2015 Trend: New Era for International Trade

Cargo Ship3A nation’s economic prosperity depends on open and free trade with other nations and the international community is trying hard for the past 60 years to lower trade barriers, alas, with mixed success. The latest attempt to establish global free trade, administered by the Word Trade Organization, dubbed the Doha Round, went nowhere. So, the main economic centers are now working on bilateral deals, called the Trans Pacific Partnership (TPP = US and various Asian countries), and Transatlantic Trade and Investment Partnership (TTIP = US and the European Union). Despite ferocious opposition by vocal consumer and special interest groups, it is widely believed, that these trade deals are inevitable and will be signed in the next two years.

Here we’d like to focus on the the US-Europe free trade negotiations (TTIP) and highlight the opportunities and challenges for a final deal especially for the food and agricultural sectors.

The goal of TTIP:

– enable stronger economic activity and GDP growth,
– expand markets especially for small and mid-size producers,
– increase consumption and consumer choices
– provide long-term financial stability on both sides of the Atlantic.

How can that be done? First: reduce or remove all tariffs and customs duties. Second: harmonize as many import and regulatory rules in as many industries and as fast as possible.

The main sticking points:

a) although industry standards and regulatory frameworks are similar in many respects, especially in the US and European Union, it is very hard to harmonize or change them overnight. Governmental procedures, oversight authority and rule making differ substantially, often for historic and cultural reasons.

b) some regions and industry segments still need protection from open competition, especially in rural areas, or those vulnerable to unemployment.

c) Different world views about privacy, consumer vs.investor protection,  financial market regulation and de-regulation, business owners vs. employee rights and food production and safety practices  persist. These differences are based, again, on historical and cultural traditions, and are therefore highly emotionally charged. Even scientists cannot agree.

TTIP for the food and agricultural industries:

A transatlantic trade agreement would have to overcome a range of technical and perceptual hurdles, both of which are highly emotionally charged:

From the European side:

– widespread use of genetic modification, hormones and antibiotics in animal and crop farming
– food safety measures such as the chlorination of chicken
– disregard for the Protection of Geographic Indication for some foods, like Parmesan Cheese
– the domination of multinational corporations in the consumer foods industries and a penchant for mass produced, fast food in the USA

From the American side:

– High tariffs and protective measures
– Preference for imports from former colonial regions
– A disregard for science in regards to biotech and use of steroids and pharmacological products in agriculture
– A certain European arrogance in regards to the quality, taste and traditions of foods produced and consumed in the US

More to follow…