AN EU PERSPECTIVE ON THE

ROLE OF FOOD AND

AGRICULTURE IN THE US-EU

TTIP NEGOTIATIONSAlan Matthews

alan.matthews@tcd.ie

Trinity College Dublin, Ireland

Presentation to the Session “Transatlantic Trade and Investment Partnership: Challenges and Opportunities”

IAMO Forum ”The Rise of the 'Emerging Economies': Towards Functioning Agricultural Markets and Trade Relationships”

25-27 June 2014 | Halle (Saale), Germany

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Rapid approval to start negotiations

• 2011 US-EU Summit sets up High Level Working Group on Jobs and Growth (HLWG)

• Oct 2012 European Parliament calls for launch of negotiations on comprehensive US EU FTA

• Feb 2013 HLWG final report recommends launch of negotiations on a comprehensive trade and investment agreement

• March 2013 Commission proposes negotiating guidelines and released impact assessment and independent study on potential consequences

• March 2013 President Obama notifies Congress of intent to negotiate TTIP under the procedures of the last lapsed TPATPA

• June 2013 Negotiations launched at G8 Summit in Northern Ireland

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But the many previous initiatives should limit

expectations...

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…even if the geopolitical and economic environment is

different today ?

Broad objectives of TTIP

• increase market access through the elimination of barriers to trade and investment in goods, services, and agriculture and the further opening of government procurement markets

• enhance regulatory coherence and cooperation

• develop new rules in areas such as foreign direct investment, intellectual property rights, labour, the environment, and emerging “21st century” areas of trade (e.g., regulating data flows, trade facilitation in a supply chain environment, and the role of state-owned enterprises)

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TTIP is not mainly about agriculture

• From EU perspective• Seen as a potential stimulus for the EU economy still stuck in crisis

in crisis mode (parallel with the single market initiative in the early early 1990s)

• Bilateral approaches to trade, investment and trade-related issues issues such as standards and regulations could potentially set global global standards in a multilateral framework

• As a defensive measure to avoid loss of market share through through potential TPP between US and Asian economies

• Key sectors include autos, chemicals, financial services, public procurement

• However, addressing food and agricultural trade irritants will have will have political significance for final approval• Baucus-Hatch letter to the USTR February 2013• European Parliament resolution on TTIP mandate May 2013

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EU agrifood trade surplus with the US –

but mainly due to beverages and snacks

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Source: DG Agri, Monitoring Agri-food Policy 2004-1

EU negotiating objectives in food and

agriculture

• To eliminate all duties on bilateral trade, with the shared objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of all but the most sensitive tariffs in a short time frame.

• To remove unnecessary obstacles to trade and investment, including existing NTBs, through effective and efficient mechanisms, by reaching an ambitious level of regulatory compatibility for goods and services, through mutual recognition, harmonisation and through enhanced cooperation between regulators.

• Regulatory compatibility shall be without prejudice to the right to regulate in accordance with the level safety, consumer, labour and environmental cultural diversity that each side deems otherwise meeting legitimate regulatory objectives.

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Source: Council negotiating mandate, June 2013 and DG Trade SPS initial position paper July 2013

EU negotiating objectives in food and

agriculture – SPS issues• The Parties shall establish provisions that build upon

the WTO SPS Agreement and on the provisions of the

veterinary agreement, introduce disciplines as regards plant health and set up a bilateral forum for improved dialogue and cooperation on SPS issues.

• Provisions of the SPS chapter will build upon the key principles of the WTO SPS Agreement, including the

requirement that each side’s SPS measures be based on science and on international standards or scientific risk assessments, while recognising the rights for the Parties to appraise and manage risk in level of protection that each side deems

particular when relevant scientific evidence is insufficient, but applied only to the extent necessary to protect human, animal or plant life or health, and developed in a

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Source: Council negotiating mandate, June 2013 and DG Trade SPS initial position paper July 2013

EU negotiating objectives in food and

agriculture – other issues

• Should seek provisions for the recognition of equivalence, implementation of pre-listing of food-producing establishments, preventing implementation of pre-recognition of disease-free and pest-free health status of the Parties and the principle of regionalisation for both animal diseases and plant pests.

• Should aim at establishing cooperation mechanisms which will, inter alia, discuss equivalence on animal welfare between the Parties.

• The negotiations shall aim to provide for enhanced protection and recognition of EU Geographical through the Agreement, in a manner that complements and builds upon the TRIPS also addressing the relationship with their prior use on the US market with the aim of solving existing conflicts in a satisfactory manner.

