What is in this article?:
- Changing agriculture dynamic for US and EU
- First chance in decades
- The United States and Europe have their first chance in decades to change the agricultural dynamic between the two trading partners.
Negotiations on the proposed U.S.-EU Transatlantic Trade and Investment Partnership Agreement are months away, but groups are weighing in on what and how the negotiations should proceed.
The International Food & Agricultural Trade Policy Council (IPC) commissioned James Grueff, a U.S. consultant on agricultural trade policy, with input from IPC Member Stefan Tangermann regarding the EU perspective, to write a discussion paper: Achieving a Successful Outcome for Agriculture in the EU–U.S. Transatlantic Trade and Investment Partnership Agreement. The take-away message is that these negotiations will be unique and require innovative thinking.
The paper addresses four issues: commercial relationships, intergovernmental relationships, views of constituencies and developing an effective negotiating process. The commercial relationships are the easiest to address. The goal is to eliminate a substantial number of tariffs at the time of implementation. The annual value of EU agricultural exports (including forest and fish products) to the U.S. grew from $5.7 billion in 1992 to $17.8 billion in 2012, with nearly two-thirds of the total value now consisting of consumer-oriented food products (the largest components being beverages and snack foods).
Intermediate products are 27 percent of the total and bulk commodities only two percent. U.S. agricultural exports to the EU have increase from $9.7 billion in 1992 to $12.1 billion in 2012, with consumer-oriented food products (tree nuts the largest category) accounting for approximately 40 percent of U.S. exports. Intermediate products are roughly one-fourth of the total, and bulk commodities accounting for about one-fifth.
Using the WTO’s tariff profiles, the average final bound duty on agricultural products entering the U.S. is 4.9 percent ad valorem; the EU average is 13.8 percent. Nearly 33 percent of U.S. agricultural tariff lines are duty free and 43 percent are between zero and 5 percent, compared to 32 percent and 10 percent, respectively, for the EU. Both have relatively high tariffs for dairy products, sugars and confectionery, and beverages and tobacco, and the EU also has relatively high applied tariffs for animal products and cereals and preparations.
In addition to tariffs and quotas, commercial trade has been restricted by the EU prohibition on imports of beef produced using hormone implants and U.S. restrictions on EU beef imports due to BSE concerns. The EU market has been closed to poultry from the U.S. until recently because of the use of pathogen reduction treatments. The largest export losses have been by the U.S. soybean industry because of regulations on biotech soybeans.
While the governments of the U.S. and EU have protected their agricultural industries in previous multi-lateral and bilateral trade agreements, the U.S. has been more interested in opening its markets than the EU. The differences in government approaches to trade policy are most obvious in the Sanitary and Phytosanitary Agreement (SPS) in the Uruguay Round Agreement in the early 1990s. According to the paper, “The U.S. and other countries insisted on the trade-oriented, science-based approach that became the basis for the SPS Agreement. Meanwhile the EU took a much more cautious approach in the negotiations and continually advocated the inclusion of non-scientific factors, such as consumer concerns, clearly reflecting the EU policy milieu of that time.”