EU looks to offer Trump a bigger slice of its beef market as trade war looms

Brussels is preparing to allow U.S. President Donald Trump to sell more tariff-free American beef in Europe in a gesture that could act as a potential olive branch to avoid a full-blown trade war.

French President Emmanuel Macron and German Chancellor Angela Merkel are visiting Washington this week in a last frantic attempt to dissuade Trump from imposing duties on Europes steel and aluminum producers on May 1.

In parallel to these high-level diplomatic missions, the Europeans are shortly planning to offer Washington a big concession by expanding the access of U.S. cattle farmers to European markets.

The European Commission insists that the beef proposal is entirely unrelated to the threat of steel tariffs and has been under consideration for years, but EU officials noted that the timing of the measure was politically useful. One senior official described it as “a very convenient coincidence of events.”

Agriculture is one of Trumps priorities and, in remarks made during Macrons visit on Tuesday, he made clear that he wants Europe to buy more American steaks and beef burgers.

EU officials and diplomats said that the European Commission would soon present a mandate for revising the quota to grant the U.S. better market access.

“They have trade barriers that are unacceptable,” the U.S. president said. “Our farmers cant send their product into the European Union as easily as they should. And we accept their products. So we have to make a change, and they understand that.”

The quota regime that the EU is looking to alter is an agreement from 2009, under which the EU allowed the U.S. to export an annual quota of about 45,000 tons of hormone-free beef without paying duties.

U.S. farmers have long complained that this was a bad deal for them, because the same quota was also made available to other WTO countries such as Australia and Uruguay. With their highly competitive beef production, the Latin American and Australasian countries soon managed to fill large parts of the quota, and Americas share fell from 98.8 percent in 2009 to only 32.6 percent in 2016, according to the U.S. Meat Export Federation.

Responding to those complaints, EU officials and diplomats said that the European Commission would soon present a mandate for revising the quota to grant the U.S. better market access. Washington aims to double its current beef exports under the quota to about 30,000 tons a year, according to two people following the talks.

Trade-offs with Trump

The Commission completed a consultation on a new beef offer on Tuesday, but could not give a date for when it would present the mandate for revising the quotas.

“The quota has not worked out as they [the U.S.] had anticipated in terms of the volume they can access,” said a senior EU official, adding that a way had to be found to revise it so that American farmers would benefit more. Under the WTOs most-favored nation principle, the EU cannot open a quota just to the U.S. but has to keep it open to all other competitors that fulfill the export requirements. A Commission spokesperson said that any solution has to be “WTO-consistent.”

Beyond the immediate steel tariff threat, the EU has also been keen to resolve the dispute over the beef quota because Washington has been threatening countermeasures against iconic European goods ranging from Vespa scooters to Camembert cheese.

Apart from the potential beef deal, Brussels has also mulled making other offers to Trump: EU trade chief Cecilia Malmström said last week that the EU was “willing to discuss anything when it comes to trade facilitation” with the U.S. under the condition that it wins a permanent exemption from steel and aluminum duties. One potential offer to the U.S., which has strong backing from Germany, would focus on a customs-only trade deal that is limited to industrial tariffs and public procurement.

Playing by the rules

European agriculture associations — usually no fans of negotiations on beef — are largely supportive of tweaks to the quota, according to comments from the consultation to the Commission published Tuesday.

As long as the overall quota remains at the current level, and hormone-reared beef stays banned, Europes farms lobbies are largely content to tip the balance in Americas favor. As American beef is more costly than Latin American rivals, an internal recalibration of the quota to help Trump could actually reduce competition for European farmers.

U.S. President Donald Trump has long appealed to American farmers | Jim Watson/AFP via Getty Images

“We believe that the European Union should reflect on a technical solution aimed at ensuring that a sufficient proportion of imports within the already identified quota of 45,000 tonnes … is filled by the USA,” wrote Italys farm lobby Coldiretti. However, “the EU must not increase” the overall size of the quota and not allow in any hormone-treated meat, Coldiretti added.

European agricultural lobby Copa & Cogeca said: “We support the European Commission initiatives concerning negotiations.”

Unsurprisingly, big beef producers such as Argentina, Australia and New Zealand expressed concerns and noted that the EU would have to find a way to restructure the quota that does not fall foul of WTO rules by structuring it in a way to favor the U.S.

Gregory Andrews, New Zealands ambassador to Belgium, insisted that the EU should ensure that all countries enjoy equal rights to access the quota after any restructuring.

Andrews said access to the quota “is of high value for New Zealand industry, which has invested to ensure it meets the European Union access requirements.”

Justin Brown, Australias ambassador to the EU, said: “The Australian beef export sector has invested heavily to meet the EUs quota … and its expectation is for the continuation of current access levels.”

The U.S. Trade Representatives office said securing market access was a high priority. “We are optimistic that we will find a solution in the near term,” a USTR spokeswoman said.

Simon Marks and Emmet Livingstone contributed reporting.

CORRECTION: An earlier version of this story misstated the job title of Gregory Andrews, New Zealand ambassador to Belgium.

This article and headline have been updated for clarity.

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