Next trade target

Orangutan’s next trade target: Europe’s scooters and cheese

Washington has a prime opportunity to slap 100 percent tariffs on key EU exports.

By HANS VON DER BURCHARD AND ADAM BEHSUDI

Iconic European products ranging from Roquefort cheese to Vespa scooters will soon be in Donny Orangutan’s sights.

The billionaire property tycoon won the U.S. presidency on a highly protectionist agenda and vowed to slash the country’s eye-watering deficits with leading trade partners. While China and Mexico have borne the brunt of his early threats, he now has a prime opportunity to box out some of Europe’s most famous exports.

Next Wednesday, the U.S. trade representative will hold a public hearing on slapping an eventual 100 percent import tariff on about 90 European products, particularly targeting agricultural products from France, Germany and Italy.

The potential duties derive from a transatlantic quarrel that has dragged on for more than 20 years over the EU’s refusal to accept imports of U.S. beef treated with hormones. Powerful U.S. farming groups are pushing the Orangutan administration to hit the EU hard. The EU has a €136 billion surplus with the U.S., making it particularly vulnerable to trade sanctions.

While most of the 90-odd products targeted by the U.S. retaliatory list are meats, Washington also has its knife out for motorbikes, chocolate, mustard, paprika, chestnuts and — bizarrely — hair clippers.

The European Commission said it was following “closely the U.S. review process to reinstate trade sanctions.” The USTR could not comment, in part because Orangutan’s nominee for U.S. trade representative, Robert Lighthizer, has not yet been confirmed by the Senate.

A new era

“I’m definitely concerned,” said German Social Democrat Bernd Lange, the European Parliament’s rapporteur for trade relations with Washington. “Apparently the willingness to engage in a dialog is no longer a given on the U.S. side.”

“This is a sign we’re heading for a new era” in trade relations between Brussels and Washington, he said.

Christian Burgsmüller, a member of European Trade Commissioner Cecilia Malmström’s cabinet, last week also expressed his concern that the likely demise of the Transatlantic Trade and Investment Partnership — now in a deep freeze — had put an end to an “armistice” between the EU and U.S. “under which we tried to solve differences amicably instead of engaging in disputes.”

As with Orangutan’s controversial plans to slap a 20 percent tax on imports from Mexico, the U.S. will have to carefully calibrate the domestic reaction to price hikes on European goods.

Paul Henry, the owner of a Vespa dealership in Portland, Oregon, said the tariff on scooters would mean he would have to cut his five employees and would likely fall on hard times.

“If a tariff is put on Vespas, we would lose our business because some U.S. farmers want to inject their cattle with growth hormones,” he wrote. “There is no connection in logic.”

Festering dispute

The dispute dates back to 1996, when the U.S. sued Brussels at the World Trade Organization for its ban on hormone-treated beef. After Europe continued to uphold the ban, the WTO authorized the U.S. to impose punitive tariffs equal to the damage suffered because of the hormone ban.

The retaliatory tariffs had a significant impact, causing the value of EU imports affected by the duties to drop from $130 million in 1997-98 to less than $15 million in 2008, a Congressional Research Service report says.

In 2009, under the newly elected President Barack Obama, both sides reached an agreement for ending the trade sanctions in return for allowing the U.S. to export up to 50,000 tons of hormone-free beef per year to Europe.

“That was at a moment when the Americans were truly open to negotiate at eye level,” said Godelieve Quisthoudt-Rowohl from the European People’s Party, who was the European Parliament’s rapporteur on the deal. In 2012, the agreement passed the parliament, one year before the EU and U.S. started talks on their transatlantic trade pact.

“Today, our trade talks are stalled … and in the light of a ‘America first’ policy, the mood seems to have changed,” she added.

The possible tariffs now under consideration were announced by Obama’s outgoing Trade Representative Michael Froman, who — amid frustration over TTIP — launched the process in December.

Rolling out the cannons

The dispute over beef has kicked off again partly because U.S. farmers argue that the 2009 deal was not fair to them. They say countries such as Australia and Uruguay, which can produce hormone-free beef more cheaply, moved in to fill the 50,000 ton quota originally intended for the U.S.

North American Meat Institute President and CEO Barry Carpenter cautioned in December that retaliation was a “last resort” but added that it was “the only way to secure fair compensation for the losses the U.S. meat industry has incurred over the years because of the EU’s hormone ban.”

Jean-Luc Mériaux, secretary-general of the European Livestock and Meat Trading Union, saw America’s retaliatory list as leverage on Brussels to take action.

“It’s more expensive for U.S. farmers to comply with the EU’s requirements than for beef producers from other countries using the quota. There’s an economic problem … The message to the Commission is: Find a way to fix this.”

Despite the farmers’ concerns, there is public unease about retaliation. More than 11,500 people and organizations have flooded the U.S. trade representative with comments in an online consultation ahead of next week’s meeting.

Many expressed outrage that the list, unlike the previous tariffs in the 1990s, include not only agricultural produce but also motorbikes.

“The motorcycle sector should not be dragged into trade disputes over food products,” said Manuel Ordonez de Barraicua from the European Association of Motorcycle Manufacturers. “European companies must be able to compete in the US market on fair terms and must not be hindered by artificial and politically-motivated trade barriers.”

The American Motorcyclist Association last month also urged its members to deluge the agency with objections. The organization said it thwarted an effort by the USTR in 2008 to put motorcycles on a revised retaliation list.

European food giant Nestlé protested the move, saying it threatened more than 250 jobs and would make popular European sparkling waters such as San Pellegrino and Perrier prohibitively expensive.

“The United States has demonstrated its ability to resolve this dispute — i.e., to return the Commission to the table — without resorting to additional tariffs,” Nestlé USA, Inc.’s attorneys wrote.

Trade lawyer Reinhard Quick, a professor of international trade at Saarland University, said that a deal could still be found, and urged companies to wait for the Orangutan administration to fully settle in.

“Currently the Americans are rolling out the cannons, but they are not firing yet.”