ClO—Lancaster Farming, Saturday, January 1,1983 WASHINGTON, D.C. - The European Community presents a mix of opportunities and obstacles for U.S. exports. However, as. the scales have tipped toward fewer opportunities and greater ob stacles, strains m U.S.-EC trade relations have intensified. In the balance may be billions of dollars in U.S. agricultural exports, reports Harold A. McNitt, economist with the International Economics Division of USDA’s Economic Research Service. The 10 EC member nations are often viewed as a single body because of their common agricultural policies. As such, they make up the largest overseas market for U.S. farm products, accounting for around 20 percent of the total value of U.S. agricultural exports. U.S. exports to the EC (including Greece ) were worth $9.5 billion in fiscal 1980, and roughly $9 billion in each of the last two recession-depressed trade years. Behind the impressive sales figures are 280 nulhon EC con sumers whose average purchasing power approaches that of U.S. consumers. Further supporting U.S.-EC trade are close com mercial ties, efficient shipping channels, modern port facilities, and a well-oiled banking system that links the two markets. Yet partially offsetting these stimulants to trade is the EC’s array of tariffs, unport levies, and other barriers to protect its own producers. Import levies ensure that the price of an import from outside the EC is higher than the price of a corresponding item produced within the Community. These charges make it difficult, if not impossible, for many U.S. commodities to compete in the EC market. In addition, the EC’s internal system of farm price guarantees, subsidies, and other benefits for producers and processors has spurred agricultural output. Protected from outside com petition and prodded by big price supports, EC producers now meet or exceed many of the EC’s domestic needs for food and livestock products. As a result, the EC has become one of our slowest growing farm markets. In 1980, for the first tune in history, Europe fell behind Asia in purchases of U.S. farm products, and the spread has since widened. The EC’s expansion adds to the difficulties faced by U.S. ex porters. Greece joined the Com munity in 1981, and Spain and Portugal are scheduled to enter in the miu-1980s. Membership in the EC will give them additional trade advantages. These nations, Spain in particular, are large producers of several items important in the U.S. agricultural export picture, including almonds, lemons, raisins, preserved fruit, and tresh and frozen vegetables. With all these obstacles, how are U.S. agricultural exports faring in the EC market? The export record varies considerably, depending on the commodity in question. Here’s an update and a look at prospects for major commodity groups. Soybeans: A Strong Market EC demand for soybeans developed rapidly during the 1970 s to meet the needs of an expanding commercial livestock sector. U.S, soybean exports to the EC rose from 5.5 million tons in 1976 to an estimated 9.8 million this year. High-protein teed based on soymeal is used tor intensive poultry, hog, and dairy production In recent years, EC crushers more than doubled their meal output, European Community offers relying largely on U.S. soybeans which account for about four-fifths of EC soybean unports. Since the demand for soymeal itself is not fully met by EC crushers, processed soymeal is also imported, mainly from the United States and Brazil. Although Brazil usually captures the larger share of the market, the United States will contmue to rank as one of the top two suppliers. The EC has been trying, with little success, to reduce its dependence on imports of lugh protein feedstuffs. Soybean cultivation is highly subsidized, but yields have been low, and annual production is only about 18,000 tons. Also, the EC is offering incentives for the production of pulses (broad beans and field peas), rapeseed, and sunflower seed. Yet, so far, none of these crops has been able to supply more than a small proportion of the EC’s protein feed needs. The EC has considered imposing taxes or other barriers on soybean and meal imports, but these proposals have not been adopted. The United States has strongly objected that any such barrier would violate the EC’s in- ternational trade agreements, which assure free entry to all oilseeds and oilmeals. A proposed EC vegetable oil tax seriously concerns the United States because it would cut demand for soybeans and other oilseeds. Besides soybeans, the United States is also the leading supplier of sunflower seeds—bought mainly by West German crushers to produce oil for margarine—and is usually the primary source of peanuts imported by the EC. Corn Outlook Poor Corn, second only to soybeans among the top U.S. exports to the EC, faces a declining or stagnant market. Since 1975, U.S. corn exports to the EC have fallen from 11.8 million tons to an estimated 10 million this year. While high EC farm price sup ports stimulate domestic output of grams for feed, EC import levies ensure that the price of imported corn is always higher than the price of the home-grown product. France is Europe’s foremost feed grains producer, and it has first claim on EC purchases because of the built-in price ad vantage. U.S. corn remains a major EC import only because— unlike barley and soft wheat—local producers are not able to satisfy demand. In tact, though the United States plays the role