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| Don't count on so-called Trump "friend" Jean-Claude Juncker to somehow get the EU to buy boatloads of American soy. |
The stock market is not very smart: Late yesterday when it was announced that the US and EU had arrived at a temporary "ceasefire" on slapping additional tariffs on each other as they negotiate some nebulous trade deal--I hesitate from calling it an agreement--US stock markets
rallied. However, there is significantly less than meets the eye here. Consider that most sensitive and vulnerable of products, the humble soybean.
Actually, there are no tariffs being applied to the foodstuff already, hence there is
no way of securing additional EU market access or purchases short of subsidizing them. Moreover, the EU isn't China where one guy from the Communist Party can order his minions to buy as much soy as necessary to appease Trump if the Reds felt like doing so. Last I checked, it was made up of 28 (soon-to-be 27) independent countries. Anyway....
But a mere handshake agreement to send more soybeans across the
Atlantic won't make up for a reduction in exports across the Pacific.
For starters, that's because the European Commission doesn't actually
have authority over how many soybeans Europe imports. It doesn't
procure soybeans for European markets and it doesn't tell European
businesses where to buy their soybeans.
Of course, there are other ways that governments can encourage
businesses within their borders to purchase materials from certain
sources. Lowering trade barriers is one way to do it. If the
Trump-Juncker agreement would lower European tariffs on American-grown
soybeans, for example, that might do the trick of getting Europe to buy
more American beans.
Except, well, the European Commission currently doesn't charge any
tariffs on American soybeans. Which means European businesses already
have access to all the American soybeans they would want. It's hard to
see how—short of subsidizing demand across the pond—Juncker will follow
through with his promise to have Europe buy more soybeans.
That brings me to another point unmentioned in the
Reason blog post excerpted above: Most of the soybeans planted in the United States are genetically modified (GM). Think something on the order of
93%. While the US has been wanting to crack open the EU market for GM soy for the longest time, the EU has always been reluctant about doing so. Not only do they plant far less of the stuff--negligible quantities, really--European consumers generally disdain GM unlike the vast majority of indifferent American consumers. This case has been a
long-running saga at the WTO. And because European consumers dislike GM foodstuffs, it's unsurprising EU regulations are quite
stringent on their importation (e.g., labeling that these are indeed GM):
But soybeans intended for Chinese markets can’t
necessarily be redirected to the European Union, which has stringent
regulations on genetically modified foods.
According
to a senior E.U. official, there have been no discussions about lifting
those standards to purchase U.S. soybeans. The same official said that
agricultural products were outside the talks between Juncker and Trump,
directly contradicting comments from Commerce Secretary Wilbur Ross, who
said Tuesday that “all agricultural products are something that will be
discussed.”
It is thus highly unlikely that all these GM soybeans meant for the Chinese market will now find a place in GM-hating Europe. It may be good for show when Trump glad-handed European Commission President Jean-Claude Juncker, but it's really hard to see how the EU becomes a replacement for lost sales to China when (a) it already can buy as much American soy as it needs tariff-free and (b) GM foods like soy are shunned by consumers in Europe.
