U.S.-EU Agricultural Trade and TTIP
Jun 09, 2016
The agricultural trade relationship between the United States and the member countries of the European Union has been a stormy one for several decades. The original six EEC members--France, West Germany, Italy, the Netherlands, Belgium, and Luxembourg--which signed the Treaty of Rome in 1957, got together with a common goal of modernizing their agricultural sectors to achieve food self-sufficiency for the region. The EEC launched the Common Agricultural Policy in 1962, which consisted of an interlocking system of guaranteed commodity prices (crops and livestock), stiff import protection as well as market interventions when deemed necessary. This long struggle is one of the reasons why the trade agreement that the United States and EU have been negotiating since 2013, the Trans-Atlantic Trade and Investment Partnership (TTIP) is not yet completed.
The barriers raised against agricultural imports began to raise concerns within U.S. agriculture after Spain and Portugal joined the EU in 1986, increasing the membership to 12 countries. At that point in time, the market consisted of a population of nearly 367 million people, and it was largely shut off from the products that U.S. agricultural exporters were focusing on at that time, bulk commodities such as grains and oilseeds. The transition for the two countries into the EU allowed the United States to continue to export corn to those markets, but the tariff structure made exports of corn and most other grains nearly prohibitively expensive to ship into the rest of the EU.
Over the years, the EU has erected various barriers against access to U.S. agricultural products. Some of the most heated trade disputes between the two entities, initially under GATT rules and later under the World Trade Organization (WTO) have been over such matters, involving both tariffs and a variety of non-tariff barriers. One early such dispute was initiated in 1988 under GATT rules, when the U.S. government objected to the high subsidies being provided to EU farmers raising oilseeds, primarily rapeseed at the time. Despite the fact that the GATT dispute settlement process was not binding on participating parties, the U.S. government was able to cajole the EU into limiting the total planted area on which oilseeds could receive subsidies, and this agreement was negotiated in conjunction with the final efforts to reach a multilateral trade agreement in the Uruguay Round, which was completed in 1994. This deal effectively limited internal EU oilseed production, and allowed the U.S. to retain a key market for soybeans and soybean products, at least for a while.
Not every U.S. effort to address EU trade barriers under the GATT or the WTO has been successful--in 1989, the EU imposed a ban on beef produced with the use of six specific types of growth hormones. This rule affected imports primarily from the U.S. and Canada, and in response, the U.S. government filed a dispute settlement case under GATT rules shortly afterwards. The EU blocked establishment of a dispute settlement panel on this case--as was allowed under GATT rules--so the U.S. imposed countervailing tariffs on a variety of EU products under its own trade laws until the WTO dispute settlement process was up and running in 1996. At that point, the U.S. and Canada filed a new case against the EU hormone rules. The U.S. and Canada won every step of the way because the EU lacked scientific justification for their action, but after nearly 20 years the EU still is not willing to accept imports of beef produced with the uses of such hormones, although they did agree to increase the import quota for hormone-free beef from both countries.
Over the last few decades, additional disputes over trade in wheat gluten, poultry, wine labeling, biodiesel, the EU biotech approval system, the EU GMO food labeling regime, so-called geographical indications for food products such as Parmesan cheese, barley, and beef from the EU (due to concerns over BSE) have kept U.S. and EU trade negotiators and lawyers fully employed.
Between 2011 and 2015, USDA data show that U.S. agricultural exports to the European Union, now with 28 members, has averaged about $11.2 billion annually in value. Between 1986 and 1990, the average was $7.4 billion. This represents a 22 percent decline in the inflation-adjusted value of this category of exports, even though the EU market with now 28 member countries is nearly 40 percent larger than it was in the late 1980’s. According to EU data, extra-EU agricultural imports were valued at $115 billion in 2013, so the U.S. share amounts to less than 8 percent of that market.
The inability to reach an agreement over some of these still simmering issues, such as the treatment of geographic indications and harmonization of sanitary and phyto-sanitary rules within the TTIP negotiations, appears to be among the obstacles holding up completion of the deal. At this point, the process seems quite likely to carry over into the next Presidential administration in 2017.