BUSINESS

EU says farming 'not part' of US trade deal, contradicting Trump

July 27, 2018
US President Donald Trump tours US Steel's Granite City Works steel mill in Granite City, Illinois on Thursday. — AFP
US President Donald Trump tours US Steel's Granite City Works steel mill in Granite City, Illinois on Thursday. — AFP

BRUSSELS/ NEW YORK — The EU insisted on Friday that proposed trade talks between Europe and the United States would not include farming, in contradiction to a claim by President Donald Trump.

"I have been very clear on that... Agriculture is not part of it, only the things that are explicitly mentioned in the statement," EU Commission spokeswoman Mina Andreeva told reporters in Brussels, in reference to a joint communique after White House talks on Wednesday.

"When you read the joint statement ... you will see no mention of agriculture as such, you will see a mention of farmers and a mention of soybeans, which are part of the discussions and we will follow up that," she said.

The clarification came a day after Trump hailed the agreement as a major victory for US farmers, who have seen their exports plummet due to Washington's protectionist policies.

"We just opened up Europe for you farmers," he said at a rally in the farm state of Iowa, where Trump has seen his strong support in opinion polls dim.

Led by farming powerhouse France, the EU is under pressure to underline that no such concession was made to Trump, especially amid widespread opposition in Europe to seeing an influx of genetically modified imports from the US.

In the US on Wednesday, Trump and Juncker announced their plan to defuse a festering trade row, that in effect saw Washington back off a threat of auto tariffs against Europe, at least for now.

A statement mentioned very briefly that further trade talks would seek to "increase trade" in soybeans. An senior EU official insisted this would have no consequence in the talks and that markets alone will decide on the level of US soybean imports to Europe.

President Donald Trump also said the European Union would soon become a "massive" importer of US natural gas, but some energy analysts expressed skepticism at such an outcome.

Trump, joined by European Commission chief Jean-Claude Juncker, said Wednesday that the two key economies reached agreement to boost trade of liquefied natural gas (LNG) and soybeans as they defused an escalating trade dispute.

But exporting LNG is an expensive business and likely will not be a big part of European energy anytime soon, experts said Thursday. "What counts for the European consumer is the price," said Thierry Bros, a researcher at the Oxford Institute for Energy Studies, who noted the lofty costs of US LNG.

After Europe liberalized its energy markets, "the price is set between buyers and sellers at the exchange in Holland," he added.

Unlike oil, which already is in liquid form, natural gas must first be liquefied at a factory in the United States before it is shipped and then re-gasified in Europe at another plant. By contrast, conventional natural gas can just be sent to the EU via pipeline.

"I don't see how the US can force European clients to buy US liquefied natural gas that is more expensive," said Matt Smith, analyst at ClipperData.

A senior EU official agreed with that assessment. "We are not going to turn into a Soviet style economy" that can order up more imports, the official said.

"The EU wants to increase imports... the text does not say that the EU is committing to increase imports. It is not a declaration of intent."

The spotlight on US natural gas exports comes as supply of the comModity remains robust amid an American shale boom that has elevated US standing in the world of oil and gas.

LNG exports from the US quadrupled in 2017 and the country became a net exporter of natural gas for the first time in 60 years. Boosting exports further would lower the US trade deficit, a focal point for Trump.

"The European Union wants to import more liquefied natural gas (LNG) from the United States to diversify its energy supply," the joint agreement said.

Juncker said the EU was prepared to invest to build additional infrastructure for LNG. But analyst Bros notes that is not really the issue: current LNG import facilities are only running at about 26 percent of full capacity.

European gas imports have been on the rise for a while, increasing 4.3 percent in 2017 to 467 billion cubic meter as production fell 5.3 percent to 118 billion cubic meters.

The trading bloc has sought to diversify supply away from Russia, which currently accounts for about one-third of the region's gas.

Europe has embraced gas from Azerbaijan as part of this strategy. But LNG also is a promising source of additional supply, whether from Qatar, Mozambique, Australia or the United States.

Trump has repeatedly touted US gas as a solution to Europe's conundrum, while castigating the Nord Stream 2 pipeline project that could double gas shipments from Russia to Germany.

US exporters until now have sent most gas to Asia and Latin America. In 2017, more than 50 percent of US LNG exports went to three countries —Mexico, South Korea and China.

But "the ramp up in US LNG exports has only just begun," said S&P Global Platts, which projected that LNG exports from the US would more than quadruple by 2020 following construction of new liquefaction plans, according to S&P Global Platts.

US natural gas producers have become more efficient in extracting natural gas, another factor that "would likely raise the competitiveness of US LNG," said S&P Global Platts. — AFP


July 27, 2018
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