Well,
President Trump is back from his trip to Davos where he made a major
presentation that reporters said did not break much new trade or economic
policy ground. He is now preparing for his State of the Union speech on
Tuesday.
One
interesting development did attract press attention last week, though, and that
was discussions of much more vital global markets. A number of analysts are now
suggesting that global markets have turned around now and that economic growth
is much more widespread--modest, but widespread, Bloomberg says.
The
group also points out that Europe is approaching the next stop in its global
market-opening drive aimed at countering a U.S. “protectionist tilt.” Top
officials from the European Union will meet with the Mercosur group of Argentina,
Brazil, Paraguay and Uruguay this week to gauge the prospects for a “free-trade
deal that would follow groundbreaking commercial pacts with Japan and Canada,”
Bloomberg says.
The
EU-Mercosur talks began almost two decades ago, faltered and were re-started in
2010. President Trump’s move into the White House a year ago with his “America
First” agenda prompted an EU push to wrap up the negotiations, which advanced
before getting hung up last month over the politically sensitive issues of
agriculture and cars.
“Our
aim is to conclude a very ambitious trade agreement between us and Mercosur in
the coming weeks,” EU Trade Commissioner Cecilia Malmstroem said in an
interview in Brussels last week. “We aim to finalize this very soon because the
clock is ticking.”
EU
policymakers are seeking to keep markets open worldwide in the face of Trump’s
anti-globalization stance and to underscore the bloc’s continuing commercial
clout as the UK prepares to leave. In addition to building on existing European
free-trade pacts with partners that also include Singapore, Vietnam and South
Korea, a deal with Mercosur would give the EU political momentum as it gears up
for talks with Australia and New Zealand.
The
U.S. threat to the global order in place since the end of World War II was
highlighted last week when Trump invoked rarely used “safeguard” rules to
impose tariffs on U.S. imports of solar panels and washing machines, Bloomberg
said.
With
EU-Mercosur trade worth almost 85 billion euros ($105 billion) in 2016, a market-opening
agreement would be among Europe’s biggest. The meeting on Tuesday will be at
ministerial level, giving both sides a chance to make political concessions
that would embolden the negotiators.
However,
there are still bumps to be worked out. Mercosur says an EU offer to open
further its agricultural markets, including for beef, is inadequate.
Malmstroem’s team in December proposed to let Mercosur export to the bloc at
reduced duties an extra 70,000 metric tons of beef, 600,000 tons of ethanol and
100,000 tons of sugar annually.
“If we
don’t get a significant agricultural offer, we cannot achieve this agreement,”
Rigoberto Gauto Vielman, Paraguay’s ambassador to the EU, told the European
Parliament’s trade committee on Jan. 23 in Brussels. Europe must do more to
ensure a “fair and reasonable” accord, he said.
The EU
counters that its farm offer is generous and Mercosur must agree to open its
markets more to European cheeses, cars and car parts.
European
agricultural producers’ interests, traditionally a touchy issue in Brussels,
may be even more so now because Ireland is concerned about the potential impact
of the UK’s planned exit from the EU on Irish beef exports. Mercosur already
accounts for around three-quarters of EU beef imports and focuses on pricier
cuts.
“The
moment is quite difficult for Europe in terms of beef,” Sandra Gallina, the
chief EU negotiator with Mercosur, told European lawmakers last Tuesday. “Our
partners are very well aware that there is a Brexit going on and that beef from
Ireland may be impacted, so I want to say this is perhaps not the best of
moments to go after such a deal.”
Pekka
Pesonen, secretary general of Copa-Cogeca, the main European farm-lobby group,
told reporters on Jan. 24 that a Mercosur-EU accord could cost farmers in
Europe billions of euros and that “we would reject any concessions at this
stage.” Malmstroem played down the deadlock over agriculture, saying farmers’
interests have long kept international trade negotiators at the table longer.
“They
are always the last to remain,” she said. “They are difficult, but I hope they
are surmountable.”
So, we
will see. Many U.S. producer groups are nervous already about EU and Latin
American efforts underway to open ag markets while the U.S. remains on the
sideline—and are especially worried about the NAFTA talks. As always, the
groups will parse the SOU talk for hints of policy commitments that could
increase market access and also support beneficial policies in the coming farm
bill debate. This will be yet another week of high level, high tension policy
discussion that producers should watch closely as they proceed, Washington
Insider believes.