Straight From D.C: The Mystery of the Trade Policy Onion

Straight From D.C: The Mystery of the Trade Policy Onion

Agriculture has always been one of the most heavily protected economic sectors in the world. Governments have maintained a variety of barriers against food and agricultural imports, claiming a need to enhance food security or shelter domestic producers from competition. 

A former colleague at USDA once described the bewildering variety of trade barriers as a “policy onion.” If you succeed at peeling away one layer, there is always another layer underneath.

Even though negotiations to reduce trade barriers have been conducted via the General Agreement on Tariffs and Trade since 1948, governments didn’t agree to discuss agricultural issues until 1986. While protection remained high (the average agricultural tariff globally was still 62% in 2001), the Uruguay Round Agreement required countries to stop using outright import bans to protect their agricultural markets, to convert the variety of non-tariff barriers into tariff equivalents and to cap tariffs at agreed levels, called “bound tariffs.”

There were other important developments in conjunction with the Uruguay Round that provided tools to help peel the ag trade policy onion. First, it led to the creation of the World Trade Organization (WTO) in 1994, with a legally-binding trade dispute settlement process for member countries. Second, the Uruguay Round also included agreements on Technical Barriers to Trade (TBT) and Sanitary and Phyto-Sanitary measures (SPS).
Under TBT, countries commit to not using technical standards and regulations as unnecessary barriers to trade. With SPS, countries are required to use science-based risk analyses to establish measures to protect human or animal health. 

Under both agreements, if countries adopt international standards, those standards are considered safe harbors. A country can impose higher standards, but it must be able to defend those standards with scientifically rigorous risk assessments. Countries are also barred from subjecting imported products to higher standards than similar products of domestic origin.

Since WTO was established in 1995, the majority of agriculture-related trade disputes pursued by the U.S. have involved border measures imposed by other countries. Out of 34 cases initiated against barriers to U.S. products, six stemmed from tariff issues, eight addressed violations of national treatment principles and 11 concerned overly restrictive import licensing requirements. The remaining nine cases represent efforts by the U.S. government to knock down TBT and SPS measures they viewed as unjustified by science and/or inconsistent with WTO rules.

Since 2010, the Office of the U.S. Trade Representative (USTR) has released an annual report detailing the SPS barriers U.S. food and agricultural products face in key markets. The latest version of that report, released in March 2014, covered barriers in 51 countries and was 115 pages long. The report notes the proliferation of questionable SPS measures in recent years, such as bans of U.S. meat and poultry exports in response to modest or localized animal disease outbreaks that go far beyond what can be justified under science-based standards.

All sectors of U.S. agriculture face obstacles when accessing overseas markets, and they rely on USDA and USTR to identify and challenge the SPS and TBT measures that don’t serve a legitimate purpose. Many such measures are subsequently modified or rescinded after U.S. pushback, but when informal consultation fails, the WTO dispute settlement mechanism is available as a last recourse. It is important for all parties to remain vigilant against new barriers against U.S. agricultural exports. 

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