Tag: Tariffs

Ukraine’s bumper grain exports rile allies in eastern EU

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Ukraine’s farmers played an iconic role in the first weeks of Russia’s invasion, towing away abandoned enemy tanks with their tractors.
Now, though, their prodigious grain output is causing some of Ukraine’s staunchest allies to waver, as disrupted shipments are redirected onto neighboring markets.
The most striking is Poland, which has played a leading role so far in supporting Ukraine, acting as the main transit hub for Western weaponry and sending plenty of its own. But grain shipments in the other direction have irked Polish farmers who are being undercut — just months before a national election where the rural vote will be crucial.

Diplomats are floundering. After a planned Friday meeting between the Polish and Ukrainian agriculture ministers was postponed, the Polish government on Saturday announced a ban on imports of farm products from Ukraine. Hungary late Saturday said it would do the same.
Ukraine is among the world’s top exporters of wheat and other grains, which are ordinarily shipped to markets as distant as Egypt and Pakistan. Russia’s invasion last year disrupted the main Black Sea export route, and a United Nations-brokered deal to lift the blockade has been only partially effective. In consequence, Ukrainian produce has been diverted to bordering EU countries: Hungary, Poland, Romania and Slovakia.
At first, those governments supported EU plans to shift the surplus grain. But instead of transiting seamlessly onto global markets, the supply glut has depressed prices in Europe. Farmers have risen up in protest, and Polish Agriculture Minister Henryk Kowalczyk was forced out earlier this month.
Now, governments’ focus has shifted to restricting Ukrainian imports to protect their own markets. After hosting Ukrainian President Volodymyr Zelenskyy in Warsaw in early April, Polish President Andrzej Duda said resolving the import glut was “a matter of introducing additional restrictions.”
The following day, Poland suspended imports of Ukrainian grain, saying the idea had come from Kyiv. On Saturday, Polish Prime Minister Mateusz Morawiecki, after an emergency cabinet meeting, said the import ban would cover grain and certain other farm products and would include products intended for other countries. A few hours later, the Hungarian government announced similar measures. Both countries said the bans would last until the end of June.
The European Commission is seeking further information on the import restrictions from Warsaw and Budapest “to be able to assess the measures,” according to a statement on Sunday. “Trade policy is of EU exclusive competence and, therefore, unilateral actions are not acceptable,” it said.
While the EU’s free-trade agreement with Ukraine prevents governments from introducing tariffs, they still have plenty of tools available to disrupt shipments.
Neighboring countries and nearby Bulgaria have stepped up sanitary checks on Ukrainian grain, arguing they are doing so to protect the health of their own citizens. They have also requested financial support from Brussels and have already received more than €50 million from the EU’s agricultural crisis reserve, with more money on the way.
Restrictions could do further harm to Ukraine’s battered economy, and by extension its war effort. The economy has shrunk by 29.1 percent since the invasion, according to statistics released this month, and agricultural exports are an important source of revenue.
Cracks in the alliance
The trade tensions sit at odds with these countries’ political position on Ukraine, which — with the exception of Hungary — has been strongly supportive. Poland has taken in millions of Ukrainian refugees, while weapons and ammunition flow in the opposite direction; Romania has helped transport millions of tons of Ukrainian corn and wheat.
Volodymyr Zelenskyy and Poland’s Prime Minister, Mateusz Morawiecki | Omar Marques/Getty Images
Some Western European governments, which had to be goaded by Poland and others into sending heavy weaponry to Kyiv, are quick to point out the change in direction.
“Curious to see that some of these countries are [always] asking for more on sanctions, more on ammunition, etc. But when it affects them, they turn to Brussels begging for financial support,” said one diplomat from a Western country, speaking on condition of anonymity.
Some EU countries also oppose the import restrictions for economic reasons. For instance, Spain and the Netherlands are some of the biggest recipients of Ukrainian grain, which they use to supply their livestock industries.
Politically, though, the Central and Eastern European governments have limited room for maneuver. Poland and Slovakia are both heading into general elections later this year. Bulgaria has had a caretaker government since last year. Romania’s agriculture minister has faced calls to resign, including from a compatriot former EU agriculture commissioner.
And farmers are a strong constituency. Poland’s right-wing Law & Justice (PiS) party won the last general election in 2019 thanks in large part to rural voters. The Ukrainian grain issue has already cost a Polish agriculture minister his job; the government as a whole will have to tread carefully to avoid the same fate.
This article has been updated.

