World food trade in 2019: Small wins gained but major uncertainty dominates

04 Dec 2018 --- From the still-to-be-confirmed EU and UK Brexit deal, so-called trade war truce between the US and China and the oil protests in France, controversial trade issues remain in the spotlight as 2018 draws to a close. And as we head into a new year, trade issues will remain high on the agenda. The EU and Japan have upgraded their strategic partnership with both countries signing a major trade agreement that will make it easier for European companies to export to Japan. This includes eliminating 90 percent of tariffs on more than 90 percent of the EU’s exports to Japan and signals the “dawn of a new era” between the two trading blocs. The proposed agreement is being hailed as a major deal that will ramp up trade relations and comes as turbulent trade issues in other parts of the world continue to dominate.

The EU and Japan have agreed to upgrade their partnership against a background of increasing international tensions and protectionism. EU companies export more than €58 billion (US$66 billion) worth of goods and €28 billion (US$31.8 billion) in services to Japan a year, but the trade agreement will likely boost this even further by removing remaining barriers to trade. 

Eliminating the majority of tariffs on the majority of the EU’s exports to Japan is expected to save EU exporters about €1 billion (US$1.1 billion) in customs duties a year. In addition, Japan will recognize the special status of more than 200 European agricultural products from specific regions, known as “Geographical Indications.” Examples include Roquefort, Aceto Balsamico di Modena, Prosecco, Jambon d'Ardenne, Tiroler Speck, Polska Wódka, Queso Manchego, Lübecker Marzipan and Irish Whiskey. Measures will also be taken to lower non-tariff barriers, for example, by relying on international standards rather than specific Japanese requirements.

The planned strategic partnership is also expected to improve cooperation on common challenges such as security and the environment. 

“The EU-Japan Economic Partnership Agreement sends a timely signal in support of open, fair, values- and rules-based trade at a time of increasing protectionism and an erratic trade policy by US President Donald Trump,” says Lead MEP Pedro Silva Pereira, a Portuguese member of the S&D group.

“This agreement also represents an opportunity for the EU in the Asia-Pacific, especially since the US withdrawal from the Trans-Pacific Partnership (TPP) regional free trade agreement, and helps promote EU values and high standards in the region.”

The MEP says that the agreement is about much more than just stimulating trade: “This agreement will foster not only closer bilateral economic ties, but also concrete cooperation on sustainable development like the fight against climate change. The agreement can, in addition, enhance coordination on multilateral issues with Japan and help shape rules for the global economy in line with our high standards and shared values of respect for human rights, democracy and the rules of law.”

The now-defunct TPP – the proposed trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US – was signed in February 2016 but was not ratified as required. After the US withdrew its signature [when], the agreement could not enter into force. 

A new trade agreement called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which incorporates most of the provisions of the TPP and which is to enter into force on 30 December 2018, was negotiated by the remaining nations.

This partnership comes as the US and China claim a trade war truce as Trump says relations with Chinese President Xi Jinping have “taken a big leap forward.” The two leaders have agreed not to increase tariffs for 90 days as they negotiate a way forward on controversial trade issues that have been a sticking point and concern for several sectors of the food industry for months. 

Trump claims China will “reduce and remove” the 40 percent tariffs it places on US cars imported into the country. This is unconfirmed by China. However, it is being widely reported that the temporary truce on trade has been called as the leaders met during the G20 summit. 

Meanwhile, weeks of violent protests in France have culminated in the French government saying it will suspend a fuel tax rise in a bid to seek compromise with the so-called “yellow vest” protesters. Protests across France have escalated in recent days, reflecting much more widespread anger at the government. 

The EU-Japan proposed agreement, which still needs to be voted on during the December plenary and approved by the European Council before entering into force – also comes at a pivotal time considering Brexit as politicians, members of the public and the industry wait with baited breath for the outcome of the UK Parliamentary vote scheduled for December 11. 

The Withdrawal Agreement – which has the full backing of Europe – will go before UK MPs next week, make or break time for the Brexit deal that would avoid a no-deal scenario. 

Many within the food industry would like to see a deal passed in order to get clarity on key trade issues as the UK is set to leave Europe next March. However, under the proposed Withdrawal Agreement, there is a transition period that would last until December 2020 which could be extended further. 

What’s next?
All eyes will be firmly fixed on UK Parliament next Wednesday as much of what happens next boils down to whether British Prime Minister Theresa May’s deal gets the backing on MPs, something the food industry, at large, wants to see happen. The so-called US-China truce may or may not last and it remains to be seen how exactly the suspension of France’s fuel price hike will impact protests. However, the EU-Japan agreement is an example of how positive trade relations could be central to keeping the global economy bubbling in 2019 and beyond. 

By Gaynor Selby

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