Tensions between the European Union (EU) and United States (US) over the lack of progress in the Transatlantic Trade and Investment Partnership (TTIP) agreement came to a boiling point recently with each side blaming each other over the stalemate in concluding the transatlantic trade deal before President Barack Obama leaves office in January 2017. The heated communication between the US Ambassador to the EU (Anthony Gardner) and the European Commission (Phil Hogan) was leaked by the POLITICO news service.
The European Commission blames the US for the stalled negotiations by saying that “the EU has not yet seen substantial progress in areas of significant importance to EU agriculture, such as geographical indications, wine and non-tariff barriers.” This is in retaliation to Ambassador Anthony Gardner complaining about Agriculture Commissioner Phil Hogan’s position and public statements on the TTIP to the 28 EU member states’ ambassadors in Brussels, and thus criticizing the EU for perceived inflexibility in the negotiations.
Agriculture is one of the most controversial of the 24 chapters currently under negotiation in the TTIP talks.
Agriculture is one of the most controversial of the 24 chapters currently under negotiation in the TTIP talks. Each side is under intense pressure from strong domestic lobbies to protect their specific interests.
EU’s success in cheese exports to the US
The US indicates that EU cheese exports to the US are sky-rocketing with EU exports of romano, reggiano, provolone categories increased by over 200 percent in 2013 and at the same time sustaining a price premium in the US over the past two decades. US statistics show that in 2015, the US had a staggering 966 million dollars trade deficit in cheese with the EU.
There is no wonder why the EU is pushing hard on the US to accept the EU system of protecting geographical indications. On the other hand, the US National Milk Producers Federation (an influential association) is opposing the continuation of the TTIP negotiations unless dairy export concerns are fully addressed. Therefore, the US is eager to eliminate tariffs in the dairy sector because EU tariffs (42%) are two to three times as high as US tariffs (17%) on average. The US is also claiming that the high tariffs and non-tariffs barriers in the EU have virtually eliminated many key agricultural exports from the US. Therefore, US stakeholders have been at a clear disadvantage for many years. This is reflected in the US agricultural and food trade deficit with the EU for the past 17 years.
EU’s trade surplus is due to the exports of beverages
EU exports high value products subject to low or zero tariffs in the US, and thus the EU argues that the food trade surplus with the US is a reflection of the US consumer demand. The continuous EU trade surplus with the US is essentially a result of wines, spirits and beer exports to the US. According to EU statistics, these beverages alone amount to 4.4 billion euros of trade surplus for the EU. When these beverages are disregarded, the agricultural and food trade between the US and EU is almost balance.
According to US statistics, US total agricultural exports reached over 155 billion dollars in 2014, but US agricultural exports to the EU were merely 13.5 billion dollars. In inflation adjusted terms, US agricultural exports to the EU are only one-third of the level in 1980. In comparison, US agricultural exports to the rest of the world are growing fast. Therefore, the US is offensive in dismantling the prohibitive tariffs on food products such as meat, dairy, cereals, fruits and vegetables.
EU wants to protect sensitive food products in the TTIP
The EU is insisting that there should be no full liberalization in agriculture and there should be alternative approaches to full liberalization for import-sensitive products such as meat and dairy products. It is important for the EU to minimize losses that may affect EU farmers and to seek gains in areas other than tariffs such as enhanced protection of EU geographical indications. The EU insists that EU gains on dairy and wine exports would only be effective if other non-tariffs elements are addressed, however, there has been very little progress on non-tariff measures such as geographical indications for wine and cheese and Sanitary and Phytosanitary Measures (SPS).
Food safety regulations and standards will increase tensions
Both the EU and the US are part of the SPS agreement, under the World Trade Organization (WTO), specifying the measures applied to protect human, animal or plant life and health must be based on science. However, the precautionary principle applies if there are suspected risks of causing harm to the public or to the environment, in the absence of scientific consensus. The EU has made this principle a cornerstone of its risk management on issues of health and plant protection. In the US, the precautionary principle is seen as an excuse to build barriers to trade and the science-based method is the preferred policy.
At the heart of the disputes are the use of growth-enhancers in animal breeding; the use of pathogen reduction treatments, especially all poultry production facilities in the US are washing poultry with chlorine; and particularly EU’s negative stance concerning genetically modified products and foods is also seen as a threat to US agricultural exports and an obstruction to trade. Therefore, food safety regulations and standards will add more heat to the already boiling TTIP negotiations.