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BY SUHANI, SANJANA, DEBASHMI

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As a part of the Biden administration, to end the trade war, a new deal of tariff-rate quotas was in the works. This would ease the trans-Atlantic trade tensions formed. In 2021, the US decided to roll back tariffs on European steel and aluminum which would lower costs of goods like cars and also reduce carbon emissions. The agreement would also put an end to the European retaliatory tariffs and would transform the 25% and 10% tariffs into a tariff rate quota where higher amounts of imports are subjected to higher duties. Ending the dispute on both ends prioritized low carbon production to reduce the reliance on Chinese imports. The agreement would allow the EU to ship 3.3 million metric tons of steel to the US without the imposition of a tariff. Quantity above that would be subjected to the 25% tariff. This agreement would protect the American aluminum industry by limiting duty-free imports to low levels.

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The US-EU dispute started in 2018 when the Trump administration imposed tariffs on specific steel and aluminium products from the EU which were considered to invoke a national security threat in the USA. The US government imposed a 25% tariff on steel products and a 10% tariff on aluminium products. This affected 7.2 billion dollar worth of imports of products in the US and reduced it by 53% in 2018. As a response, the EU introduced rebalancing measures such as increase in duties for the affected products and retaliatory tariffs for American products like orange juice, bourbon and motorcycles. This arrangement significantly impacted the imports/exports and the fear of a trade-war loomed.

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Gradually reducing the tariffs over time

This would be a more gradual approach that would give local dairy producers time to adjust to the increased competition. It would also help to minimize the impact on the environment, as there would be less of a sudden increase in the number of trucks on the road.

However, this approach would also take longer to see the benefits of the policy. It could take several years for local producers to become more competitive with imported milk, and in the meantime, consumers could see higher prices.

Imposing quotas on the amount of milk that can be imported

This would be a more direct way to protect local producers. It would also help to ensure that there is a steady supply of milk available to consumers, even if local producers are unable to meet demand.

However, this approach could also lead to higher prices for consumers. If the quotas are too restrictive, then consumers may have to pay more for milk, even if it is produced locally.

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In 2018, the United States and Mexico agreed to cancel tariffs on goods traded between the two countries. This was part of the North American Free Trade Agreement (NAFTA) renegotiation, which also included other changes to the agreement.

In 2019, the European Union and Japan agreed to cancel tariffs on goods traded between the two regions. This was part of a wider agreement between the EU and Japan, which also included provisions on investment, intellectual property, and services.

In 2020, China and the United States agreed to cancel tariffs on goods traded between the two countries. This was part of a Phase One trade deal between the two countries, which also included provisions on intellectual property and agricultural trade.

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Subsidizing local dairy producers

This would be a more costly option, but it could help to offset the costs of production and make local milk more competitive. It would also help to ensure that local producers remain in business, which could benefit the economy in the long run.

However, this approach could also lead to increased government spending. If the subsidies are too generous, then taxpayers could be footing the bill for milk that is not actually being consumed.

Investing in research and development

This would be a long-term investment, but it could help local dairy producers to develop new products and processes that would make them more competitive. It could also help to improve the quality of milk, which could attract more consumers.

However, it is not clear how long it would take to see the benefits of this investment. It could take several years for new products and processes to be developed and implemented, and it is not clear how much of an impact they would have on the market.

Ultimately, the best alternative for Israel will depend on a number of factors, including the impact of the current policy, the preferences of consumers, and the environmental impact. It is important to weigh the pros and cons of each alternative before making a decision.

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Alternatives to accepting the steel quota:

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Alternatives to accepting the steel quota:

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Reciprocal Tariff Reduction - Allows both nations to work towards a desirable outcome, promotes fair trade and results in lower tariffs imposed from both, USA and EU on specific goods

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If the US-EU deal is not renewed by October 2023, the tariffs and retaliatory measures from both sides would become effective again. The EU thinks that its new CBAM ( Carbon Border Adjustment Mechanism ) would be effective. This would levy tariffs on imports depending on the carbon intensity. However, the US does not have any carbon pricing system and is unwilling to accept EUs proposition. The US is also reluctant to get rid of the tariffs.

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Gradually reducing the tariffs over time. This would give local dairy producers time to adjust to the increased competition and would help to minimize the impact on the environment.

Imposing quotas on the amount of milk that can be imported. This would allow for some competition from imported milk, but would also protect local producers from being undercut.

Subsidizing local dairy producers. This would help to offset the costs of production and would make local milk more competitive with imported milk.

Investing in research and development. This would help local dairy producers to develop new products and processes that would make them more competitive.

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Main reasons behind accepting steel quotas:

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Main reasons behind accepting steel quotas:

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1. Limiting the amount of steel exported to USA will result in the country reducing its tariffs
2. Easier for the EU to gain access to the domestic markets and compete with local companies due to reduced cost of imported steel
2. Allows stable economic relations between the two nations and easier and more effective international trade

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Why was the tariff canceled?
To overcome milk shortages; The shortage of milk had further led to the raw milk prices being 24% higher than the EU average. The cancellation of tariffs would lead to a greater supply of milk. Thus, ending the shortage and controlling the rise in prices.

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The decision to accept the quotas may have been made to avoid an escalation of the trade war which would have led to further economic damage to both the US and the EU. Other strong economic and political factors might have played a role in the accepting of these quotas.

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Lower prices for consumers: The removal of tariffs is likely to lead to lower prices for milk and dairy products in Israel. This is because imported milk will be able to enter the country more freely, which will increase competition and drive down prices.

Increased competition for local producers: The increased competition from imported milk is likely to put pressure on local dairy producers. Some producers may be forced to lower their prices or even go out of business.

Changes in the supply chain: The removal of tariffs is also likely to lead to changes in the supply chain for milk and dairy products in Israel. Some importers may choose to bring in milk from new countries, while others may simply increase the amount of milk they import from existing suppliers.

Impact on the environment: The removal of tariffs could also have an impact on the environment. If more milk is imported, it is likely that there will be an increase in the number of trucks on the road, which could lead to increased pollution.