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( With inputs from : www.politico.eu )

April 11, 2023
Trump’s tariff time bomb threatens to blow up transatlantic trade

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BRUSSELS — The next big transatlantic trade fight is primed to explode.
Negotiators from Brussels and Washington are scrambling to solve a five-year dispute over steel and aluminum dating back to former U.S. President Donald Trump’s decision to slap tariffs on European imports. They have until October to get a deal but are still so far apart that European officials now fear the chances of an agreement are slim.
Without a deal, both sides could reimpose billions of dollars worth of trade tariffs on each other’s goods — potentially spreading well beyond steel to hit products including French wines, U.S. rum, vodka and denim jeans.

While U.S. negotiators are still hopeful that an agreement can be reached in time, the political fallout of failure for President Joe Biden would be serious, with U.S. exports facing a hit just ahead of his potential re-election battle in 2024. More broadly, another breakdown in trade relations between Europe and the United States would heap further pressure on a relationship that is already under strain from Biden’s green subsidies package for American industries.
With a more assertive China threatening to disrupt supply lines, and Russia’s war in Ukraine straining global commerce, the last thing world trade needs is a new crisis between major Western allies. Six EU officials briefed on the talks worry that’s exactly what will happen.
“The start positions are just too far away,” said one of the officials, who asked to remain anonymous to discuss sensitive matters. “The huge concessions that would have to be made are politically not realistic in that timeframe.”
The transatlantic disagreement is a hangover from the days of Trump, who imposed tariffs on €6.4 billion worth of European steel and exports in 2018. The tariffs were extra sensitive because Trump had imposed them on grounds of national security.
After he came to power, Biden agreed to a temporary cessation of hostilities rather than a complete end to the dispute. His aim was for negotiators to work jointly on making steel production greener and fighting global overcapacity. The unofficial U.S. goal is also to squeeze Beijing’s dumping of Chinese steel, which is made with far more coal-fired power.
But unless a new deal is struck by October, the risk is that tariffs return. A summit between Biden and EU leaders has now been penciled in for October, potentially to coincide with the final leg of talks on the dispute.
China hawks
Officials in Brussels see the ongoing negotiations as just another push from the U.S. to force them into taking a harder line against China. “The language just seems written to tackle one country specifically,” said one of the European officials.
Discussions only recently picked up pace through the exchange of a U.S. concept paper and then an EU response. Those texts showed how far apart the two sides are on key issues, the officials said.
Washington wants to impose tariffs on imported steel or aluminum products, which would increase progressively based on how carbon-intensive the manufacturing process is, according to the proposal seen by POLITICO. Countries that join the agreement, which would be open to nations outside the EU, would face lower tariffs, or none at all, compared to those that do not.
Former U.S. President Donald Trump at a rally at Waco airport | Brandon Bell/Getty Images
The EU’s response — also seen by POLITICO — does not include any form of tariffs, according to the officials. Brussels fears the American plan for tariffs goes against the rules of the World Trade Organization, which is a no-go for the EU.
But a senior Biden administration official, who spoke on the condition of anonymity to discuss ongoing negotiations, told POLITICO that tariffs should not be off the table.
“That’s a pretty powerful tool for driving the market both to reduce carbon intensity as well as to reset the playing field to counteract non-market practices and excess capacity,” the U.S. official said. “What we’ve been trying to understand and respond to, in part, is what are those reasons that the EU has to have concerns about a tariff-type structure.”
Karl Tachelet, deputy director general of European steel association Eurofer, said: “We haven’t seen any real ambition or vision to use this as an opportunity to tackle excess capacity or decarbonization. So it can only lead to a clash of views.”
Americans don’t see it that way.
“The U.S. and the EU share a commitment to tackling the dual threat of non-market excess capacity and the climate crisis, and the Biden administration is committed to developing a high-ambition framework that accomplishes those objectives for our workers and these critical industries,” said Adam Hodge, spokesperson for the Office of the U.S. Trade Representative.
A student does steel work in Dayton, Ohio | Megan Jelinger/AFP via Getty Images
But the senior Biden administration official argued that the EU proposal lacks ambition. It makes “tweaks around the margin” without actually attacking “the fundamental problem” that the two sides agreed to address when they called their truce.
“Our concern with the EU’s paper is that it doesn’t really change the dynamic of trade,” the U.S. official said.
“If we’re going to change the course of the impact of non-market excess capacity on market economies like the U.S. and EU, as well as really thinking about how can we use trade as a tool to drive decarbonization, we need to produce something that’s different and more ambitious,” the official added.
Several officials said Washington is also seeking an exemption from the EU’s carbon border tax, which imposes a tax on some imported goods to make sure European businesses are not undercut by cheaper products made in countries with weaker environmental rules.
Such an exemption for the U.S. is another no-go for Brussels. A European Commission spokesperson said giving the U.S. a pass on the carbon border tax would constitute a breach of WTO rules and “cannot be compared with” the U.S. steel and aluminum measures.
Workers at LB Steel LLC in Illinois manufacture wheel assemblies for high-speed trains | Scott Olson/Getty Images
Another European concern is that the U.S. wouldn’t scrap the possibility of re-imposing tariffs on the EU, even though the WTO branded them as illegal. Under Trump, Brussels argued only a complete withdrawal of the tariffs would satisfy the EU, contending the duties were an illegal slap in the face of an ally.
The senior U.S. official said that using national security to justify the tariffs — a rationale that would surely draw opposition in Brussels — “hasn’t been a part of our conversation with the EU to date.” But the Biden administration’s concept paper wasn’t written with WTO compliance top of mind, the official added.
Landing zone
Brussels and Washington are now negotiating to find a landing zone.
“Both sides are coming from two different positions on this,” said one of the European officials, while stressing that “there is a mutual interest to find a solution.”
Others were more pessimistic. Either way, a Plan B is taking shape in the background. Several of the European officials stressed the EU and the U.S. can also buy more time by prolonging the current ceasefire. “The deadline is always flexible,” said Uri Dadush, a Washington-based fellow at the Bruegel think tank. “Both sides can easily agree to extend.”
Steven Overly reported from Washington. Sarah Anne Aarup and Camille Gijs contributed reporting from Brussels.

