European Union looks to WTO after Russian food sanctions
By CaSEY MINTER
The Russian embargo on food products will hit European Union farmers hardest, but the impact on world prices also worries U.S. exporters.
Russia last week cut off food imports from the EU, U.S., Canada, Australia and Norway. The ban was in retribution for western economic sanctions against Russia for its political and military involvement in the Ukraine and Crimea.
Before the ban, Russia was the EU’s second-largest customer for food exports after the U.S. In 2013, the EU exported $15.8 billion worth of agricultural products to Russia. The U.S. exported $1.3 billion in food to Russia last year.
Overall, the food products exported to Russia last year represented less than 1 percent of total U.S. agriculture exports of $144 billion. The three largest U.S. exports to Russia were poultry meat and products at $310 million, tree nuts at $172 million and soybeans at $157 million.
Beef and dairy products will not be directly affected by the ban because beef exports to Russia were closed in 2013 and dairy exports stopped in 2010.
However, the impact on world prices for commodities such as dairy is a concern, even for exporters not directly affected by the Russian ban, U.S. industry officials say.
Alan Levitt, a spokesman for the U.S. Dairy Export Council, warned there may be ripple effects from a suddenly flooded world market.
“We don’t ship anything to them, but that’s not to say there won’t be an impact on our market,” Levitt said.
Russia is the world’s second largest dairy importer and its major supplier before the import ban was Europe. European countries will now have to find a new buyer for products that had previously been imported by Russia.
“In a weak world market having all this extra supply on the market will not be helpful,” Levitt said. “There could be a little bit of a disruption in world trade for a while until this European product finds a new home.”
In addition, the EU will most likely go to the World Trade Organization seeking recourse, a trade expert says.
“I think there’s a huge likelihood of that happening,” said Craig Pirrong, director of the Global Energy Management Institute at the University of Houston. “Russia has been accused even before all this of being a chronic violator of WTO rules, and this is a legal forum that would allow the EU and U.S. to address them.”
Russia became the 156th member of the WTO in 2012 after a grueling 19-year application process that was riddled with controversy and conflict, he said. EU and U.S. officials hope that appealing to the WTO will make the sanctions they imposed earlier in July due to Russia’s annexation of Crimea and continued aggression in Ukraine a worldwide issue.
As of Monday, Russian grocery stores still had shelves stocked with EU and U.S. food, but once the reserves run out the country will have to find new markets to make up for now-restricted imports. Russia is looking primarily to South America to fill that gap.
EU officials plan on holding talks with South American leaders, appealing on moral grounds to dissuade them from stepping in to replace EU and U.S. exports, Pirrong said.
With billions of dollars to be made, South American farmers and processors likely won’t go along, he said.
“I doubt there’s much potential that South America will agree,” Pirrong said.
Brazil has already authorized the immediate export of chicken, beef and pork from 90 meat plants, and Russian officials have also contacted Argentina, Chile and Paraguay concerning more exports from those countries.
On the West Coast, growers will see around $175 million worth of exports disappear with Russia’s ban. That’s less than 1 percent of the region’s overall exports.
California: In 2012 Russia was California’s 15th largest agriculture export trading partner, with a total value of $144.7 million, said Steve Lyle, spokesman at the California Department of Food and Agriculture.
“Total California agriculture export value was $18.18 billion, so Russia represents less than 1 percent of that number,” Lyle said.
The top commodities exported to Russia from California last year were almonds at $102.4 million, pistachios at $17.4 million, rice at $5.8 million, prunes at $5.8 million and wine at $5.1 million. In light of Russia’s political problems, some California exporters had already started turning down business in Russia, reducing trade by as much as two-thirds of last year’s level and seeking more business in China and elsewhere, an industry representative said.
Washington: Growers sold $23 million worth of last season’s pears and apples to Russia, Mark Powers of the Northwest Horticultural Council told the Yakima Herald-Republic.
Of that, $12 million was 598,000 boxes of apples, Todd Fryhover, president of the Washington Apple Commission, told the Capital Press. Russia bought 550,000 boxes of pears worth about $11 million from Washington last year.
Oregon: Exports to Russia totaled $5.3 million in farm products last year. Of that, $4.3 million was raw agricultural products and $1 million of manufactured agricultural goods. That makes up less than 1 percent of the yearly $3 billion of farm products that Oregon exports worldwide.
Idaho: The Russian ban does not include live animals, the major agricultural export from Idaho to that country. A total of $16.8 million in Idaho agricultural products were exported to Russia in 2013 and live beef and dairy cows accounted for $15.1 million of that. Idaho exported $1.3 million worth of pulse crops, including dry peas, lentils and chickpeas, to Russia last year. Idaho potatoes, which have been a growing export to Russia, will now be restricted as well.
Capital Press reporters Dan Wheat and Sean Ellis contributed to this story.