The U.S. and the EU have been negotiating the Transatlantic Trade and Investment Partnership (TTIP) trade agreement for the past two years.  With two developed economies, the partnership has to open markets that could be supplied domestically.  A recent publication from the Economic Research Service (ERS) of USDA Sanitary and Phytosanitary Measures and Tariff-Rate Quotas for U.S. Meat Exports to the European Union addresses some of the policy challenges for U.S. meat in the EU.  

The EU is considered to have a relatively open agriculture with average trade-weighted tariff of 8.6 percent.  The U.S. average trade-weighted tariff is estimated at 2.1 percent.  Despite that reputation for openness, EU pork imports were less than 0.1 percent of consumption at 15,000 metric tons (MT) in 2013.  The U.S. was the second largest supplier at 1, 700 MT.  The EU has taken advantage of growing markets in the world with exports of 2.2 million metric tons (MMT) almost 10 percent of production of 22.4 MMT.  The EU has tariff rate quotas (TRQs) tariff rates that are high.  Boneless loins and hams have a rate of $345 per metric ton (MT) in-quota and $1,200 per MT on above-quota.  The quota fill rate was less than 12 percent in 2013.  Total EU pork imports have usually been lower than the 5-percent minimum market access target under the WTO.

The EU is some better with broiler (young chicken) meat.  The EU is a major producer at in 2013 at 9.8 MMT and consumer at 9.4 MMT.   Exports were 1.1 MMT, 11 percent of production about the same as pork.  Imports were 0.67 MMT, about 7 percent of consumption.   Imports from the U.S. were only 388 MT in 2013.  Broiler meat imported by the EU is almost all from countries that do not use pathogen reduction treatments (PRTs), such as a chlorine wash, in their production.  PRTs are commonly used in U.S. production.  Over 90 percent of EU imports in 2013 came from Brazil and Thailand.

The EU was a small net importer of beef in 2013 with production at 7.5 MMT and consumption at 7.6 MMT.  Imports were 376,000 MT, 4.9 percent of consumption, and exports were 244,000 MT.  Argentina, Brazil, and Uruguay supplied 78 percent of imports in recent years.   The U.S. provided about 5 percent of imports.  The EU banned hormone growth promotants in 1989.  USDA’s Agricultural Marketing Service (AMS) began in 1999 the Non-Hormone Treated Cattle (NHTC) Program in to gain some access to the market.  The U.S. and Canada won a WTO case over the EU and were allowed to place retaliatory tariff on EU exports.  The EU did not remove the ban on hormone use.

In the TTIP talks the U.S. negotiators have to balance changes in sanitary and phyto-sanitary (SPS) rules with changes in TRQ to gain additional market access.  For example, a reduction in TRQ in-quota and over-quota tariffs for pork are of no benefit if the SPS rule for ractopamine (banned), a growth promotant approved for use in the U.S. in 1999, are not changed.  Newer members of the EU like Poland, Bulgaria and Romania imported substantial amounts of U.S. pork raised with ractopamine before they joined the EU and lost access to U.S. products.  Removing the ban on ractopamine would likely open some new markets.

The EU has a TRQ open to all WTO members that allows for imports of 70,390 MT of pork per year.  The EU has a separate TRQ for Chile in their FTA and has one in the proposed EU-Canada FTA.  A substantial one would be needed with the U.S. to have a truly market opening effect.

The U.S. has shown that it can compete in the world boiler trade with a 40 percent market share for total global exports of broiler parts.  The U.S. has a 16,665 MT TRQ with the EU for boiler parts and shares smaller TRQs with all countries for other products.  A larger TRQ and resolution of the PRT will be needed for the U.S. to have real access.  European Food Safety Authority analyses have found that chlorine-based PRTs are safe and effective as are peroxyacetic acid solutions as a possible alternative.  EU law allows only ‘potable water’ to be used for a rinse unless something else is specifically authorized by the EU.  Several prominent EU politicians have said that no EU food safety legislation will be changed to implement the TTIP, so this appears to be a non-starter.  The U.S. industry would have to decide if they want to follow the EU protocols.

In recent years all growth of access of U.S. beef has occurred through the NHTC program.   Between 1997 and 2009, the U.S. and Canada shared an 11,500 MT per year High Quality Beef (HQB) TRQ.  In 2009, the U.S. received an additional 20,000 MT TRQ with zero tariffs in return for giving up the retaliatory tariffs from the WTO hormone case.  In 2012, the cumulative total for the TRQ was increased to 48,200 MT, but is shared among Australia, Canada, New Zealand, the U.S., and Uruguay.  Argentina was added in 2014.  The TRQ is still small compared to total EU consumption of 7.6 MMT.  According to the ERS analysis, in 2011 over 80 percent of the cattle in U.S. feedlots with 1,000 head capacity or more were implanted with hormones.  They would have to give up cost savings of almost $70 per head to comply with the NHTC program and aim for the small EU HQB TRQ.

The U.S. could get a TRQ exclusively for itself; Canada got 50,000 MT per year in the proposed EU-Canada FTA, but with the hormone ban in place.  The U.S. share of the EU market would grow, but would still be small and an SPS market barrier would be further legitimized.

The U.S. and the EU are to be commended for beginning the TTIP negotiating process and for including agriculture in it.  The ERS analysis shows that it is hard to create a 21-century agreement based on compromises made in the past.  The negotiators should begin with the current situation and provide a 5-10 year transition to a new framework not built on the past.  The fact that the EU has a closed pork market should not influence where the industry is in ten years.  The goal should be no less open than today or at least 10 percent open to trade if less that today.

Japanese agriculture has been rightly criticized for slowing negotiations on the TPP trade agreement, but this TTIP exercise shows just how hard change is for trade issues in agriculture.  That is not a reason to quit trying, but a reason to go in with eyes wide open and committed to truly open markets to the benefit of consumers and efficient producers everywhere.

Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade &Technology (www.truthabouttrade.org). Follow us: @TruthAboutTrade and @World_Farmers on Twitter |Truth About Trade & Technology on Facebook.