Donald Trump has moved quickly to claim a trade truce with the EU as a major victory, boasting to supporters in a recent fundraising email that he had secured an “incredible new fair trade deal with the European Union thanks to our tariffs”.
But even as officials on both sides of the Atlantic plan for what amounts to talks about talks over a new transatlantic trade deal, a major stumbling block is emerging.
The EU’s insistence on taking any discussion of agriculture off the table because of opposition from France has alienated a powerful US farm sector already feeling aggrieved over the damage caused by Mr Trump’s trade wars.
This has also raised questions about whether the sort of narrow deal envisioned — one that applies only to industrial goods other than cars — could ever secure the approval of Congress, which itself raises doubts about whether one is even possible.
David Salmonsen, a trade expert at the American Farm Bureau, the US’s biggest agricultural lobby, said: “[The EU and US] are going to talk some more which is better than just slapping tariffs on each other [but] if we’re going to talk with the Europeans we are going to want to talk about our issues.”
The problem for Mr Trump is that farm groups have emerged as among his most vocal critics on trade and his efforts to placate them have so far fallen flat.
Farmers criticised a $12bn aid plan announced last month for producers hurt by retaliatory tariffs as an unwanted handout that would do little to offset the long-term harm they face in important markets such as Mexico and China.
Mindful of the politics and a looming midterm election, US officials have promised several times that farmers will benefit from a deal with the EU.
“We just opened up Europe for you farmers,” Mr Trump told a group in Iowa the day after his Rose Garden appearance with Jean-Claude Juncker, the European Commission president.
The president has seized on what he said was a promise by Mr Juncker that the EU would buy more soyabeans as a win for the US. And EU officials have indulged him, on Wednesday publishing the first of what they said would be bimonthly reports on European purchases of US soyabeans with the data showing a jump of more than 280 per cent over the past year even before the truce took effect.
But EU officials also insist that Mr Trump specifically agreed to leave agriculture out of wider talks during the White House negotiations that preceded last month’s announcement. According to people who were in the room at the time, the president rebuffed efforts by cabinet members including Robert Lighthizer, the US trade representative, to have agriculture included in a joint statement after Mr Juncker told him it would be a deal breaker. France’s powerful farm lobby has long resisted any opening up. “Agriculture is explicitly excluded from the text. It is as simple as that," said one senior EU official.
At one point during the meetings, EU officials agreed to discuss agriculture but only if the US would contemplate dropping its politically sensitive “Buy America” public procurement provisions, which Mr Trump has repeatedly hailed.
When officials started arguing over that trade-off Mr Trump intervened again and said "let's not make this too complicated”, said a senior EU official.
Agriculture has long been a major friction point in the transatlantic economic relationship. The EU’s strict rules on the use of genetically-modified crops irk American farmers who view them as unscientific barriers to trade. The same applies to the EU’s scepticism over hormone-fed beef and US poultry bathed in anti-bacterial chlorinated baths. Such rules alongside EU subsidies, US farmers claim, have long kept them out of the lucrative European market.
US agricultural exports to the EU have grown from $8.8bn in 2007 to $11.5bn last year but the EU still ranks only fifth among US export markets for agriculture. Less than 6 per cent of the value of the EU’s total imports from the US last year was in farm products.
Darci Vetter, who served as the US’s top agricultural trade negotiator during the Obama administration, said the gap between the two sides has closed in recent years. US consumers’ evolving preferences for GMO-free products and the like have driven US regulations and producers closer to European ones.
Congress is likely to insist on including agriculture in any formal EU negotiation, said Ms Vetter, who is now at Edelman, the consultancy.
Under the US Constitution, Congress has authority over international trade agreements. It has for decades delegated the power to negotiate them to presidents in return for strict conditions. The 2015 version of the legislation used to pass on the trade powers declared that the US’s top trade negotiating goals included obtaining “competitive opportunities for United States exports of agricultural commodities in foreign markets”.
As Mr Trump is discovering, the US farm lobby is a powerful political force. It also has a history of seeing through spin and focusing on the bottom line.
While EU officials seduced Mr Trump into a truce in part by pointing to increased European buying of US soyabeans, farmers point out that Europe still buys far fewer soyabeans than China.
According to EU figures released this week Europe went from buying 9 per cent of US soya exports a year ago to 37 per cent last month. But it still lags behind the $12.5bn worth of soyabeans China bought last year, US farm groups point out. “Nobody is going to make up for China,” said Mr Salmonsen.
Additional reporting by Mehreen Khan in Brussels
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