Economic Policy PaPEr SEriES 2012

a TranSaTlanTic ParTnErShiP agriculTural iSSuES

DiffErEnT ViSionS, a common DESTiny
Eric TrachTEnbErg

 2012 The German Marshall Fund of the United States. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the German Marshall Fund of the United States (GMF). Please direct inquiries to: The German Marshall Fund of the United States 1744 R Street, NW Washington, DC 20009 T 1 202 683 2650 F 1 202 265 1662 E info@gmfus.org This publication can be downloaded for free at http://www.gmfus.org/publications/index.cfm. Limited print copies are also available. To request a copy, send an e-mail to info@gmfus.org. gmf Paper Series The GMF Paper Series presents research on a variety of transatlantic topics by staff, fellows, and partners of the German Marshall Fund of the United States. The views expressed here are those of the author and do not necessarily represent the views of GMF. Comments from readers are welcome; reply to the mailing address above or by e-mail to info@gmfus.org. about gmf The German Marshall Fund of the United States (GMF) is a non-partisan American public policy and grantmaking institution dedicated to promoting better understanding and cooperation between North America and Europe on transatlantic and global issues. GMF does this by supporting individuals and institutions working in the transatlantic sphere, by convening leaders and members of the policy and business communities, by contributing research and analysis on transatlantic topics, and by providing exchange opportunities to foster renewed commitment to the transatlantic relationship. In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has seven offices in Europe: Berlin, Paris, Brussels, Belgrade, Ankara, Bucharest, and Warsaw. GMF also has smaller representations in Bratislava, Turin, and Stockholm. about gmfs Economic Policy Program The Economic Policy Program is an initiative of GMF dedicated to promoting cooperation between the United States and Europe on domestic and international economic policies as vital instruments of global prosperity, especially for the poor and those affected by shifts in the global economy. The United States and Europe account for more than 40 percent of world economic activity, close to $20 trillion in goods and services on an annual basis. Given the size and importance of this relationship, GMFs Economic Policy Program seeks to ensure that the benefits of globalization are distributed equitably and fairly. Through in-depth research, targeted grantmaking, strategic convening, and outreach to key policymakers and the media, the program supports transatlantic leadership at the critical nexus of economic policy, trade, development assistance, and management of domestic sectors such as agriculture. On the cover: @ BanksPhotos

A Transatlantic Partnership Agricultural Issues

Different Visions, a Common Destiny

Economic Policy Paper Series October 2012

By Eric Trachtenberg1

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Different Visions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Outstanding Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 A Common Destiny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Notes & Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1 Eric Trachtenberg is the director of food & agriculture at McLarty Associates. The views in this paper only represent those of the author. They do not represent those of McLarty Associates, the German Marshall Fund, the reviewers, or any government agency.

The author would like to thank Alan Larson, Audrae Erickson, Audrey Talley, Bruce Stokes, Hiddo Houben, Jennifer Hillman, Joe OMara, Karil Kochenderfer, Nicola Lightner, and William Westman for their comments. He takes final responsibility for any remaining errors or oversights in the report.

Executive Summary

he United States and the European Union (EU) continue to face difficult times. As they look to restart growth, there is a unique opportunity to boost economies on both sides of the Atlantic through trade liberalization. If the United States and the EU seize the opportunity, they could create one of the worlds largest free trade areas, potentially bringing immense benefits to both business and consumers. Despite the merits of a transatlantic free trade area, progress on an agreement could be slow because of several challenging issues. One of the most difficult of these is agriculture.

