In virtually every article one reads about the potential Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union, references are made to “thorny” agricultural issues that could stall or derail negotiations. What are these issues, and what kind of threat do they pose to the negotiations that are set to start in July?
Tariffs on industrial products are low-hanging fruit and should be easy to eliminate, but tariffs on agricultural products will prove a more difficult negotiation. On average, the EU’s applied tariffs are higher than those of the US, so American exporters stand to gain more than their European counterparts. However, these gains will be limited if the EU’s Meursing Code system is not put on the negotiation table. The Meursing Code is a highly complex system of tariffs in place for processed agricultural goods entering the European Union. Depending upon a good’s content of milk, starch, and sucrose, it is subject to an additional tariff. This not only increases the effective tariff rate but is also complicated and variable for exporters—particularly SMEs. The EU-Korea FTA provides an example that the EU can make duty-free access available on most food products, and the EU should not be allowed to maintain the Meursing code system on US exports.
SPS measures inherently reflect domestic, cultural priorities to protect food safety and animal and plant health. The United States and the European Union approach SPS measures far differently; resolving existing barriers will be difficult to overcome. While the US applies a risk-based assessment of SPS-related items, the EU operates on the principle of precaution—if there is a chance that a policy could pose harm to the public, the burden of proof that it is not harmful falls on those taking an act. This has been particularly problematic in the case of genetically modified organisms (GMOs), and the issue has already been raised at the WTO level in relation to beef hormones. While it is unrealistic to expect the EU to abandon the precautionary principle altogether, there is the expectation that some negative effects for American exporters could be mitigated via the TTIP. For example, the European process of approval for GMOs could be expedited, and there is some possibility that the TTIP could establish a transatlantic SPS consultative committee to address issues as they arise in the future.
Geographical indications highlight another significant difference between those on either side of the pond. GIs are the use of a geographical name on certain products to attest to the good’s level of quality, the method or production, or reputation (for example, “Parma ham” from Parma, Italy). As such, the issue sits at the intersection of intellectual property, agriculture, and technical barriers to trade. With the exception of wine and spirits, GIs are practically non-existent in the United States. Furthermore, the US is expected to take the position that GIs are part of the “Intellectual Property” chapter of an FTA, not as part of the “Market Access” chapter, which typically covers only tariffs and quotas. Europeans have fought hard in recent years to ensure that the GIs of a long list of well-known products produced in Member States are protected in its trade negotiations, and directly linked to the “Market Access” chapters in FTAs. As third countries, including Korea and Canada, continue to adopt European GI standards, US food producers may face more barriers in important export markets. Europeans are expected to pursue their offensive interests in the TTIP, and to demand GI protection as quid pro quo for tariff elimination in the TTIP.
Each of these thorny agricultural issues must be tackled to some degree if the TTIP is to be truly “comprehensive.” Yet, backlash from domestic interests is highly likely. Negotiators therefore must conduct a delicate balancing act, bolstering transatlantic trade in agriculture while maintaining domestic support for the policies on which they are trying to agree. It is an unenviable task, but there is hope for progress.
To learn more about the TTIP, check out USTR’s website. To learn how the TTIP might benefit your company, contact TradeMoves. We are here to help.
Melanie Wheeler MWheeler@TradeMoves.net
Shawn Marie Jarosz SJarosz@TradeMoves.net 240.242.8108 / 202.415.4016