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Source: Council negotiating mandate, June 2013 and DG Trade SPS initial position paper July 2013

US negotiating objectives in food and

agriculture

• Elimination of all tariffs on agricultural products between the United States and the EU, with substantial duty elimination on entry into force of the agreement, transition periods where necessary for sensitive products, and appropriate safeguard mechanisms

• Commitments to base SPS measures on science and international standards or scientific risk assessments, apply them only to the extent necessary to protect human, animal, or plant life or health, and develop such measures in a transparent manner, without undue delay; and to establish an on-going mechanism for improved dialogue and cooperation addressing bilateral SPS issues.

• Go beyond existing TBT commitments through increased openness and transparency in setting standards and regulations, equivalence of certification mechanisms and regulatory dialogue

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Source: USTR T-TIP Negotiating Objectives Fact Sheet, Mar 2014

Tariffs on agrifood, 2012

Product group US

MFN applied

EU

MFN applied

Animal products 2.2 20.4

Dairy products 19.9 52.9

Fruits and vegetables 4.7 10.7

Coffee, tea 3.3 6.2

Cereals and preps. 3.1 17.1

Oilseeds, fats & oils 4.8 5,6

Sugars and confectionary 14.4 32,1

Beverages & tobacco 14.0 19.9

Other agric. products 1.1 4.3

Agrifood (simple) average 3.4 13.2

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Source: WTO World Tariff Profiles

Tariffs faced by US and EU exporters,

2011

MFN average of

traded tariff lines

Trade-weighted

Duty-free imports

Simple Trade-

weighted

Tariff lines

%

Value %

Average tariff faced by EU

agrifood imports to US

7.1 2.2 23.9 47.1

Average tariff faced by US

agrifood imports to EU

16.9 5.7 14.7 46.9

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Source: WTO World Tariff Profiles

Tariff negotiations

• US approach (adopted in prior FTA negotiations) is to seek comprehensive elimination without exceptions for sensitive sensitive products• few exceptions – sugar with Australia and rice with Korea

• EU approach – tariff rate quota increases for sensitive products• Sensitive products likely to include beef, pigmeat, poultry

• EU initial tariff offer proposes to eliminate duties on 96% of of tariff lines immediately, 3% of tariff lines over time, and maintain tariffs on 1% tariff lines for sensitive products

• Initial US offer only offers 69% duty-free tariff lines (UK CBI CBI estimate) and has been rejected by the EU

• However, all agree that the main action in these negotiations is negotiations is around non-tariff measures (NTBs)

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Significance of NTMs for processed foods

(food & beverages)ECORYS (2009) US EU

Ad valorem equivalent of NTMs 73% 57%

After actionable NTMs addressed 35% 27%

Sector level percentage changes in income, output and exports following NTM

alignment (ambitious scenario – Long Run)

Economy-wide NTM

reductions

(i.e. reductions of NTMs in all

sectors simultaneously)

Sector-specific NTM

reductions

(i.e. reductions of NTMs only

in

the specific sector)

US EU US EU

Income (€bn) 1.2 5.0

Output % -2.1 0.9 -0.3 0.0

Exports % 3.0 5.4 2.4 0.8

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Significance of tariff and NTM barriers for

agriculture and processed foods

CEPR (2013)

Changes in EU output by sector (in per cent). 2027 benchmark, 20 per cent

direct spill-overs

Less ambitious More ambitious

US EU US EU

Agriculture

Output % -0.01 0.05 0.00 0.06

Exports % 0.67 0.41 1.07 0.22

Processed food

Output % -0.52 0.30 -1.13 0.57

Exports % 4.58 5.21 6.85 9.36

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SPS issues

• US and EU share basic mandate to achieve a high level of food safety and consumer protection

• EU General Food Law 2002

• US Food Safety Modernization Act 2011

• Both laws contain many similarities in approach…

• ..but cultural, political and institutional differences between the US and EU continue to result in different perceptions of risk and thus different regulatory

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Perceived differences in US-EU SPS

regulatory approaches

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Source: BEUC, 2013

EU food safety outcomes not necessarily

superior to US experience

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SPS high-profile issues

• Beef hormones (banned in EU in 1985 but still permitted in US)• Beta agonists e.g. ractopamine (widely used as feed additive for beef

and pigs in US but banned in EU in 1996 and zero tolerance for residues despite disputed CODEX vote in 2012)

• Biotechnology (GM plants permitted in US since 1986 but restricted beginning in 1990)

• Pathogen reduction treatments (PRTs) (generally not approved in lactic acid to clean beef carcases permitted in 2013)

• US 1998 ban on EU beef imports due to BSE lifted in 2013, but import clearance yet to be given.

