European Union + UK 2020 Export Highlights

Source: U.S. Census Bureau Trade Data - BICO HS-10
*Excludes soybeans

Highlights

The 27 Member States of the European Union and the United Kingdom were collectively the fifth largest destination for U.S. agricultural exports in 2020 at $11.2 billion. This represents a 4 percent decline from 2019. The United States maintained the No. 2 position in EU market share at 9 percent, second only to Brazil. On June 20, 2018, the EU adopted additional retaliatory tariffs ranging from 10 percent to 25 percent on a range of agricultural, consumer, and industrial products and materials imported from the United States. While these tariffs and discriminatory import regulations continue to challenge U.S. agricultural exports, the EU maintains a strong position in the top 5 of U.S. agricultural product export markets. The commodities that saw the largest increase in exports to the EU in 2020 were prepared foods at $62 million, wheat at $35 million, and vegetable oils at $16 million. Reductions in exports were seen in tree nuts ($236 million), planting seeds ($53 million), wine & beer ($31 million), processed fruits ($22 million), feeds & fodders ($13 million), and soybean meal ($7 million). Despite these reductions, the EU remained the top market for tree nuts, planting seeds, and pulses.

Drivers

• In 2020, the decline in U.S. agricultural exports to the EU was shared across sectors – planting seeds, processed products, tree nuts, and feed. This year’s decline in the feed sector deepened the impact of the previous year’s decline, partially the result of Section 232 retaliatory tariffs that the EU imposed on corn, sorghum, and rye from April 27 to August 27, 2020.
• The EU imposition of 25 percent tariffs in retaliation for U.S. duties on steel and aluminum has contributed to a decline in U.S. exports to the EU for some processed agricultural products. In addition, in November 2020, the EU imposed trade retaliation on U.S. goods, including 25 percent tariffs on various agricultural products, in connection with a WTO dispute against the United States related to large civil aircraft. These additional tariffs and the economic impact of COVID-19 altered the EU’s imports and consumption of U.S. agricultural goods.
• The wine & beer sector has been hit particularly hard by the COVID-19 pandemic, largely due to decreased demand for alcoholic beverages in the hospitality sectors that have experienced unforeseen closures and capacity restrictions. Uncertainty caused by the United Kingdom’s (UK’s) exit from the EU has impacted the transatlantic wine trade, particularly because the UK serves as the major hub for bottling U.S. wine bulk shipments destined for the EU.
• Record U.S. harvests put downward pressure on almond unit values in 2020. The unit value of almonds dropped nearly 20 percent, which contributed to the decline in tree nut export value. U.S. exports of pistachios and almonds continued to be affected by trade disruptions from aflatoxin phytosanitary requirements.
• U.S. wheat exports to the EU, primarily durum to Italy, increased due to a dip in production in the EU and Italian millers buying extra supply because of COVID-19. In calendar year (CY) 2021, it is anticipated that U.S. wheat exports will decline as production and supply stabilize.
• In CY 2020, U.S. exports of prepared food to the EU reached a record high of $613 million, up $62 million from the previous year. The Netherlands, UK, and Austria accounted for 74 percent of the export growth with increases of $9 million, $24 million, and $11 million, respectively. Likely driven by increasing demand for shelf-stable products during the COVID-19 pandemic, canned prepared foods saw a 233-percent increase, from $5 million to $16 million. Most notably, U.S. exports of canned prepared foods to the Netherlands rose from $2 million to $10 million.

European Union’s Agricultural Suppliers

Looking Ahead

Several non-tariff barriers continue to have profound effects on U.S. agricultural exports to the EU. In addition, COVID-19 has greatly impacted EU economic growth, tourism, restaurant dining, and demand for certain food, and the Eurozone economy declined by 5.1 percent in fiscal year 2020. However, it is expected that the EU will rebound quickly as a major importer of U.S. agricultural products following pandemic and economic recovery. Despite the withdrawal of the UK from the EU, the EU is expected to remain a key market for exports of U.S. agricultural goods. Supply interruptions resulting from the UK’s withdrawal have the potential to present both opportunities and threats for U.S. agricultural exports. In addition, potential removal of retaliatory tariffs would significantly increase opportunities for U.S. agricultural exports, most notably from the feed and wine & beer sectors.

The United States and the EU are both competitors and robust trading partners in agricultural products. Nevertheless, there is much work to be done on trade-restrictive policies. Pressing issues include tariffs, geographical indications, and the EU’s hazard-based approaches, including regulatory policies on maximum residue limits for pesticides, regulatory timelines for approving genetically engineered products, veterinary drug restrictions, and newly adopted model certificates for products of animal origin. The EU’s implementation of proposed actions under its Farm to Fork Initiative also has the potential to affect U.S. agricultural exports.

Increased cooperation with the EU would facilitate opportunities to address some of these challenges. Although U.S. agricultural exports to the EU declined in most commodity areas from 2019 to 2020, prepared food and household food products, such as wheat and vegetable oils, were areas of growth for U.S. agricultural exports, reflecting higher demand for staple and convenience foods due to stay-at-home restrictions. As the world’s second largest importer of agricultural goods, the EU remains a valuable potential market given the current U.S. modest 9 percent market share.

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