WASHINGTON, D.C. — Marketing agents in three leading fruit-producing states are scrambling for a way out of a political firing line set up by European trade officials, who are proposing tariffs as high as 100% in response to U.S.-imposed steel tariffs.

On April 19, the European Commission proposed levying more than $300 million in trade sanctions on politically sensitive U.S. products, including Florida grapefruit and Washington and Oregon apples and pears.

The plan, which would assign tariffs worth $336 million beginning June 18, also would target steel from Pennsylvania, Ohio and West Virginia.

Within a week of the announcement, the U.S. was asking EU officials to delay their decision on retaliatory tariffs. A commission spokesman said the request is an indication that the U.S. was considering compensating the EU for the negative impact of the steel tariffs.

U.S. trade officials, as of April 25, were not saying whether they would offer compensation.

The proposal, which would require majority backing from the 15 EU member states, is designed to target exports from states that figure to be key battlegrounds in the 2002 House and Senate elections — and may be pivotal to President Bush’s re-election in 2004.

The aim of the proposal is to pressure the U.S. to reconsider its recent decision to impose tariffs of up to 30% on steel imports, including $2.1 billion of steel from Europe. The EU claims the steel tariffs proposed by President Bush are politically motivated and not based on economic need.“There’s a feeling we should at least keep this weapon in play for the time being, in the hope it’ll persuade the Americans to move, but there’s no final decision on whether to pull the trigger,” an EU diplomat told Britain’s Financial Times.

There is disagreement, the Times noted, about the legality of such short-term retaliation in World Trade Organization rules.

U.S. EXPORTERS HIT:

For fruit marketing agencies in the U.S., however, there is universal agreement that such tariffs would damage their export business.

“If the tariff structure I’ve seen is so imposed, it would be prohibitive to ship in there at those prices,” said Richard Kinney, executive vice president of Lakeland-based Florida Citrus Packers Inc. “What you didn’t ship would further tax an already saturated domestic market, both in juice and fresh.”Florida typically exports about 6.5 million to 7 million cartons of red grapefruit to Europe each year, Kinney said.

TWO PROPOSALS:

As of April 25, commission delegates were considering two courses of actions, both of which involve duties on fruits. The first plan, retaliatory tariffs that would be imposed effective June 18, contains 100% duties that on a number of commodities, including apples, pears and citrus, said Mark Powers, vice president of the Northwest Horticultural Council, Yakima, Wash.

The second proposal, which would be triggered within five days of a WTO ruling in favor of the EU — probably sometime in 2003, Powers said — contains 15% tariffs on pears, apples, citrus and stone fruit and 13% on dates, figs, guava, mangoes, pineapples and avocados. Those duties would be imposed no later than March 20, 2005, if the matter is not resolved by then.

What products would be hit was unclear, Powers said.

“It’s a fluid situation,” he said. “Even though the product may be on the list, it doesn’t necessarily mean that it may be selected for retaliation. It’s like a laundry list. They list as many products they think are conceivable targets and select the ones they deem the most effective. Of course, politics will come into play to a large degree.”

The U.S. likely would oppose any unilaterally imposed trade sanctions, Powers said.

“Our position would be to oppose them doing that without going through the process that’s set up in the WTO,” he said. “Otherwise, what’s the point of having this WTO if nobody follows the rules?”

TRADE WAR POSSIBLE:

Kraig Naasz, president of the Vienna, Va.-based U.S. Apple Association, said sanctions would harm everyone involved.

“Clearly it would have a devastating impact on our sales of apples to Europe,” he said. “But I believe that (unilaterally imposed tariffs) will be averted. If the EU were to unilaterally impose duties of this nature, it would spark a major trade war that neither group would like to see take place.”

That the U.S. and EU need each other as trading partners overrides all other concerns, Naasz added.

“We need each other, and that’s the basis of an ongoing trade relationship between the two most important markets of the world,” he said. “Neither side can afford to spark a trade war.”

Support for retaliation, nevertheless, is evident in Europe, the Times reported.

“The commission set out its ideas and while member states will need time to consider them, the initial reactions were positive and supportive of our strategy,” a spokesman for EU Trade Commissioner Pascal Lamy told the paper.

Additional tariffs on a wider range of products might be applied if the WTO supports the EU on the steel issue. That list includes steel, clothing, fruit, electrical equipment and firearms.

The EU has until May 17 to file its product lists with the WTO.
“We’re just monitoring the situation right now,” said Jeff Correa, director of international marketing with the Milwaukie, Ore.-based Pear Bureau Northwest. “There’s not much we can do in terms of lobbying. It seems it’s an internal EU matter.”

Oregon and Washington shipped 575,000 44-pound cartons of pears to Europe in 2001 and 300,000 in 2000, Correa said.
Powers estimated that as much as 5% of the Pacific Northwest’s apple exports and nearly 10% of the region’s pear exports are shipped to the EU each year.

“It’s not our No. 1 market, but it is some considerable product that would be affected,” Powers said.

Heavy tariffs likely wouldn’t kill the export deal, Correa said.
“I don’t think it would stop all shipments, but it would definitely hamper the exports to those markets,” he said. “Now, we’re having a tough time dealing with the strong dollar. That has had a substantial impact on our markets.”

Also at stake, for Washington, is a yearly apple export volume of 800,000 to 1 million cartons.

“We’d like to build our export business on the basis of fair trade,” said Welcome Sauer, president of the Wenatchee-based Washington Apple Commission. “Not one apple imported into the U.S. has a tariff of any kind applied to it. This potential tariff is one more example of how our products are taxed as we try to export them to other countries. This is not a time for decreasing fair trade. We want more fair trade.

“We’re not going the right direction here.”

Alternative markets are being developed, but nothing has materialized with the breadth and potential economic impact of Europe, said Bruce McEvoy, chief executive officer of Vero Beach, Fla.-based citrus exporter Seald Sweet LLC.

“There’s wonderful markets like China on the horizon, but that will take time,” McEvoy said. “You just don’t shift 7 million cartons of volume that quickly.”