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( With inputs from : www.politico.eu )

April 4, 2023
China turns on the charm

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Beijing wants to be friends again.
Chinese diplomats are fanning out with a new softer message for international partners and adversaries alike. Gone is the aggressive “wolf warrior” rhetoric. In its place, a warmer tone and a promise of economic cooperation.
Vice Premier Liu He took Beijing’s diplomatic olive branch to the exclusive annual huddle of the global political and business elite in Davos, Switzerland this week. With a heated transatlantic trade spat exploding in panel after panel and melting the Swiss Alpine snow, Liu offered a kinder, gentler Beijing.

“China’s national reality dictates that opening up to the world is a must, not an expediency. We must open up wider and make it work better,” Liu said on Tuesday.
The Chinese charm offensive drove a lot of private conversations in Davos amid the World Economic Forum gathering. Executives are eager to learn more — and as always to explore opportunities in a market as big as China’s. The shift, if real, would signal a return to something the Davos crowd considers more normal: a somewhat predictable, business-friendly Chinese communist leadership, more interested in making money than waging fights against internal critics or outside enemies. The improved economic relationship between China and Australia has fueled such optimism.
Western officials have heard the message as well, but are suspicious that the outreach is more diplomatic sparkle than an indication of substantive changes. They are leery that the growing economic and military threat posed by China remains despite the velvet gloves.
The shift has been gathering steam for weeks after China’s President Xi Jinping offered a warmer tone in his meeting with U.S. President Joe Biden in Bali in November. Xi urged a return to “healthy and stable growth” in bilateral relations.
That has set in motion a cascade of Chinese initiatives seemingly aimed at repairing the harm done by years of “wolf warrior”-style diplomacy; saber-rattling across the Taiwan Strait; a more bellicose military posture in the Indo-Pacific; economic coercion; and high-tech espionage.
China’s Foreign Ministry is rolling out a rhetorical red carpet for U.S. Secretary of State Antony Blinken’s visit in early February. Europe is bracing for a multi-country diplomacy spree by former Foreign Minister Wang Yi. On Wednesday in Zurich, U.S. Treasury Secretary Janet Yellen’s meeting with Liu reaped an invitation to visit China “in the near future.” And the Chinese Foreign Ministry signaled gentler public messaging by banishing pugnacious spokesperson Zhao Lijian to the bureaucratic backwater of the ministry’s Department of Boundary and Ocean Affairs last week.
Western officials still have their guard up, though — particularly since Chinese diplomats were until recently issuing outright threats to their host countries.
“We are seeing a warmer Beijing that’s keen to talk about a business-as-usual approach, and there are fewer wolf warrior narratives,” an EU official told POLITICO on condition of anonymity because he isn’t authorized to speak on the record. “However, a softer face doesn’t necessarily mean a softer heart.”
Russia’s friend
That skepticism springs from the fact that Beijing isn’t matching its rhetorical expressions of bilateral goodwill with any substantive policy shifts. China’s “no limits” alignment with Russia continues even after Moscow’s war on Ukraine and record numbers of Chinese military aircraft regularly menace Taiwan. Beijing denies its well-documented abuses against Uyghur Muslims in Xinjiang and continues what the U.S. calls “unfair trade practices” that sustain billions of dollars of U.S. tariffs on Chinese imports.
There are also suspicions that China is seeking to prevent the imposition of additional crippling U.S. export restrictions on high-technology items such as semi-conductors — and slow down or derail U.S. efforts to persuade its allies to do likewise.
Vladimir Putin and Xi Jinping in Beijing | Pool photo by Ed Jones/Getty Images
“Xi wants the American boot off his neck — he can’t stomach any more tech containment or more sanctions and recognizes that a lot of [Beijing’s] foreign diplomacy has backfired and he wants to lower the temperature,” said Craig Singleton, senior China fellow at the Foundation for Defense of Democracies. Beijing’s uptick in diplomatic outreach aims to “seek a reprieve from Washington’s regulatory assault on China’s tech sector, and then lay the groundwork to stimulate China’s economy after this current COVID wave subsides,” Singleton said.
