By Giuliano Lengo – General Manager, Piemonte Agency for Investments, Export and Tourism

"We await the response of the arbitration on the US decision to apply duties to EU products. That decision would hurt us a lot ... "
                                Giuseppe Conte, Italian Prime Minister
Saturday, September 28th, Bologna Villaggio Coldiretti


What happened on Wednesday October 2nd:

  1. The WTO authorized the United States to impose duties for $ 7.5 billion (the US had asked for $ 11 billion) against European countries to clear state aid to Airbus.
  2. Before imposing duties, the US will have to wait for the report to be adopted by the WTO's Dispute Settlement Body: this formal step takes 10 to 30 days
  3. Meanwhile, the US administration will decide how to adjust customs withdrawals
  4. In a few months the EU will receive the WTO verdict for a similar controversy related to American state aid to Boeing (the compensation should be lower: the EU complains of having suffered damages for 12 billion, the WTO estimates for 5.3).
  5. Once the verdict is out, the EU will also present the list of products subject to duties.

The escalation of duties and protectionist measures, the EU-US and US-China trade wars are an earthquake for international trade. These duties do not only affect direct exchanges, but above all indirect ones. The consequent retaliations on Made in Italy production will have repercussions on the export of our territory in the medium-long term because they mostly affect two of the sectors for which Piemonte and its companies are famous and appreciated in the world: the agri-food sector, wines included, and all the industries linked to the mechanical and transport sector, which in Piemonte immediately means automotive and aerospace.

Being aware of the rates and tariff barriers is one of the starting points for a conscious and proficient start of a growth path on foreign markets. Duties are an obstacle that our businesses have always been coping with. On the one hand this tightening can diminish the export performance of the most structured companies, i.e. medium and large ones, on the other it can even jeopardize the survival of micro and small businesses.

Internationalization is a vocation in the DNA of our companies that has never failed, even in the most difficult phases of our economic and financial life,

nationally and internationally. Export is part of a corporate strategy in international markets and Piemonte acts on the international scene with high-level skills and know-how that would be highly penalized by new and hard duties.

The immediate risk is the loss of competitiveness. If we can no longer be appealing also in terms of price ... purchasers will go elsewhere. In the case of the US/EU dispute, the Italian agri-food sector is the one that will experience the consequences in the short term. In light of the WTO verdict, Coldiretti estimates duties for € 1 billion per year, Federalimentare for 2… shortly, these estimates predict the collapsing of the sector. The Italian export of agri-food products to the US is worth € 4 billion, of which about 1.5 is wine (the US is the first outlet market for Italian wine).

An example that concerns us closely can be given: in Italy, a kg of Grana Padano cheese, which is also produced in Piemonte, costs an average 10-15 €, currently in the US it costs about 30-35 €. With the new duties and with 100% tariffs, it is estimated that it will be doubled, around 60-70 €. What does this imply?

  1. to undermine not only the producer, but the entire supply chain;
  2. the inevitable increase of fake food and Italian Sounding1 cases that will spread on the American market.

The same is true also for the aerospace and automotive sectors, whose situation is exacerbated by indirect exports. Just consider how many Made in Piemonte components are included in German cars for example (in 2017 German car producers bought Italian components for 4.1 billion €) ... it is clear then that duties have a cascade effect on all countries that are directly and indirectly involved and can have unpredictable effects.

We are at the center of a real global trade war, which involves us without having directly triggered it. The resolution is not here and now, but it is supranational, in Europe, in Brussels, which holds the exclusive competence of the negotiations with the WTO. A strong European policy is needed to support and defend businesses and their work, a policy that protects our industry, craftsmanship and all manufacturing activities from the commercial retaliation that relentlessly falls on the entire entrepreneurial system.

Piemonte Agency stands by companies in the daily management of problems and doubts related to international trade thanks to a tailored consultancy support service. Customs legislation is precisely one of the issues that our team of qualified experts, available on a daily basis to the SMEs of the territory, deals with by providing personalized answers. In addition, Piemonte Agency also offers technical and regulatory updating courses to be updated and prepared to take on the challenges of international markets.

Piemonte export figures - First half of 2019
The latest figures released by Unioncamere Piemonte in mid-September are related to the first half of 2019 and highlight some interesting trends:

  1. In the first six months of 2019 the value of Piemonte’s exports stood at 23.7 billion €, recording a 2.5% drop compared to the same period of 2018. The disappointing result recorded by our region appears to run counter to the trend registered by cross-border sales at the overall national level (+ 2.7%).
  2. Despite the negative performance, Piemonte has nonetheless confirmed itself as the fourth Italian exporting region, with a share of 10.0% of total national exports.
  3. Focusing on the two sectors that are mostly affected by the duties, these are the data:
    • Piemonte’s agri-food sector recorded an excellent + 13.4%;
    • the mechanical sector and the rubber-plastic sector showed a slightly negative trend, equal to -0.5% and -0.8% respectively.
    • the metal and metal products sector recorded -3.5% compared to the same period of 2018.
    • means of transport instead suffered a double-digit decline (-15.1%). This sector, which generates a quarter of the regional exports, recorded strong losses in terms of motor vehicle exports (-35.2%), automotive component products (-3.1%) and aerospace (-2.6%).
  4. The first destination market for Piemonte’s exports is the European Union (28 countries), which absorbs 60.9% of its sales abroad. The first non-European market is the US with 9.1%, followed by Switzerland with 5.8% and China with 3.3%.

1 Italian sounding phenomenon refers to creating images, colours and names of products very similar to their Italian equivalent.

Newsletter n. 13| December 2019 - Download PDF

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