If the ongoing US government investigation into imported Spanish olives ends up imposing anti-dumping duties, it could potentially set a dangerous legal precedent and question the entire functioning of the EU Common Agricultural Policy (CAP), experts and farmers warn.
“The argument that the US is using to punish Spanish olives can be used systematically as the recipe for all the other sectors where farmers receive direct payments,” Joao Pacheco from the Farm Europe think tank told EURACTIV.com.
Pacheco, who was also a former Deputy Director General in the European Commission’s DG AGRI, said that the US argument is not valid as EU direct payments are in a “safe” green box in terms of the World Trade Organisation (WTO) and the OECD has concluded that they don’t have trade-distorting effects
However, he warned that Washington could use it again, for instance, on French wines or olive oil in general.
“In the American system, they have adopted a pragmatic approach. Especially, those who have their domestic interests questioned, they push the government to act to protect themselves,” he noted.
As for what next step the EU should take, Pacheco explained that the best reaction was to refer to the WTO and follow a “by the book” process.
In June 2017, the US Coalition for Fair Trade in Ripe Olives, which represents the nation’s ripe olive industry, filed a petition asking the US Department of Commerce (DoC) and the US International Trade Commission to open an investigation into imports of Spanish ripe olives.
Particularly, the Coalition asked the competent US authorities to impose anti-dumping and anti-subsidy duties on imports of black olives from Spain, arguing that such imports are performing at low prices and are being subsidised under the CAP.
A month later, the DoC initiated a countervailing duty investigation. The objective was to determine whether Spanish producers and exporters of ripe olives are receiving countervailable subsidies and, therefore impose duties.
On 28 November 2017, the DoC preliminarily determined that Spanish producers and exporters of ripe olives were receiving those subsidies, like the basic payment scheme, greening payments and the second pillar of the CAP, the EU rural development policy.
In June, the DoC issued its final conclusions and established a final dumping margin of 20.04% for all ripe olives producers from Spain and a final countervailing duty (CVD) margin of 14.75 % for all ripe olives producers from Spain.
At the same time, the US International Trade Commission (ITC) initiated another investigation into whether US imports of Spanish olives damaged the country’s domestic industry.
Its final decision is due on 10 July and if it concludes there is damage, then definitive anti-dumping and anti-subsidy measures will be imposed by 24 July.
According to the DoC, the “crop type determines the grant amounts provided under [these programs] due to the direct reliance on the grant amounts provided under previous programs, which based grant amounts on the crop type”.
Critics claim that this argument is groundless, considering that since the 2003 reform, the amount of support the farmers receive is not linked to the quantities they produce.
On the contrary, it is designed to provide EU farmers with a safety net against volatile market prices based on the number of hectares farmed on the condition that “they respect strict rules on human and animal health and welfare, plant health and the environment”.
In addition, analysts claim that on a global level, the CAP’s direct payments are fully compatible with the WTO framework as they are part of the ‘green box’, which involves direct payments to producers and are fully decoupled from production.
These mainly involve income guarantee and security programmes (natural disasters, State financial contributions to crop insurance, etc.), programmes to adjust structures and environmental protection programmes.
The European Commission
The Commission has condemned the decision by the US DoC to impose “unreasonably high and prohibitive” anti-subsidy and anti-dumping duties on Spanish olives. It claims it’s an unacceptable and a protectionist measure.
Speaking at the AGRIFISH council on 18 June, EU Agriculture Commissioner Phil Hogan said that neither the process nor the substance of the US decisions was justified.
“We expected fair treatment for the Spanish exporters and producers. Instead, due process has not been respected. Unrealistic deadlines were imposed. Evidence submitted by the Spanish exporters and Spanish authorities has seemingly been ignored.”
Hogan also said he saw in this action as the US targeting the EU decoupled and non-product specific agricultural payments.
“We are examining carefully the details of the decisions and the process and will react appropriately – including at the WTO if this is necessary,” he emphasised.
US market is hard to replace
In an emailed response, ASEMESA, the Spanish Association of Exporters and Industry of Table Olives, told EURACTIV that the Spanish government was working closely with the Commission in analysing the DoC decision but formally it is only the Commission who can refer the case to the WTO.
“In our view the EU should indeed defend its CAP programmes at every possible level, including in actions before the WTO,” ASEMESA noted.
The association added that the affected companies are certainly looking at alternative markets.
“However, due to its usual volume of imports, the US market is very hard to replace,” it warned.
Asked whether it’s an isolated case and the US government does not target the CAP system in general, ASEMESA replied, “It is difficult to ascertain the intentions of the US trade authorities but the fact is that in order to countervail the CAP subsidies the US authorities have had to rule on the CAP system as a whole”.
According to data, a 42.4% decrease in exports of black olives has already been recorded for the first quarter of 2018.