China is in desperate need of an international image overhaul. The results of a Pew Research survey published in June indicated “negative views of China remain at or near historic highs” in 19 European and Asian countries due to concerns about human rights and perceptions of a growing Chinese military threat. Pew Research Center survey results released in September revealed that 82 percent of Americans in 2022 had “an unfavorable opinion of China,” an increase from 76 percent the previous year.
Beijing’s change in tone reflects its alarm at the Biden administration’s success in rallying international support for his China-countering Indo-Pacific Strategy. That has included arch-rival Japan’s embrace of closer defense ties with the U.S. underwritten by a multibillion-dollar investment in Tokyo’s military.
The ruling Chinese Communist Party’s sense of vulnerability is heightened by China’s raging COVID outbreak and an economy pummeled by three years of lockdown linked to the country’s now-defunct zero-COVID policy. “There’s recognition [in Beijing] that — wait a minute, the U.S. is not going anywhere, it is still a major geopolitical power — and so China has to reengage with the United States,” said Victor Shih, an expert in Chinese elite politics at the University of California, San Diego’s School of Global Policy and Strategy.
Uphill struggle
But old habits die hard. Vice Foreign Minister Xie Feng, the incoming Chinese ambassador to the U.S., accused the Biden administration of “besieging China through geopolitics such as the Indo-Pacific Strategy,” in a speech on Monday. And besides Zhao’s removal from the Foreign Ministry press briefing platform, Xi hasn’t fired or demoted any senior “wolf warrior” diplomats, points out Joshua Kurlantzick, a senior fellow at the Council on Foreign Relations.
EU officials in Brussels are preparing for a visit by Wang, the former Chinese foreign minister who has been promoted into the 24-person Politburo, the Communist Party’s ruling body, to oversee foreign affairs.
But Wang faces an uphill struggle in convincing Europe of a shift in China’s diplomatic settings. The EU is angered by Xi’s close relationship with Moscow despite Russia’s aggression against Ukraine. In response, European leaders have started exploring the diversification of sources of key imports, including those from China.
In conversations with their European counterparts, Beijing officials and diplomats have adopted the tactic of highlighting recent transatlantic disputes to try to persuade the Europeans that the U.S. — even after the Donald Trump era — remains an untrustworthy ally.
“They like to repeat the U.S. ‘gains’ in the Russian war against Ukraine, as well as the IRA,” another European official said, referring to the Biden administration’s Inflation Reduction Act, which is seen by many Europeans as a protectionist policy unfavorable to EU businesses. China claims that the U.S. military-industrial complex stands to gain from the war, while Europe suffers more from the energy crisis than the U.S.
Beijing is also reaching out to traditional allies in the U.S. business community to amplify its more benign messaging. Wang sat down in Beijing last month with John Thornton, former Goldman Sachs president and the current executive chair of Barrick Gold Corporation. That meeting signaled that “China is open to dialogue with the United States at all levels,” current Chinese Foreign Minister Qin Gang tweeted.
China’s former Foreign Minister Wang Yi addresses the 77th session of the United Nations General Assembly | Yuki Iwamura/AFP via Getty Images
Similar outreach to the European business community may fall flat.
“China heavily subsidizes its industry and restricts access to its market for EU companies,” European Commission President Ursula von der Leyen said during the World Economic Forum in Davos on Tuesday. “We need to focus on de-risking rather than decoupling. This means using all our tools to deal with unfair practices.”
But Beijing will hope that persisting with the warmer rhetoric will pay off even if the fundamentals don’t change.
“There are elements of Wall Street and certain constituencies in the U.S. government that are extremely receptive to talk about stability and predictability in the U.S.-China relationship after a very volatile two years,” said Singleton from the Foundation for Defense of Democracies. “But it’s an illusion.”
Matt Kaminski contributed reporting from Davos, Switzerland.

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( With inputs from : www.politico.eu )

January 21, 2023