The April 9 issue of Amber Waves from the Economic Research Service of USDA delved deeper into the potential for horticultural exports to the EU inFree-Trade Agreements: New Trade Opportunities for Horticulture.  The EU-27 has a combined population of 503 million people and GDP of $17.6 trillion, both larger than the U.S.  For 2009-11 annual horticultural exports from the U.S. to the EU averaged $2.3 billion across 143 different products.  The EU has numerous tariff rate quotas (TRQ) and for many fresh products it applies variable tariffs based on the time of the year when imports compete with local supplies.  Processed products have tariffs based on container size, sugar content and import price.

Five products – shelled almonds, unshelled pistachios, raisins, and shelled and unshelled walnuts – in 2009-11 accounted for about two-thirds of total U.S. horticultural exports to the EU.  Only almonds are subject to a TRQ, although the over-quota tariff is small at 3.5 percent.  Shelled walnuts have the highest tariff at 5.1 percent.  U.S. exports would be expected to increase for all five if the EU lowered or eliminated tariffs and quotas.

Other products with minimum tariffs of 10 percent or greater and high export potential include prepared/preserved tomatoes, certain fruit juices, dried onions, grapefruit juice, and sweet corn.  Products subject to TRQs with over-quota tariff rates in excess of 20 percent and quota fill rates equal to or near 100 percent include fresh grapes, cherries, and apples and fresh orange juice.  Strong export gains are also expected for prunes, berries, and strawberries.

Bilateral and regional free trade agreements often establish SPS and TBT committees under the WTO Agreements on the Application of Sanitary and Phytosanitary Measures and Technical Barriers to Trade to facilitate consultation and resolve contentious issues.  The ongoing Trans-Pacific Partnership Free Trade Agreement negotiations among the U.S. and 11 countries, now also Japan, have included talks on an enforceable WTO-plus SPS agreement to push beyond the WTO agreement.  That would also be essential for the Transatlantic Trade and Investment Partnership.

The EU-27 countries as a group is the kind of high income, diversified market that U.S. agricultural producers dream about.  That U.S. exports have declined as much as they have is partly the fault of years of disagreements on trade issues when both sides believed that trade was a one way street and they could afford to disagree and look for markets elsewhere.  Both have been losers as exporters and importers.

Talks on the Transatlantic Trade and Investment Partnership provide an opportunity for each side to have a fresh start on agricultural issues.  Exports and imports are extensions of multinational supply chains that smooth out supply imbalances to the benefit of both producers and consumers.  For horticultural products the reduction of tariffs and quotas will be a central focus.  For all products, the SPS and TBT issues that have vexed trade relations for the past 20 years will be critical to an acceptable outcome.  The negotiations will be complex, but an agreement will be valuable to both sides.

Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade & Technology.

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