience is anything to go by, both sides will issue warnings that the other side’s stance threatens to derail the whole deal – that’s negotiating! – until some sort of compromise unsatisfactory to both sides is reached.
- Food and cash crops like cotton are big business for both the U.S. and EU. American agricultural exports came to $143.4 billion in 2018, representing 8.6% of total goods exports, while EU agricultural exports came to $161.6 billion, or 7% of total EU goods exports.
- However the trade is skewed in favor of Europe: where the U.S. took $25.9 billion or 16% of EU agricultural exports in 2018, the EU took just $13.5 billion of U.S. agricultural exports, 9.4% of the total, leaving a U.S. trade deficit of $12.4 billion in the category.
- American trade representatives blame the agricultural trade deficit restrictions and subsidies imposed by the EU’s common agricultural policy (CAP), most of them intended to protect national agricultural industries.
- The CAP is also blamed for hurting farmers in developing countries, for example in Africa, by effectively blocking their low-cost exports from reaching European consumers.
- Trump is demanding that the EU open up its vast market to American agricultural goods, and threatened to impose new tariffs on European automobile exports if the EU doesn’t comply: “They barely take our agricultural products, and yet they can sell Mercedes Benz and they can sell anything they want in our country including their farm products, and it’s not fair.”
- For its part the EU is refusing the agriculture demand, but is offering to cut industrial tariffs and streamline the process for regulatory approval of new goods.
- U.S. Senator Chuck Grassley warns that any deal that doesn’t include agriculture won’t pass Congress. Meanwhile any deal that includes agriculture would likely be vetoed by France and other EU members with large, protected domestic agriculture industries. At the same time the EU says any new auto tariffs would immediately cancel trade negotiations. In short: don’t hold your breath.