“Taken as hostage”: Dairy dragged into long-running aircraft dispute, tariffs on EU exports angers sector

11 Oct 2019 --- The repercussions of an EU-US trade conflict as a result of the Airbus dispute, are slammed by the European Dairy Association (EDA) as “collateral damage of an airborne fight.” Under the new levied tariffs on European fine cheeses and other goods, sector players underscore significant losses for consumers. FoodIngredientsFirst speaks to representatives of the European dairy sector, who outline that there may be more losers than winners in this ongoing dispute.

“I cannot see any reason for US cheese aficionados to pay for the aircraft battle. They would have to pay higher prices for dairy products imported from the EU member states involved in the airbus project [France, Germany, Spain and the UK],” Alexander Anton, Secretary General of the EDA, tells FoodIngredientsFirst. 

“Agri-food products – and hence the farming community – is now regularly taken as hostage in trade disputes. This is an unacceptable development. It not only puts additional pressure on the agri-food businesses all over the world – in the US as much as in the EU – as well as on food prices”, warns Anton. 

Raised tariffs would only hurt consumers, opponents argue.The US is currently a prime export market for EU dairy, especially for cheese and butter, highlights the EDA. For both product categories, the US is the top export destinations. Nevertheless, the EU dairy exports have diversified in recent years. The EDA notes that EU dairy is no longer as dependant on one third country market as it was a few years ago. With the Free Trade Agreement with Japan, South Korea and Singapore, these markets have opened up significantly.

Leo Bertozzi, a collaborator of Italian dairy sector consulting firm Advisory in Dairy and Food Product (CLAL), asserts, “Tariffs might be justified to ensure a fair competition. Not as a retaliatory stance. The US is an historic market for EU dairy premium products, such as Protected Designation of Origin [PDO] and specialty cheeses. US consumers request these EU cheese specialties. Therefore, increasing tariffs over the ordinary rate means to go against the consumers demand.”

“We did not want to see dairy dragged into a longstanding dispute on aircraft subsidies. We are disappointed by this development,” comments Alice O'Donovan, Legal & Policy Adviser of the European Association of Dairy Trade (Eucolait). “The tariffs are damaging to the EU industry and to the US consumer. They will not benefit the US industry either as their cheeses will face even stronger competition on the global market. More broadly, an escalating trade war is in no one’s interest.”

“The final notice of the additional tariffs and the product lines that will be hit have not been published in the US Federal register yet, but we expect that this will be published very soon. We have already seen the list as published by the USTR, and cheese in particular has been heavily targeted. Butter, spreads, milk protein concentrates and yogurts are also included in the list,” she adds.

Tit-for-tat tariffs warranting concernUnder a Free Trade Agreement, Asian markets have significantly  opened up for the EU.
Under the current tariffs for EU cheese in 2018, US import tariffs were at a volume of around US$100 million in 2018, according to EDA reports. At 133,000 metric tons, EU cheese exports to the US make up less than 2.3 percent of the US domestic cheese production. The European cheeses enjoyed by US consumers are mainly “typical” European cheeses with unique characteristics – additional and/or retaliatory tariffs would only increase the price of these cheeses for US consumers.

In the Airbus case, a so-called “retaliation list” drafted by the US includes all cheese categories among dairy products, highlights the EDA. “The tariffs for cheese have been originally agreed between the EU and the US in the General Agreement on Tariffs and Trade [GATT] negotiations as an integral part of a wider agreement that seems now to be jeopardized by the US action. We also question the legality of the differentiation between EU member states in the US retaliation tariff list. The EU and the European ‘lactosphere’ must be treated as a single unity in WTO terms,” states the EDA.

These proposed US tariffs will be imposed in addition to existing levies on European products. These came about last year after the US began charging levies on imports of steel and aluminum from key allies including the EU. Tariffs have been increasingly used as a negotiating tool by the US. Last year, the Trump administration was mired in escalating trade conflict between the US and China. Now the world’s two largest economies are still locked in that “trade war” with both sides imposing their own set of tariffs. 

The EU imposed its own retaliatory tariffs on €2.8 billion (US$3.2 billion) worth of US goods in June 2018, including on products such as bourbon whiskey, cranberries, peanut butter and orange juice. At the time, European Trade Commissioner Cecilia Malmström said President Trump’s tariffs left the Union with no alternative option but to impose its own “rebalancing measures.”

Following the WTO ratification of US countermeasures in the WTO Airbus dispute, Commissioner for Trade Cecilia Malmström asserts, “Our readiness to find a fair settlement remains unchanged. But if the US decides to impose WTO-authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same.”

“We are in the dairy business and hence less acquainted with the Airbus versus Boeing case, but for this airplane state aid battle, a solution must be found within the aircraft sector. For all we see, WTO pointed out the illegality of US state aid for Boeing and of EU aid for Airbus – as it did before on Canadian state aid for Bombardier. So, indeed, there seems to be something going wrong in the aircraft sector,” states the EDA.

Anton previously stated in April, “When talking about ‘retaliatory tariffs’, we underline that in considering what measures to take, the complaining party shall first seek to suspend concessions with respect to the same sector, which is also the essence of the word retaliation [Latin, ‘talis-qualis’] – we cannot see why dairy and cheese would be part of this discussion.” 

“We are in contact with the US authorities on that very issue. We know that the services of the European Commission do their utmost to defend European dairy and to de-escalate this conflict,” concludes Anton. 

By Benjamin Ferrer

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