agreement. In 1996 and 2006, both sides agreed to recognize geographic indications for wine and spirits. In addition, both are phasing out export subsidies, improving their food aid practices, and may be poised to reduce market-distorting domestic support. By building on this momentum, an agricultural pact in the context of a U.S.-EU free trade agreement could deliver substantial benefits to the more than 800 million people living on both sides of the Atlantic. A transatlantic free trade agreement would have value far beyond economics. The United States and the EU could reinvigorate the Doha Round both by demonstrating global leadership and resolving many of the issues that disrupt world agricultural development and trade. An agreement would also be a hugely significant demonstration of solidarity and cooperation between the Western democracies and reinvigorate this vital important bilateral relationship. Resolutions of agricultural issues would prepare both sides for a world where an ever-increasing population and an expanding middle class make ever-larger demands on the food system. Finally, a transatlantic agreement would enable both sides to develop a joint strategic vision for the world economy of the future. Some concrete measures to liberalize transatlantic agricultural trade could include: The eventual elimination of all duties with the use of long transition periods and special safeguards if needed. The resolution of a significant number of sanitary and phytosanitary issues. An agreement to follow international (Codex, OIE, and IPPC) standards on sanitary and phytosanitary standards. The establishment of a Bilateral Scientific Dialogue on new technologies such as

While agriculture and food issues have long bedeviled the bilateral trading relationship, there is now a real chance to make headway. On issues such as import duties, geographical indications, non-trade concerns (NTC),1 export subsidies, domestic support, and food aid, it may be possible to find middle ground between the two sides. Even complex sanitary and phytosanitary issues such as meat market access or biotechnology may see progress with some creative thinking. And the timing could be good since both sides may be ready to look at agricultural sector policy reform in 2013 because of growing fiscal pressures and deepening concerns about world food supplies. Furthermore, despite a history of transatlantic farm frictions, there is also a history of Washington and Brussels eventually resolving agricultural issues. For example, on February 15, 2012, the United States and the EU signed a mutual recognition agreement on organic products despite intense previous suspicions on both sides of the Atlantic. As a result, organic products certified in either Europe or in the United States can be sold as organic in either region since June 1, 2012. This is not the only
1 In the context of agriculture trade, non-trade concerns refers to food security, the environment, structural adjustment, rural development, poverty alleviation, etc. (WTO Backgrounder 2004)

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biotech and nanotechnology to encourage competitiveness on both sides of the Atlantic. The establishment of mutual recognition for geographical indicators. An agreement on non-derogatory but clear labeling for biotech products. The establishment of a Consultative Committee to implement the agreement. The elimination of all export subsidies.

The creation of a Global Food Security Committee to coordinate food aid donations and prepare global agriculture production for the world of 2050. All measures would not only be consistent with WTO disciplines on sanitary and phytosanitary measures, technical barriers to trade, and intellectual property but should make them even more robust.

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Background

he United States and the European Union have an ironic economic relationship. On one hand, both economies are deeply integrated and trade flows are very large. In 2011, bilateral trade in goods alone was totaled 445 billion or $636 billion, while the transatlantic economy represented half of the worlds GDP. Investment flows and trade in services are also immense and important. For example, transatlantic capital flows accounted for 75.3 percent of the outward foreign investment in the world and support an estimated 15 million jobs. Despite these critical linkages, transatlantic trade is also marked by some intense frictions. For example, in 2010 EU-U.S. disagreements accounted for 47 percent of the EUs WTO trade disputes despite the fact that this bilateral trade accounts for less than 22 percent of EU trade. Although these issues only account for a small share of imports and exports, they undermine the ability of both sides to gain from further trade liberalization. To move beyond the problems and create new opportunities, in November 2011 U.S. President Barack Obama and European leaders directed the Transatlantic Economic Council to create a U.S.-EU High Level Working Group on Jobs and Growth to find ways to boost jobs, growth, and competitiveness. This official initiative was announced midway through the deliberations of the Transatlantic Task Force on Trade and Investment (a joint project of the German Marshall Fund of the United States and the European Center for International Political Economy). The Transatlantic Task Force report, along with papers produced by the Transatlantic Business Dialogue (TABD) and the Business Roundtable (BRT), examined ways to liberalize and improve transatlantic trade, despite todays challenging economic and political environment. Specific goals included eliminating tariffs and non-tariff barriers, enhancing regulatory convergence, and aligning of

