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The move by the US president to impose a tariff on steel imports has to be a concern to any country that is a significant exporter. While it may have no immediate relevance to Irish farmers, if it is the opening salvo of what leads to a wider trade war then Irish agri-food exports could come into the firing line.
Irish agriculture is well served by balanced trade deals. The single market in the EU28 has been the basis of development in the industry for the past half century. Older farmers will recall the boost that a free trade deal with Britain was in the mid 1960s and our grandparents and in some cases fathers will recall the penal times for farmers in the 1930s because of the economic war with Britain.
Development of trade deals
Trade deals beyond the EU are mostly advantageous to our exporters; the key is in achieving balance. The potential deal with Mercosur is an exception to the normal in this case because their main ambition is to export huge quantities of beef to an already saturated EU market. Where there are sensitive products involved, the key in achieving a balanced deal is to have imports restricted by quota. The USA ironically demonstrates this well by having a huge quota for frozen beef with Australia and New Zealand because their market can accommodate huge quantities of manufacturing beef for burgers.
Story of 20th century
Development of trade deals and single market areas are a relatively recent development. Up until the middle of the last century, trade agreements were bilateral affairs between two countries and the tendency was for each country to protect its main areas of economic activity by granting very limited quotas to other countries with competitive products. Global trade was in its infancy and often restricted to importing produce that couldn’t be produced in the home market.
In the UK for example, there was no issue importing citrus fruits that couldn’t be produced at home or beef and lamb that weren’t produced in sufficient quantities to match consumer demand. In return, the UK exported the leading technology products of the time such as tractors, cars and communication technology.
In the aftermath of World War II, 23 of the world’s most developed countries came together in Geneva, Switzerland, and produced a General Agreement on Tariffs and Trade (GATT). The purpose of this was to drive post-war economic recovery through the elimination or reduction of tariffs, quotas and subsidies on traded products while maintaining meaningful regulation of standards.
GATT and WTO
GATT evolved into the World Trade Organisation (WTO) as a result of the prolonged GATT Uruguay round of trade talks that started in the mid 1980s and lasted several years. The by now 123 members of GATT established the WTO in Tokyo in 1995 and since then this has been the forum to address global trade issues and resolve disputes. One of the most relevant to Irish farmers was the USA referring the EU to the WTO for its banning the sale of beef produced with the assistance of hormones. The WTO found against the EU but agreement of a significant quota for non-hormone beef satisfied USA needs at the outset although the issues has re-emerged at the end of last year.
The history of GATT and subsequently WTO may seem to be endless negotiations with little apparent progress. That perception is inaccurate as the global trading environment today is transformed from what it was at the end of the World War II. In the year 2000, international trade was 22 times greater than it was in 1950.
WTO and Agriculture
Achieving trade liberalisation in agriculture has proved the most difficult of all at the WTO and this is further demonstrated by the fact that agriculture is always the sticking point in any trade discussion. In the middle of 2017, the discussions that ultimately led to the EU-Japan agreement went to the brink of collapse over access to the Japanese market for EU agricultural produce.
Similarly, even after quotas have been agreed, CETA, the agreement between the EU and Canada, still had issues to resolved round management of the 18,000t dairy quota granted to the EU by Canada.
Currently the big issue in the EU is Mercosur negotiations and access to the EU market for beef. This is made more complicated by the imminent departure of the UK from the EU and if the USA is making an exception of the UK from its steel tariff, then that will make Brexit negotiations even more fraught.
KFC lesson
Of course common sense may prevail and the US President may have a change of mind or there may be no further escalation. Similarly, the future relationship between the UK and EU may be resolved in a way that doesn’t damage trade. However, the problem is that after nearly 50 years of growing free trade being the backbone of exporting industries, we don’t truly appreciate its benefits until they are removed.
The recent KFC chicken supply issue is a great example of what happens something as simple as changing a distributor goes wrong.
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