The abolition of tariffs between the EU and the US, good news for the Catalan agri-food sector

[UPDATE 06/15/21] As part of the bilateral summit between the United States and the European Union, it has been agreed the suspension for the next five years of all tariffs following the disputes between Airbus and Boeing, one of the longest trade disputes in the history of the WTO (World Trade Organization).

🇪🇺🇺🇸GOOD NEWS ✈ We have an Airbus-Boeing Deal #EUUSummit pic.twitter.com/3Y662xqhJW

— Valdis Dombrovskis (@VDombrovskis) June 15, 2021

The vice-president and head of trade of the European Commission, Valdis Dombrovskis, celebrated via Twitter the ratification ofan agreement that was already anticipated following the arrival of Joe Biden in the White House. After a month of being appointed president of the United States, he and the president of the European Commission, Ursula von der Leyen, announced a four-month truce (which expired next July 4) for temporarily suspend the export tariffs that both regions imposed on each other, as a sign of good will for the "new start" in relations between the EU and the US, as defined by von der Leyen.

Glad to speak to @POTUS @JoeBiden this afternoon.

As a fresh start for our 🇪🇺🇺🇸 partnership we agreed to suspend all tariffs related to the Airbus-Boeing disputes on aircraft & non-aircraft products for an initial period of 4 months. We are also committed to solving these disputes.

— Ursula von der Leyen (@vonderleyen) March 5, 2021

In October 2019, the tariff increases in European countries. The Trump administration decided to hit the European Union with trade tariffs equivalent to $7.5 billion, to offset European subsidies to Airbus. These tariffs, a 25% increase in the rates for some of the products most exported to the United States, were applied mainly to the agri-food sector and the most affected were non-carbonated wines with less than 14% alcohol content in containers of up to 2 liters, olive oil and frozen pork.

The Catalan agri-food sector is in luck

So, despite the temporary nature of the agreement, five years, the agreement is very good news for Catalan companies that export food and beverages to the US, which see a first step to recover lost competitiveness in this market key for the food industry.

It should be noted that exporting companies assumed a large part of the cost of the tariff increase; the impact of these tariffs was €16.4M, which resulted in a total cost of €56M for Catalan companies, including taxes and loss of business.

In fact, since March 2021, when the EU and the US announced the removal of provisional tariffs, Catalan food companies 19 M€ have already been saved, according to calculations by the Knowledge and Strategy Area of Prodeca with data from Datacomex.

The United States, 9th destination market for Catalan agri-food products

In 2020, Catalonia exported food and beverages worth €289.5M in the United States, which was the 9th destination market for Catalan food products, a setback compared to the previous year: the impact of Trump's protectionist policies represented a decrease in exports to the United States of 10.58%. Although this decrease, in the last 10 years sales of Catalan products in the USA soared by 125% and 65% in the last five, an upward trend that has been truncated by the economic policies of the American government. 

The main sectors affected by the increase in tariffs were wine (-10% exported in value compared to 2019) and olive oil (-24%). In total, 22.67% of the value of food products exported by Catalonia to the USA in 2020 were affected for additional tariffs.

And it is that by products, the exports of still wines affected decreased by 23% in value. It is noteworthy that the USA is the 1st market in this subsector. As for virgin olive oil, it decreased by 8.59% in value. Frozen pork was also affected in terms of percentage (-82% in value compared to 2019), but not so much in absolute numbers, since due to the necessary certification, very few companies export this product to the USA. In total, the value of the affected products was €66.6M.