of residual supplier, we usually gel a larger share of the EC corn market than France, our principal rival. French output appears to have leveled oft for now, so the United States may remain the largest supplier for the next tew years. However, total EC corn con sumption isn’t expected to grow, and it may even decline further. The reason; Barley and wheal are both substituted tor corn in EC teed rations, and their prices tend to be lower because they are surplus EC crops. Corn remains necessary toi some poultry and other feeds, but its use is dropping tor feeds in which wheal, barley, and nongram teedstuffs are cheaper substitutes. Other Feedstuffs Score Gains EC unports of U.S. corn gluten teed (used mainly tor EC dairy cattle and hogs) more than tripled during the last halt of the 1970’5, and the U.S. share ot the market soared to well ovei 80 pel ■ >n 'in U.S. corn refining (wet milling) industry combined high efficiency in manufacturing with active opportunities, obstacles export promotion to boost sales. Com gluten feed enters the EC free of levies or tariffs in accord with the EC’s international trade agreements, so it’s very com petitive as a nutrient in many formulas. However, future sales growth could be jeopardized by an EC proposal to place quantitative limits on com gluten feed imports. U.S. citrus pulp, a carbohydrate feedstuff used in cattle rations, also achieved big sales gams during the late 1970’5. The United States supplies, more than half of the EC's imports, with Brazil providing most of the remainder. Brazil may narrow the U.S. lead, but the United States should retain its position as principal supplier during the next few years at least. Problems for Processed Foods The EC is a very tough customer when it comes to introducing or expanding U.S. exports of many processed agricultural products, as well as unprocessed com modities with high unit values. More than half of EC members’ import needs for processed and high value products (HVF's) are met by trade within the Com munity. The rest comes from a variety of countries, with less than 5 percent from the United States. Variable levies and other import charges render a large portion of American HVF’s uncompetitve on the EC market. The HVF’s hit hardest include poultry, beef, pork, dairy products, eggs, milling industry products fexcept corn gluten feed), and bakery goods. Among meats, the exceptions are edible offals and horsemeat, which are big U.S. sellers on the EC market. Trade in fruits, vegetables, and nuts may* offer greater op portunities tor U.S. exporters, especially for novel and high quality varieties. But the com petition is fierce, and the EC’s own producers have the advantage because their goods are free from import duties and levies. In ad dition, most Mediterranean producers outside the EC and many developing countries receive preferential tariff treatment. Spanish and Israeli oranges, Turkish raisins, Spanish lemons and almonds, and many other items are given a competitive price advantage .over U.S. products. The most rapidly growing American HVP exports are edible nuts. Sales more than tripled during the lt>7o’s. Almonds, like all edible nuts, are free of variable levies, but they are charged a 7- percent tariff. The United States is the major supplier, but we will soon face increased competition from Spain because its almonds will have duty-free access when it joins the EC. The small U.S. share of the EC fresh citrus fruit market is due partly to the high tariff faced by U.S. oranges during October-Apnl, when Spain and other Mediterranean suppliers receive large tariff preferences. Lemons and grapfruit—subject to lower tariffs—are somewhat more successful. On the EC dried fruit market, the Unites States is the leading sup plier of prunes because ot the Community’s own producers, France and Italy, can’t meet demand. However, U.S. prunes still face a 12-percent tariff. U.S. raisin sales may .continue to decline, partly, because EC processors are eligible for sub sidies if they use EC-grown grapes. Dried beans accoujg fur three- fourths of EC unports of dried legumes from the United States. Half go to the United Kingdom for further processing into baked beans and-soup. Preferences are extended to certain Meditarranean 1 suppliers, but tariffs on U.S. dried beans are relatively low. Prepared and preserved fruits and vegetables are among the most difficult HVP’s to expoft to the EC. The U.S. share of EC imports of these items is averaging only about 3 percent. The EC is still the largest un porter of unmanufactured U.S. tobacco, but the extension of tariff preferences to most major U.S. competitors exerts a downward push on U.S. sales. The U.S. market share may continue to drop during the next 5 years, possibly falling below 20 percent. U.S. cigarettes and other manufactured tobacco products are virtually excluded from the EC by very high tariffs. Overall, the EC is a challenging market for some U.S. exports, but an unreachable one for others, lii a free trade atmosphere, a product’s success is 'determined by such factors as quality, availability, price competitiveness, and product differentiation. However, EC unport policies frequently cast the United States in the trade rule ot "least favored nation,” and these policies must be part of any realistic assessment of a U.S. product’s market potential. ITS MACK How quickly YmGctßenitti From Our CbMuiUedi! PHONE 717-394-3047 0r717-626-1164 ■'> ,i i,.'. >.