Trade war looms over higher tariffs
September 20, 2012
The European Union’s ambassador to Norway is calling the Norwegian government’s decision to raise import tariffs on meat and cheese “a clear violation” of a European trade agreement that took effect earlier this year. The higher tariffs are aimed at protecting and further raising the prices of Norwegian agricultural products, and EU Ambassador Janos Herman warned “there will be reaction” within the EU.
“It was a surprise to read about this (the higher tariffs) and I’m disappointed,” Herman told newspaper Aftenposten on Thursday. He said that Article 19 of the agreement regarding the European Economic Area (referred to as the EØS in Norway) states that all parties to it shall work towards steady liberalization of trade of agricultural products.
The Norwegian government coalition’s decision — at the insistence of one of its two small members, the rural-oriented Center Party — to raise import tariffs by recalculating how they’re set does exactly the opposite. Norway’s government is protecting and effectively increasing public subsidy to Norwegian farmers at the expense not only of Norwegian consumers (who already pay among the highest food prices in the world) but of Norway’s trading partners as well. Foreign beef, lamb and most cheese will be kept out of the Norwegian market, forcing Norwegian consumers to buy Norwegian meat and cheese at even higher prices.
“If they (the government) really do this, yes, there will be reaction,” Herman told Aftenposten. “I don’t know what these reactions will be, but we take this very seriously.”
Aftenposten reported that the EU Commission had sent a letter to Norway’s Ministry of Agriculture in May, warning the Norwegians against moving forward with higher customs duties on cheese. At that time, Norwegian farmers were in the midst of disruptive protests and demonstrations around the country because they were angry they didn’t get the huge increase in direct state subsidy they’d demanded. They received pay raises that were in line or even higher than those granted other workers, but they wanted much more to cover what they claim are the higher costs of farming in Norway.
EU officials were clearly worried already then that the government would ultimately cave in once again, not least since the Center Party relies on farmers to form its major base of constituents. The letter, reported Aftenposten, stated that EU officials hoped “to avoid a situation” where Norway’s agricultural agreements with the EU “would be put in danger because of one-sided measures” from Norway.
Herman stressed that the EU’s intention is to liberalize trade, not impose more protectionism as the Norwegian government is set to propose in its state budget, which will be presented to Parliament next month. Because the three government coalition parties (Labour, the Center Party and the Socialist Left) have a majority in Parliament, the budget with its tariff proposal is likely to be approved.
“Now we need to gather all the details of what Norway intends to do,” Herman said. “This proposal has attracted attention from ministers in several EU countries. That means it’s already up at the political level.”
Even Norway’s closest neighbours, Sweden and Denmark, are reacting strongly to the proposal for higher tariffs.”This is something we have feared, that Norway would put higher customs duties on cheese and meat,” Danish Agriculture Minister Pia Olsen Dyhr told Norwegian Broadcasting (NRK). “We have to discuss with our EU colleagues how we’ll handle this, because it defies the agreement we have with Norway.”
Norwegian Foreign Minister Jonas Gahr Støre, whose Labour Party normally supports freer trade and the EU, is believed to have gone along with the Center Party’s and farmers’ demands reluctantly, and for the sake of government unity. Now he has to defend the prospect of higher tariffs, and claims the threats of a trade war (which could put higher tariffs on Norwegian seafood and oil) are exaggerated.
“We have good channels where we can clarify and explain the proposed changes with the EU,” Støre told Aftenposten. “That will be important, because we believe there’s no basis for some of the worries.”
Støre also claimed that Norway has the right to make the tariff changes within the framework of World Trade Organization rules, “and I would warn against speculating in countermeasures from our trade partners.”
He admitted that Norway had pledged to contribute to increased trade liberalization regarding food products, but pointed out that it must occur within the framework of each individual country’s agricultural policies. Without the higher tariffs, he argued, Norway’s agricultural policies would not be in line with what the government has set.
Meanwhile, neither Støre nor other government leaders, and certainly not the farmers, seem worried about what consumers think about the prospect of even higher prices. While relatively high salaries in Norway mean that many Norwegians can afford then, a wave of discontent has been building for months if not years, even among Norwegian voters who have sympathy for Norwegian farmers. Their patience with ever-rising prices and poorer selection than in most other countries is wearing thin, according to the numbers of Norwegians driving over the border to shop in Sweden and the reactions of opposition parties representing a rising number of constituents.
“The government doesn’t understand the feelings attached to food and food tariffs around the world,” Ketil Solvik-Olsen of the Progress Party, which favours maximum market liberalization. “And we can’t demand that other countries open up for more of our fish exports when we boost barriers to meat and cheese ourselves.” Norway’s large seafood industry already has expressed deep concern about the higher tariffs, and fears they will backfire on their own exports.
Svein Flåtten of the Conservative Party said he understands the EU’s reaction. “It amazes me that the government argues that it has the law on its side, because this is about much more than the law,” Flåtten told Aftenposten. “It’s about politics and business and, not least, loyalty towards our trading partners.” He said he thinks Norway “is putting itself in a very difficult situation.”
Views and News from Norway/Nina Berglund
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