• US dairy standards (Grade A Pasteurized Milk Ordinance)

• Proposed changes to EU pesticide regulations which would ban substances classified as endocrine disruptors and set default low MRLs

• Antibiotics in animal feed (significantly restricted in the EU in 1998 banned for non-medical use in 2006)

• Cloning restrictions

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Geographical indications (GIs)

• EU position on GIs set out in Doha Round negotiations –seeks TRIPS+ agreement on foodstuffs

• US protects GIs through its trademark system, particularly certification and collective marks

• Two different systems – additional costs to register EU GIs

• Disagreement over generic names

• Precedents in the EU-Korea and Canadian CETA agreements

• EU list of demands relatively short – just a few names of economic significance

• ‘live and let live’ with respect to prior trademarks

• Compound names protected but not necessarily the individual components

• US Senators ‘cheese names’ letter to USTR March 2014

• Compromise seems possible

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Food labels and other NTM issues

• Greater consistency in food label requirements would seem an obvious area for coordination

• Organic labels (agreement under 2012 Organic Equivalence Agreement)

• GM labelling (EU has long had GM labelling, US moving towards this?)

• COOL labelling

• Nutrition labelling

• Sustainability certification (e.g. biofuels sustainability standards under the EU RED)

• Horizontal issues (bioterrorism, customs, etc)

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The prospects for regulatory convergence

• Previous efforts have had limited success• 1995 New Transatlantic Agenda

• formalizing regulatory cooperation agreements in virtually all areas of economic regulation through a Joint EU-US Action Plan outlining over 150 specific areas of cooperation

• 2002 Guidelines for Regulatory Cooperation and Transparency agreed to encourage US and EU agencies to consult each other on a regular basis

• 2004 Roadmap for EU-US regulatory Cooperation and Transparency

• 2005 High-Level Regulatory Cooperation Forum set up

• Some successes in the agri-food area• Veterinary Equivalence Agreement (1998)

• Wine Agreement (2006)

• Organic Equivalence Agreement (2012)

• Key issues• How would an agreement affect EU decision-making on SPS and TBT issues?

• What enforcement mechanism would be available?

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Prospects for ratification

• Approval procedures in the EU following the Lisbon Treaty• EU’s exclusive competence in commercial (trade) policy extended from

from trade in goods to services and IPR, as well as external investment investment policy

• Mandate for the negotiations formulated by the Council which thus retains the power to set the objectives for the negotiations

• Approval in the Council based on qualified majority voting• agreements covering the new issues (services, IPR, investment) fall under

under unanimity except in three cases (domestic implementation by unanimity, audiovisual services that affect cultural or linguistic diversity, diversity, services in the social, education or health sectors).

• Agricultural negotiations “are not too tough to handle” – COPA COPA COGECA Director, May 2014

• Strong mobilisation by civil society constituencies around specific regulations and issues (including food)• “governments are currently losing the public debate” (Novy, 2014)

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Prospects for ratification

• Role of the European Parliament

• Parliament can try to influence the mandate by adopting a resolution prior to the Council (as it did in May 2013, successfully arguing for exclusion of audio-visual services)

• Parliament also consulted in Commission’s ‘scoping exercise’ prior to adoption of mandate

• Commission required to keep the Parliament (International Trade Committee INTA) informed of trade negotiations on the same basis as the Council’s Trade Policy Committee (governed by Annex III of 2010 Interinstitutional Agreement)

• EP’s INTA updated by Commission before and after each round of negotiations

• European Parliament consent required for all trade agreements (similar to ‘up or down’ vote granted under TPA in the US)

• EP has used its power to refuse consent on various occasions since 2010

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Prospects for ratification

• Implications of recent European Parliament elections

• Centre/right wing views on trade dominate in the current Parliament

• Despite the rise of anti-EU and anti-establishment parties (up from 21% to 30% of seats), the two main groups (EPP and S&D) will continue to dominate

• EP hearings to approve new Trade Commissioner Sept 2014

• TTIP will be a mixed agreement which also requires ratification by 28 national parliaments

• Scope for carving out a separate agreement on exclusive competence issues

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Conclusions and discussion

• Food and agricultural issues are not central to the economics of these negotiations but have a higher political profile along with other high-profile issues (data privacy, ISDS, financial services).

• Key tariff and regulatory issues in the food and agriculture area are all long-standing; compromises are possible but high expectations should be avoided

• EU policy-makers have given strong mandates to conclude TTIP but high-profile campaigns in the end game could require fine-tuning of a draft agreement (EU-Korea FTA as example)

• Should TTIP be open to other parties (most obviously, Canada, Mexico, Turkey)?

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