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Thursday reports relative to the Juncker-Trump meeting:
Europeans agreed ... to buy billions of dollars of American soybeans.
Now, my question is quite simple: Does the European union buy soybeans or do companies within EU member nations actually buy soybeans?
And if the answer is that the companies are the actual purchasers, can the EU Commission force or otherwise obligate companies to purchase US soybeans instead of their existing non-US suppliers.
According to Reuters, it's not the EU but companies:
“It is not the European Commission that buys, but the industry, and traders who look for goods where they are the least expensive for their financial interests,” one European soybean trader said.
Reuters also quotes a market reseacher saying that the statement is "largely symbolic", and that soybean imports would have increased anyways for economic reasons (because of a decrease in price in the US and an increase in South America).
CNBC also agrees and says that the EU has no real measure to increase purchases, as there are no taxes or similar on soybeans which could be lowered or removed:
According to Donovan, even though the EU promised to buy more soybeans, it doesn't actually have the power to force European farmers to purchase more from the United States. "The U.S. is already the largest exporter of soybeans to the EU. There are no subsidies, trade taxes or quotas on soybeans in the EU. Private farmers decide whether to buy more soybeans or not," he said.
According to Thinkprogress, the Wall Street Journal also agrees (I'm citing TP because the WSJ article is behind a paywall):
According to the Wall Street Journal, Juncker, as the head of the European Commission, has little power to promise increased soybean or energy purchases, as they rely on private companies business decisions and “market conditions.”
“[The LNG and soybean pledge is] a bit of a stunt,” an EU official told the Journal. “You give something without giving anything.”
can the EU Commission force or otherwise obligate companies to purchase US soybeans instead of their existing non-US suppliers.
Not directly, but it doesn't need to anyway. Here's why:
Since China retaliated against US tariffs, the price of US Soya has fallen steeply. China now buys soya from Brazil. The price of Brazilian Soya has consequently risen. EU businesses will naturally buy a little less from Brazil and a little more from the USA.
This doesn't help US soya farmers because the total EU market for soya is only a fifth of China's. So EU businesses cannot make up for the losses caused by the trade war with China.
The EU negotiates a single trade deal for all of its member nations, who are obligated legally to adhere to any such agreements, which fall largely into the arena of import duties (or lack of).
So if the EU agrees to a favorable trade deal for US soybeans, its member nations are not obligated to buy those soybeans. However, if the price is right, they would be wise to take advantage of a good deal.
Aside from the US, the only other major producer of soybeans is Brazil, who is actually surpassing the US in soybean production.
There is a problem... Brazil follows very destructive farming practices with soybeans, as this article notes. Soybeans are particularly hard on soil, extracting a lot of nutrients when grown in volume. In the US, farmers practice crop rotation - soy one year, grasses for two years to revitalize the soil. Brazil simply runs soybeans until the soil is exhausted and almost nothing will grow in it, and then cuts down more rain forest. With Brazilian soy production soaring, the deforestation has increased to a previously unheard of level.
It is true that US soybeans have been genetically modified to increase insect resistance, by increasing production of an insect repellant substance the soy plant was already making. It is also true that the EU overlooks their anti GMO stance when it's to their benefit - such as buying US soybeans in the past.
It is possible, though only anecdotal evidence to back this up, that the anti GMO position is more to benefit local agriculture than any real dangers of that process. The US and the EU have had agricultural trade spats, on and off, for decades... one well known incident was the Chicken War that occurred between 1961-1964. Understand that it is in every nation's strategic interests to keep local agriculture viable, so that there is a local source of food in the event that international commerce is disrupted by war. That can be seen as protectionism by other nations who export food. It's a touchy subject.
So one can invite the subjective issues of GMO crops, or the very real deforestation issues of Brazilian crops.
The trade standoff with China continues, but the US and EU coming to an agreement can't help their case any. It remains to be seen if the Chinese tariffs that triggered the standoff are worth more to them than the business they'll lose.
Does the European Union buy soybeans?
No, but the EU can prevent its citizens from buying soybeans.
The EU has lots of anti-GMO rules, while the USA doesn't care as much.
As I understand the current situation, soybeans from the USA aren't tracked whether or not they are GMO, and therefore don't confirm to the current EU requirements.
If the EU keeps those anti-GMO requirements, the USA can claim at any time that the EU has artificial barriers against soybean trade, and raise tariffs.
This future tariff would be in compliance with WTO rules (1), and easily explainable to the public: "They promised to buy more, but kept an artificial barrier in place. Bad people!"
So in effect, the EU has given Trump a perfect excuse to sell the next trade war to the USA public.
(1) IANAL, but based on the current round of new tariffs seem to be acceptable to the WTO. So I ask myself: What would it take to not comply with the WTO rules?
