And now the spotlight is on these two as they formally work their way through the negotiations of the Trans-Atlantic Trade and Investment Partnership (TTIP). Many of the outstanding issues have been negotiated between the two sides for years, before the inception of the TTIP negotiations, without much progress.
It should not be assumed that shifting the discussion to bilateral trade negotiations will necessarily yield more progress – that is, not without being more flexible than either party has ever been in other free trade agreement (FTA) negotiations.
This means learning from previous experiences, having innovative approaches, and clear, specific objectives, with a commitment to achieving them. All this will determine how the negotiations will unfold and what precedent it will set for global agricultural trade moving forward – and the world is watching.
The US and the EU are both large economies and have significant influence, both globally and in international standard-setting bodies, such as Codex Alimentarius and the World Organization for Animal Health (OIE). There is no question about it – any health or food safety-related agreements reached during TTIP negotiations can have impacts internationally, specifically on these international standard-setting bodies.
The US and the EU have been large and important agricultural markets for each other. However, the US Census Bureau estimates that, between 1992 and 2012, the annual value of total EU agricultural exports to the US rose from $5.7 billion to $17.8bn – a $12.1bn increase – whereas the annual total US agricultural exports to the EU during that same time period increased from $9.7bn to $12.1bn – only a growth of $2.4bn.
Not only has the growth in agricultural exports from the US to the EU been growing significantly less than vice versa, the share of US agricultural exports to the EU compared to total agricultural exports has decreased, from 13% in 2002 to 8% in 2012. TTIP, if successfully completed, will be the largest US FTA, representing 45% of the world’s gross domestic product and 12% of the world’s population.
It would allow the US to address this disparity in agricultural trade between the two regions and capture greater agricultural market access in the EU that is more balanced. But how does the US plan to capture more of the European market for agricultural products through TTIP?
Overall, tariff issues within the scope of TTIP will play a much lesser role in the negotiations as the average US and EU tariffs are already quite low. The World Trade Organization’s (WTO) 2014 Tariff Profiles show 30% of the US agricultural tariff lines are already duty-free and an additional 44% of US agricultural tariff lines are between zero and 5%. Roughly 32% of the EU’s agricultural tariff lines are at zero and an additional 10% of the EU’s agricultural tariff lines are between zero and 5%. However, given the extent of the trade between the two negotiating parties, further tariff elimination could mean significant economic gains to both sides.
Addressing existing EU tariff rate quotas (TRQs) such as those on pork products is one area where the US could see an advantage through a successful TTIP negotiation. The EU has set its pork TRQ for all WTO members to 70,000 MT (metric tonnes) per year (less than 1% of the total EU pork consumption). This is significantly less than, and not in line with, the 5% of the consumption standard (equal to more than 1m MT) set in the Uruguay Round, which led to the creation of the WTO. On top of that, the in-quota duties for the EU’s pork TRQs range from $325/MT to $1,020/MT. The out-of-quota duties for the TRQs are set at rates so high that it makes it almost impossible to export product into the EU outside the TRQ amount.
There are high expectations for TTIP, beyond just that of the standard tariff and quota eliminations to stimulate trade. Tariff elimination won’t mean much without also addressing the unjustified non-tariff barriers, including sanitary and phytosanitary (SPS) and technical barriers to trade measures that have historically been used to block food and agricultural trade. If TTIP is to be successful, science-based decision making must be the central principle in addressing both today’s SPS barriers and those of the future. However, the US and EU clearly have differing approaches toward evaluating food safety and managing risks within their own agricultural and food systems.
Jack Bobo, senior adviser on food policy at the US Department of State, accurately describes one of the inherent challenges we face today regarding the advancement of agriculture and global perception: "People like innovation almost as much as they despise change... this really reflects a lot of the angst people have when we talk about food and agriculture." The EU’s use of the "precautionary principle" (PP) as justification for adopting non-scientific risk management measures is a perfect example of this angst.
The EU’s PP is in its regulation (EC 178/2002), but more importantly, it is ingrained in the mind-set and attitude of its people. While based on the WTO’s Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), the EU’s PP has been implemented in broader terms than the original intent of the WTO’s language. Whereas the PP is to be used in situations where there may be a possibility of harm, but where scientific uncertainty regarding the risk exists, the EU tends to employ PP even when scientific evidence points to the contrary. An example of this is the EU’s ban on ractopamine, a dietary additive that improves the feed efficiency, growth rate and lean carcase percentage of live hogs and cattle.
The US Food and Drug Administration approved the use of ractopamine in 1999 and in 2012. Codex, which sets international standards for food products, approved a maximum residue limit (MRL) for ractopamine, which gives it an international standard as defined by the WTO. Regardless of this approval and the establishment of an MRL, thus the creation of an international standard, the EU continues to ban imports of pork from pigs fed with ractopamine.
The EU is the second-largest market in the world for pork consumption at 22.5m MT annually. The EU should be a significant market for competitively-priced, high-quality US pork; however, because of TRQ restrictions and the EU’s ban on ractopamine, the National Pork Producers Council reports that in 2012, the US only exported only 4,889 MT of pork. The EU’s ban on ractopamine is not based on sound science or legitimate food safety concerns and is in clear violation of the WTO’s SPS agreement. Within the text of the European Commission’s recently issued draft TTIP proposed text on SPS, one can see the EU’s continued insistence on not upholding international standards and not making science the foundation of evaluating food safety: "Parties shall ensure that tolerances and maximum residue levels adopted by the Codex Alimentarius Commission... will be applied by each party with undue delay, unless the importing party had signalled reservation in the Codex Alimentarius Commission."
The language shows the EU’s complete disregard for international standard-setting bodies as a whole. The EU is on the record objecting to Codex’s approval of and MRL for ractopamine. This language means that if the EU has shown any objection to tolerances and MRLs adopted by Codex, that they will not be required to uphold that standard within the context of TTIP. This contradicts the language of the WTO SPS Agreement. Would the new international standard then be to not recognise international standards? If the EU continues to apply the PP in the way that it does and rejects the international standard for ractopamine, and other international standards, the legitimacy of Codex and the SPS Agreement itself, could be undermined.
Through TTIP, my hope is for the EU to be held accountable to international standards and science-based measures, and, in so doing, send a message to the rest of the world about the fundamental role of science in regulatory decision-making processes.