It’s all About Agriculture in Trade Negotiations

By Steve Kopperud, Policy Directions, Inc.

If the respective economies of the United States (US) and European Union (EU) were both booming, with unemployment rates on both sides of the Atlantic low and US trade relations with the muscle-flexing Pacific Rim solid, would President Barack Obama be salivating over the Transatlantic Trade and Investment Partnership (TTIP)? The answer is, likely not so much. However, just the reverse is true and the White House wants TTIP bad.

In March, when Obama announced his desire to forge what would be the largest US trade bilateral agreement ever negotiated, the agriculture community had been actively courted by the Office of the US Trade Representative (USTR) and US Department of Agriculture’s Foreign Agriculture Service for several months. The question: Is TTIP achievable, and can a deal that’s enforceable be inked that both sides of the Atlantic can live with?

Never mind that the French want television and radio issues off the table, or that EU member wannabe Turkey sees itself getting the short end of any deal the EU might cut. Forget about the folks who are contending that a US-EU deal will put both governments in a stronger position to deal with China as a global economic force. Ultimately, a comprehensive US-EU trade pact will come down to agriculture issues.

Here’s the timeline and description for what’s at stake. The United States and EU hope to begin formal TTIP negotiations in late June. These talks are expected to take at least two years, and as one very seasoned EU minister said recently, “Trade negotiations never follow a timeline.” The goal is to have an agreement in place by 2014 and implementation beginning in 2016, just as Obama is packing to leave the White House. So, it’s apparent there’s a bit of presidential legacy built into the desire to weld a US-EU trade pact.

However, the numbers surrounding this potential trade deal are impressive and enticing. Such a bilateral pact would create the wealthiest single market in world history. The United States and 27-member nation EU represent 54 percent of the global gross domestic product, which translates into about 40 percent of world purchasing power. The two regions are also responsible for over one-third of global trade. Economists estimate the lagging economies of the United States and EU would both experience a 0.4 to 0.5 percent fiscal shot in the arm, though that boost likely wouldn’t hit until 2027. This translates to an annual economic bump of roughly $155 billion for the EU, while the United States would enjoy a $123.2-billion hike.

The initial response from collective US agriculture was cautiously optimistic, at least publicly. However, stronger words were forthcoming from powerful members of the US Congress. Senator Max Baucus (D-MT), chair of the Senate Finance Committee, warned the EU that no deal will be struck unless US agriculture is a primary focus and the EU agrees to play by world trade rules. Similar messages have also come from other members of Congress with a political say on the future of any US-EU deal.

Over the years, US agriculture has learned the hard way that when dealing with the EU, it’s about trust, but verify on all fronts. From a repeated refusal to recognize the science underlying the safety of US beef implanted with hormones – despite World Trade Organization (WTO) rulings to the contrary – to “precautionary” barriers to just about all things biotech, the EU has presented some of the thorniest non-tariff trade barriers to US ag exports over the years. However, public enthusiasm from the US ag sector has abounded, laced with repeated admonitions to the Europeans that all issues must be on the table, including EU adherence to science-based sanitary/phytosanitary (SPS) standards.

The ag hurdles recognized thus far – and those likely to be the “stickiest,” says Esther Bintliff, a Financial Times blogger – include:
• the chasm that separates US acceptance of biotech and EU restrictions;
• the previously mentioned hormone-treated US beef issues that force the United States into meeting a non-hormone beef quota;
• lingering US bovine spongiform encephalopathy (BSE) restrictions on EU beef exports;
• the use of chlorine in US poultry processing, while the EU prefers a potable water standard;
• the US objection to subsidy levels under the EU Common Agricultural Policy;
• the United States’ admittedly complex “grade A milk products” dairy import rules;
• US “Buy America” campaigns on iron and steel contracts; and
• EU demands that only certain products of certain regions be allowed to carry the equivalent of a copyrighted name, as in Camembert cheese or Danish ham.

Even after recognizing these significant hurdles, the pre-negotiation stuff truly hit the fan on April 24 when the EU Parliament adopted a resolution instructing negotiators to defend the EU’s numerous non-science-based regulations, particularly regarding biotechnology and the “precautionary principle.” They also called on the United States to drop its prohibitions on beef imports from EU BSE countries as a “trust-building measure.” As of this writing, collective US agriculture is preparing to send a tough letter to Mike Froman, former White House national security advisor nominated to replace Ron Kirk as Special USTR, advising him “any optimism we felt for the TTIP negotiations may have been premature or misplaced.”

US agriculture sees the juxtaposition of issues as “interesting,” which is a polite way of saying the statement is classic EU schizophrenic policymaking, in that Parliament demands the European Commission defend non-scientific SPS barriers and the precautionary principle, while calling on the United States to remove its science-based ban on EU beef resulting from that continent’s BSE crisis. The coalition goes on to say – again, in a very polite manner – that the impetus for this position is political, not scientific, revisiting non-tariff conflicts involving not only biotech but also cloning, labeling requirements, “arbitrary” sustainability requirements, and so forth. US aggies recommend Froman insist on a negotiating structure that mirrors the rules currently guiding the Trans-Pacific Partnership (TPP), particularly US negotiations with Japan.

It’s this structure – hard fought and won in TPP pre-negotiations – that brings in all sectors and issues without exception and does not allow for single issue agreements and side deals, that is, the “single undertaking” approach. What this boils down to is that until everything is agreed to, nothing is agreed to. Further, for US agriculture, it’s no deal unless everything agreed to carries strong and enforceable WTO-plus disciplines.

The TPP structure appears to be the way to go; if all the players in that duke out can agree, then surely the EU can accept the structure. In a very American way for broad agriculture, it’s basically an all-or-nothing approach. And while it’s premature to say a US-EU trade deal is unlikely, it is fair to say the European and American negotiators are going to have to leave years of protectionist trade philosophy at home if they want to have a truly meaningful agreement. Or as one headline writer put it, the negotiations are going to be a real “slog.”

June 2013 RENDER | back