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.
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