TTIP: Agriculture
Negotiations between the European Union and the United States surrounding the Transatlantic Trade and Investment Partnership appear to be wrapping up, with a preliminary agreement likely to be announced within the next few months. If ratified and enacted, the treaty would serve to strengthen economic and business ties between the world’s two largest trading blocs, with benefits of up to $100 billion per year for both sides. With TTIP, Europe and the United States have committed themselves to reducing barriers to trade in a variety of categories, including the historically contentious topic of agriculture. Breakdowns over agricultural subsidies contributed significantly to the collapse of the Doha Round in 2008, and the subject long been a sore point in international trade negotiations. However, both parties have repeatedly signaled their willingness and enthusiasm to tackle the topic, and for good reason: according to an extensive study commissioned by the European Union, “TTIP would increase EU agri-food exports to the US by about 60 % and EU imports from the US by about 120 % by 2025.” Clearly, both sides have strong incentives to get a deal done.
As the world’s largest agricultural export economy, sending over $145 billion in agricultural products overseas in 2013, the United States will push hard to liberalize trade to the greatest extent possible. U.S. farmers have watched with dismay to see their share of the European import market erode significantly in the past decade, from fifteen percent in 2000 to a mere nine percent by 2013. Part of the decline can be blamed on Europe’s aggressive pursuit of bilateral free trade agreements with nations such as Canada and Chile, and a proposed treaty with Mercosur, which would involve agricultural giants like Brazil and Argentina, has U.S. exporters worried. Europe clearly intends to use these agreements to inject new competition into markets in order to lower prices for consumers and businesses, and U.S. famers and agribusiness want to stay as competitive as possible and thus have significant interests in extracting favorable trade concessions from Europe. Indeed, they have approached the topic with zeal: the food industry has been lobbying European trade negotiators more than any other industry or interest group in its attempt to gain greater access to European markets.
One obvious means of increasing international trade between the two regions is to eliminate the tariffs that are levied directly on imports. In the food industry, current rates average around only four to five percent, though some export industries are subject to significantly higher duties – for instance, tariffs applied to meat and dairy clock in at around 20% and 40% for the United States and EU, respectively. But though such tariffs surely hinder cross-border agricultural flows, they are hardly the most significant barriers to trade, and negotiators on both sides have expressed confidence in their ability to eliminate most or all such tariffs.
Other important points are the removal of non-tariff measures (NTMs), which either increase the cost of doing business for firms or restrict market access in the form of rules on consumer protection, business practices, and other regulations. Since there are close links between agriculture and personal health, the food industry is subject to all sorts of regulations concerning the use of certain pesticides, hormone treatments, food safety inspections, and animal welfare practices. And because regulations differ significantly between Europe and the United States – in general, the U.S. has less stringent food safety standards – NTMs have an outsized influence on trade in agricultural products.
Take the case of genetically modified organisms. EU regulations governing GMOs are among the most stringent in the world, requiring explicit approval and extensive labeling before they can be used in products that are sold to consumers. The United States, in contrast, has almost no restrictions on GMOs – though labeling efforts are slowly building support, the recent failure of several EU-style regulations in referendums of the 2014 election serves to demonstrate the wide gap between the two regions. The fact that there is no scientific consensus on GMOs makes matters worse, as both proponents and critics of strict regulations can both make valid arguments. But trade policy must still be implemented, even in the absence of conclusive science, and the extent to which one side concedes rules to another for the sake of harmonizing regulations is unclear. But it seems that the EU Commission’s stance on agricultural standards is quite strong: “The negotiations will not be about compromising the health of our consumers for commercial gain. Tough EU laws, like those relating to hormones, or those which are there to protect human life and health, animal health and welfare, or environment and consumer interests will not be part of the negotiations.” If the U.S. and Europe agree to disagree over the GMO issue and other contentious issues, then so be it – but maintaining the status quo would mean a significantly less ambitious agenda than first proposed.
It will be curious indeed to see what a final TTIP agreement looks like – too lax of standards will likely cause significant backlash over fears of a “race to the bottom” in regulatory standards, especially among more liberal Europeans and Americans; however, keeping NTMs in place would mean less overall trade.