US/EU trade – heads, I win, tails you lose

The new trade flows are very clear. Europe is importing ever increasing quantities of American coal to burn in its power stations. Meanwhile, the US closes down its coal-burning stations and is rapidly building new gas-fired ones to use its cheap gas. The irony of all this should not be lost on us, as European negotiators attempt to broker a trade deal with the US at almost any price.

Broadly, coal is a filthy fuel from a carbon and greenhouse gas emissions point of view, unless there are very expensive add-ons to the power station infrastructure.

Poland has shut down many of its lignite burning stations, which are the dirtiest of all. Europe has adopted a range of ambitious measures to reduce its carbon emissions to below 1990 levels by signing the Kyoto agreement. The US has refused to follow suit. However, the irony is that the US is cutting its carbon emissions faster than any country in the world as it swings from coal to gas for its power.

Although as the US/EU trade talks go on, the real irony is that the US, in effect, bans the export of gas (and indeed oil) from its territory on the basis of national security. Each shipment of gas has to get a special licence if the owners wish to export it. As a result, the price of gas in the US is between one-third and one-quarter of what it is in Europe. Japan is even more expensive than Europe.

If the US was really serious about these trade discussions with the EU, it would open up and work towards a common energy market. Tankers with liquefied petroleum gas would be steaming across the Atlantic, which would dramatically reduce European dependence on politically unstable expensive Russian gas, while also helping to reduce European carbon emissions from burning increasing quantities of American coal.

How likely is it that all this will happen? Not very.

In a similar type of trade deal with Australia, the US specifically refused to import any Australian sugar cane on the basis that it would undercut American beet sugar produced in its northern agricultural belt.

The awful events in Ukraine over recent days should give extra impetus to reduce dependence on Russian gas. France has stayed with its nuclear programme, Germany has abandoned its nuclear ambitions completely and is spending a fortune encouraging renewables, including wind. While this may all be fine, a reliable long-term mainstream source of energy is essential. US gas could fit this role.

Is the US willing to share its energy assets in an open market framework?

This will be the real test of whether, from a European farmer’s point of view, it is simply a matter of the United States taking the attitude of “heads I win, tails you lose”.

The other point worth noting is that US industrialists and farmers know that their government is on their side. Can we say the same about our negotiators as this Commission enters its dying days?