Three Reasons Rushing T-TIP Concerns U.S. Dairy

A hurried Transatlantic Trade and Investment Partnership would tilt an already unlevel playing field toward the European Union.  

Trade negotiations and rapidity are concepts that don’t typically work well together. Both the United States and the European Union have pledged to conclude Transatlantic Trade and Investment Partnership (T-TIP) negotiations this year. That is why it is so concerning that a host of issues, including critical dairy concerns, are nowhere near resolution. 

“It is unclear how the two sides can reach an agreement that satisfactorily addresses the wide range of non-tariff barriers to trade, including the EU’s global geographical indications (GIs) which restrict sales of common food products, in only seven months,” says Tom Suber, president of the U.S. Dairy Export Council (USDEC). “U.S. negotiators should not conclude a T-TIP agreement without removing the existing barriers to U.S. exports and ensuring that new ones won’t immediately spring up to take their place. A bad deal is far worse than no deal at all.”

The U.S. dairy industry is united in its concern that dairy issues will not be appropriately resolved under that timeline. In a joint news release, USDEC, the National Milk Producers Federation and the International Dairy Foods Association praised a bipartisan group of senators for urging U.S. negotiators to remain firm in addressing the needs of U.S. agriculture, including key dairy issues.

 “The United States runs an annual $1-billion-plus dairy trade deficit with the European Union, and it is not because we have inferior products or our suppliers do not know how to export,” says Suber. “The playing field is decidedly tilted toward the EU. U.S. suppliers to Europe face far greater barriers to trade and risk of requirements shifting than do EU suppliers to the United States, and given the EU’s T-TIP efforts, the bloc is looking to make it even more lopsided.”

Over the years, Free Trade Agreements have benefited the U.S. dairy industry. USDEC has supported nearly every FTA, including the recent Trans-Pacific Partnership. But the push to finalize a T-TIP agreement this year despite a lack of progress on key dairy issues is worrisome, the USDEC board has concluded.  

Three major areas, all of them vital, concern the U.S. dairy industry, given the ample work still remaining to address them:

1. Inappropriate non-tariff barriers.

Tackling tariffs means nothing if U.S. negotiators fail to remove existing EU non-tariff barriers to trade and gain assurances there will be no new non-tariff barriers erected. Failure in this area would only serve to deepen the existing dairy trade gap.

The EU is adept at developing creative ways to hinder agricultural trade, particularly for dairy. Current challenges include:

• Shifting certification requirements that make market access more difficult than it should be.
• Cumbersome licensing procedures that essentially prevent U.S. companies from winning commercially viable allotments of existing World Trade Organization tariff rate quotas.
• Duplicative inspection requirements that add undue complications to exports of dairy products for feed use.
• And certain EU mandates, like those for somatic cell counts, that impose restrictions on U.S. suppliers based on a quality standard and not a food safety standard.

But based on the EU’s past behavior and ongoing discussions in Europe, future challenges could very likely also emerge such as:

• Country of origin labeling for dairy products and their ingredients.
• Bans on dairy and meat from the offspring of cloned animals.
• Prescriptive animal welfare requirements unaligned to U.S. practices.

Given this, the first batch of issues can’t be viewed as static obligations for U.S. negotiators to resolve point by point in T-TIP talks. You can’t put an end to a game of “whack-a-mole” by simply hitting the current targets.

“We are seeking broader approval of the U.S. safety system in T-TIP to secure a simplified dairy certificate but also assurances that new, unjust, unscientifically-supported requirements for government statements (such as for animal welfare or cloning) will not be layered on top of it,” says Suber. “T-TIP needs to anticipate the strong likelihood that the bloc will continue erecting dairy non-tariff barriers and needs to include measures to prevent that from happening.”

2. Excessively high tariffs.

EU out-of-quota dairy tariffs are extremely high. On cheese, butterfat, and unsweetened milk powder or whey protein products, U.S. suppliers face tariffs ranging from €123-€221/100 kg net (about US$1,380-$2,479/ton).

Even in-quota tariff rates are excessive in many cases. U.S. in-quota butter exports to the EU, for example, face a 26 percent tariff. The EU by contrast faces only a 2.5 percent tariff when shipping butter to the United States.

On average EU dairy tariffs are three times more than those of the United States. T-TIP needs to not only address the disparity between EU and U.S. tariff rates, but also do so in a coordinated manner that reflects that starting-point disparity.

3. Restriction of common food names via GIs.

The EU is pushing harder than ever to restrict the use of common food names through its system of geographical indications, and its pressure is increasingly politicized. Recent statements from leaders in France and Greece and from European Commission officials echo a long-standing hard line on GIs, asserting they would accept no T-TIP deal unless the United States vowed to recognize the EU’s food and beverage GIs as part of it, in effect turning over categories worth millions of dollars.

The EU is seeking to protect a list of more than 200 GIs, including many cheeses, some of which are generic names. And if it gets its way in T-TIP, that list will grow in the future.

Although the EU suggested it would be willing to consider excluding generic names from GI protection, its definition of “generic” clearly differs from the U.S. definition, leaving names like asiago, feta, gorgonzola, munster and parmesan still under threat.

The EU is seeking to strip away the rights of U.S. cheesemakers to manufacture and market products under names that in some cases have been used for more than a century. The threat is global: The bloc is using T-TIP to accomplish that goal in the United States and using bilateral deals to block U.S. exports in third countries.

The EU is also proposing to use several U.S. legal mechanisms in T-TIP (separate from U.S. trademark law) to ensure GI enforcement. Such a move would put the costs of GI enforcement for hundreds of protected names on the shoulders of the U.S. government, giving yet another leg up to all EU manufacturers.

Even the smallest U.S. companies manage to register and defend their own intellectual property by themselves, typically through trademarks. There is no reason why EU companies should not only have a free ride but also seize control of specific varieties through misuse of GIs.

“USDEC is not inherently opposed to GIs. But the EU’s approach to restrict the use of generic names during trade negotiations focused on improved trade rules runs counter to the very nature of the endeavor,” says Suber. “Recent comments indicate that the EU’s strategy continues to see GIs as a bargaining chip in trade talks.”

Calling it “quid pro quo,” a European Commission source was recently quoted as baldly stating that the size of the EU offer to the U.S. on new pork, poultry and beef access will depend on the GI issue. Imposing restrictions on one industry in order to advantage another, however, is not an approach that the U.S. has embraced in past trade deals.

“Trade agreements are about tearing down barriers, not erecting new ones,” says Suber. “The EU’s GI scheme is clearly intended to provide commercial advantage to certain EU manufacturers and to gain support from one U.S. agricultural sector for imposing new barriers on another. That type of destructive and divisive approach to trade will not result in a positive agreement that can garner strong Congressional support.”

Negotiators from the United States and the EU will gather in Brussels in July for the 14th round of T-TIP talks.

“We commend the U.S. government’s work in defending common names against an aggressive EU GI agenda,” says Suber. “It is a challenging global issue and we urge them to stay the course by continuing to push back against attempts to abuse the very notion of a free trade agreement by using it to impose new barriers and limit competition.”

Learn more:

• Register for June 21 Protecting Your Food Names Seminar
• Why Europe Must not own 'Parmesan' and 'Feta'
• List of USDEC resources about the Trans-Pacific Partnership
• How Free Trade Agreements Ignited U.S. Dairy Exports to 6 Countries
• Study: Free Trade Agreements Helped Bring $8.3 Billion to U.S. Dairy Over 10 Years 

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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.