NETHERLANDS: MIXED REACTION TO USG RETALIATION IN WTO BEEF

UNCLAS SECTION 01 OF 02 THE HAGUE 000075 SIPDIS STATE PASS USTR FOR BILL BUSIS, DAVID WEINER, ROGER WENTZEL USDA FAS FOR ONA/AILEEN MANNIX, OCRA/SHARYNNE NENON AND BETSY BAYSINGER COMMERCE FOR 4212/USFCS/MAC/EURA/OWE/DCALVERT E.O. 12958: N/A TAGS: EAGR ETRD ECON EUN NL SUBJECT: NETHERLANDS: MIXED REACTION TO USG RETALIATION IN WTO BEEF HORMONES CASE Ref: STATE 4100 THE HAGUE 00000075 001.2 OF 002 ¶1. SUMMARY: Government of the Netherlands (GONL) officials cautioned that some EU Member States may push for more protectionist measures in response to the USTR's decision to increase tariffs (reftel),rather than finalizing the U.S.-EU "negotiated solution." The GONL will push the Commission and other EU Member States to support free trade and open markets as they considered next steps. Dutch meat industry reps believe that the Netherlands is being disproportionately penalized by the revised list and question why the U.S. would penalize a trade partner that has been supportive of U.S. positions before the European Commission. End summary. ¶2. Agricultural Counselor and Economic Officer met January 28 with officials from the Trade Policy and Globalization Department (responsible for WTO issues) of the Ministry of Economic Affairs to solicit official reaction to increased U.S. import tariffs on certain categories of Dutch frozen pork. Frozen pork in tariff code 02032940, "MEAT OF SWINE, NESOI, EXCEPT PROCESSED, FROZEN," is the only Dutch export significantly affected by the increased tariffs on EU products in retaliation for continued EU intransigence in the WTO beef hormones dispute. The Netherlands exported approximately 2,018 tons of frozen pork worth $8.9 million to the U.S. in FY 2008, or 5 percent of the EU-27 total. -------------- REACTION FROM DUTCH GOVERNMENT -------------- ¶3. Ministry officials expressed the GONL's disappointment and surprise at USTR's decision to include frozen pork on its tariff list, describing it as a "serious blow" to Dutch meat producers. Dutch government and industry believe that they are disproportionately affected by our decision, as the Netherlands is a major pork exporter, and pork products feature prominently on USTR's list. The GONL asserted that, although it had joined other Member States in voting against allowing imports of hormone-treated U.S. beef, it remained committed to a science-based approach to all agricultural trade decisions. Dutch officials noted in particular their consistent support for allowing GMOs into the EU market if they had been scientifically proven to be safe. The GONL had not supported U.S. beef imports not because of the competition it posed to Dutch beef producers, but because Dutch public opinion remained largely opposed to the use of growth hormones and genetic modifications in food products. Ministry officials added, however, that public attitudes on GMOs had begun to shift, particularly as the bulk of scientific evidence supports the safety of GMOs. As strong proponents of development assistance to third countries, the Dutch also support GMOs' potential to provide sustainable food security. ¶4. Our GONL interlocutors expressed concern that USTR's decision could produce a backlash in the EU. Instead of the desired effect of prompting Member States toward a negotiated solution to the beef hormone case, the new tariffs could be seen as more protectionism - something that the U.S. had said it would not endorse at home or abroad as a valid reaction to the global economic slowdown. EU Member States could opt in favor of their own protectionist measures - a natural reaction in times of financial crisis - thus escalating Q- a natural reaction in times of financial crisis - thus escalating the cycle of retaliation rather than moving toward resolution. ¶5. Despite these concerns, Ministry officials reiterated the Netherlands' strong commitment to free trade and open markets. They said the GONL would push the Commission and other EU Member States in this direction as they considered next steps, and away from retaliatory or protectionist stance. They added that finalizing the existing negotiated solution in the beef hormones case could be the most constructive outcome. ¶6. Ministry officials said the Netherlands, as a major food and flower producer, has a strong voice on agricultural trade issues within the EU. Dutch officials enjoy a close working relationship with EU Commissioner for Agriculture and Development Mariann Fischer Boel and her staff, and the GONL has formal and informal contact on agricultural issues at all levels with the Commission and Member States. -------------- REACTION FROM DUTCH INDUSTRY -------------- THE HAGUE 00000075 002.2 OF 002 ¶7. On January 26, Charge d'Affaires met with representatives of the Dutch meat processing industry who expressed concerns about the revised retaliation list. The Dutch reps believe that the Netherlands is being unfairly singled out and is suffering more than other countries. They noted that Dutch veal has been effectively banned from the U.S. market since the initial retaliation list. Now, the reps say, Dutch pork is effectively banned as well. The reps asserted that Dutch meat exports to the U.S. had been hampered over the past 10 years due to "political" reasons, and now, just as exports have begun to increase again, the U.S. is hampering them again. They asserted that this is particularly unfair because the Dutch have been supportive of the U.S. in finding a resolution to the beef hormone problem. (Comment: The U.S. did not ban Dutch pork for "political" reasons, but rather due to the presence of Swine Fever and, later, the introduction by the Netherlands' largest meat packing company of an unapproved inspection system. Actual Dutch exports over the last 5 years have been minimally affected. Despite the reps' claim to the contrary, the Dutch voting record in Brussels on meat trade issues has been more unsupportive of the U.S. than not. End comment.) ¶8. Charge emphasized to the Dutch that the real problem is that the European Commission (EC) has been dragging its feet on resolving the beef hormone issue, and that industry should urge the GONL to push Brussels to come to an agreement. Negotiations on increased access for U.S. hormone-free beef were going well until they stalled in the EC 7 months ago; if the EC were to return to the table and complete negotiations, the U.S. would lift its tariffs. ¶9. The Dutch reps asked if it would be possible for the new Administration to delay implementation of the revised list. This would give industry and government some negotiating space. The Charge said we would relay the request, but a delay was unlikely. -------------- COMMENT -------------- ¶10. In our meetings, Emboffs assured the GONL and Dutch meat producers that the USG's retaliation list was not designed to target the Netherlands or any other EU Member State, but rather to prompt movement by the EU in the beef hormone case. We urged the GONL and industry to use the Netherlands' strong voice in the EU to encourage the conclusion of a negotiated solution in the WTO case, as this would be the fastest and most efficient means of reducing the USG's retaliatory tariffs on EU products. GONL and industry reps said they would take USG points under consideration as they discussed next steps with the European Commission and other Member States. GALLAGHER