No Room for Half Measures in TTIP

U.S. dairy exports to the European Union (EU) averaged around $87 million per year for the past five years. Annual EU dairy shipments to the United States averaged more than $1.1 billion over that same period.

We sold more milk products to New Zealand, the world’s largest dairy exporter, than we did to the 27 EU nations in 2012.

The U.S.-EU dairy trade deficit was understandable years ago when the United States largely sat out of world markets and our specialty cheese business was less developed. But as we have grown into an export force and built a world class artisan cheese business, it makes no sense—until you consider EU trade barriers.

Trade barriers make Europe a difficult place for U.S. dairy exporters to do business, while the United States is relatively open to EU dairy products.

The EU applies significant dairy tariffs, has enacted a broad array of non-tariff hurdles, and subscribes to a regulatory policy that creates a high probability of future non-tariff trade barriers. And to top it off, the bloc is pushing a worldwide geographical indications (GI) policy that would force a realignment of the entire U.S. cheese business not only in export markets but also here at home.

Such conditions emphasize what is at stake as the United States and EU kicked off the first round of negotiations toward a Transatlantic Trade and Investment Treaty (TTIP) this week in Washington, D.C.

Open access to Europe would expand U.S. dairy export opportunity, giving us a chance to grow volume and value and chip away at that $1-billion-plus annual deficit. However, the obstacles to gaining open access are large and numerous.

• Tariffs and tariff structure and administration. EU tariffs are on average three times those of the United States. TTIP must not only remove tariffs, but do so in a coordinated manner that reflects the disparity. In addition, the EU’s tariff structure, including complex tariffs as well as the overall administration scheme (import licenses), is extremely complicated and burdensome and must be simplified and streamlined.
• Non-tariff barriers. The United States faces multiple regulatory burdens, such as those connected to somatic cell count requirements, and certificate demands unrelated to sanitary and phytosanitary (SPS) obligations, including date requirements, inconsistent use of tariff codes on dairy certificates, composite health certificates, duplicate inspection requirements and colostrum certification.

More broadly troublesome is the EU subscription to the “precautionary principle,” which relies on the mere identification of a potential or perceived risk, public perceptions and political considerations rather than science-based evidence to set regulations. The precautionary principle is widely used today and remains an open door to future non-tariff barriers.

TTIP negotiations must address SPS concerns and do so in a way that not only tackles today’s trade obstructions but also handles issues that could become tomorrow’s trade barriers. It is vital to include a strong SPS chapter that builds upon the World Trade Organization SPS agreement in an enforceable manner. The work done to date during negotiations for the Trans-Pacific Partnership is an excellent starting point.

Lowering EU dairy tariffs and streamlining tariff administration will yield negligible results if the bloc remains free to apply burdensome, non-scientific SPS regulations.

• Common food names. The EU continues to push its agenda to limit the use of common foods names around the world under the guise of GIs. U.S. exporters are facing increasing barriers to their products in the EU and other markets, as the EU seeks to monopolize common food names. USDEC welcomes separate bilateral discussions on GIs and common names that are designed to address the legitimate concerns of both sides, particularly access of common food names such as parmesan and feta into the EU. We strongly reject any suggestion, however, that this means the United States should relinquish the right to use long-standing generic names as part of that process.

The EU is wielding GIs as a tool to limit U.S. competition. It is unthinkable that a “free trade agreement” could actually make it more difficult for U.S. companies to market their products both internationally and at home.

A successful TTIP deal must be a broad undertaking that tackles all tariffs and removes all restrictions—and addresses other dairy trade issues as well. The deal, for example, is an opportunity to finally eliminate U.S. and EU export subsidies. When in use, the EU’s massive export subsidy allowances can tremendously distort world dairy markets.

We welcome the prospect of truly finding meaningful ways to address the full range of regulatory barriers plaguing the U.S.-EU dairy trade relationship. At the same time, we recognize that addressing them will not be easy. But full resolution of these issues is absolutely critical both to meet current trade challenges and to ensure that any market access expansion that results from a possible EU-U.S. trade agreement truly opens the market for our exports to the EU in reality and not in name only.

(This article first appeared in Cheese Market News in July 2013.)

The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.