standards and practices through harmonization, mutual recognition, and the adoption of international standards. The resulting direction emerging from these efforts point to a Transatlantic Partnership (TAP) concept that would not only be a free trade agreement (FTA) but a way to strengthen cooperation and integration between the EU and the United States while laying the foundation for a strategic vision for the world economy. One of the largest stumbling blocks to a TAP is agriculture, a sector that has eluded bilateral consensus for decades. While the 1995 creation of the World Trade Organization (WTO) strengthened disciplines on domestic agricultural support limits (Aggregate Market Support or AMS), sanitary and phytosanitary issues (SPS), and technical barriers to trade (TBT), transatlantic agricultural disputes still resist definitive resolution. Two high-profile examples include the EU ban on imports of beef from animals treated with hormones and on biotech products such as genetically-modified corn, soybeans, and cotton. In both of these cases, the EU opted in favor of penalties against imports instead of opening its markets. In Europe, the compensation it paid the United States to compensate it for lost revenue from beef sales was seen as an acceptable price to pay to avoid opening the EU market to products allegedly unacceptable to European consumers. While there was some resolution on beef, the biotech issue remains unresolved. From the U.S. perspective, this refusal by the EU to change its import rules despite U.S. victories in WTO dispute settlement has reduced confidence in the trading system because dispute settlement wins did not change the EUs rules and liberalize markets. While the United States itself has not always complied with WTO agricultural rulings (such as in the Brazil cotton case), the inability of the WTO to open markets has

The Transatlantic Partnership concept would not only be a free trade agreement but a way to strengthen cooperation and integration between the EU and the United States while laying the foundation for a strategic vision for the world economy.

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weakened the only multilateral institution capable of moving these issues forward. The intractability of these trade disputes arises from divergent visions and experiences with agriculture and food. These contrasting points of view are at the root of government policies that support the maintenance of substantial barriers to agricultural

trade, including tariffs and subsidies. While these issues can make it difficult to move forward on agriculture trade liberalization, they create opportunities for each side to better understand the other and as a consequence to resolve their differences.

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Different Visions

urrent agriculture policy in the United States and the EU arose from different historical experiences and relationships between agricultural producers, governments, food processors, consumers, and other interested parties. While these have complicated the resolution of transatlantic trade policy issues, they also present possible ways to find common ground. To be sure, opinions within each bloc are by no means monolithic. There is a great diversity of opinion within both the United States and the EU about food and agriculture. Nevertheless, it is possible to make some generalizations about these issues. These questions concern agricultural policy, the role of agriculture, food and culture, and confidence in regulation. Agricultural Policy European Union The EUs Common Agricultural Policy (CAP) formally started in 1962 but grew out of an environment deeply influenced by fresh memories of food shortages from World War II. In addition to these residual food security concerns, the CAP also sought to improve an agricultural sector handicapped by small and inefficient farms, poor productivity, and low incomes. It worked by setting common EU prices for agricultural products, preferring European over outside producers, and centralizing support funding through Brussels. The EU-wide financing made the CAP by far the largest EU program. It also made it subject to internal arguments about the distribution of costs and benefits between member countries. This latter issue has been particularly challenging since certain EU states such as France benefit disproportionately from CAP payments since it alone accounts for around 20 percent of agricultural production by value. A major change in the CAP came in 1992 when reforms moved it away from grain and livestock

price supports and export subsidies to the use of direct payments mostly divorced from prices or output. The change came because EU agricultural production had increased enough to make food security relatively unimportant. As output expanded, the EU changed from a net food importer to an exporter, especially of wheat, sugar, meat, and dairy products. These surpluses became increasingly difficult to manage, mirroring what occurred in the United States during the 1980s. The rising costs and surpluses also raised further concerns about the long-term competitiveness of EU agriculture. The growing commodity mountains fueled reform of the CAP into the current program. While the CAP is still designed to support farm income, its remit has expanded significantly to improving the competitiveness of EU farmers, maintaining the viability of rural areas, and providing farm products and other public goods. The European Commission makes its case for the CAP based on the need for food production, sustainable management of natural resources, and balanced territorial development. In addition, the CAP is justified as ensuring food security, the reduction of price variability, improving competitiveness, reducing greenhouse gas emissions, preventing soil depletion, improving water and air quality, and encouraging biodiversity. The CAP influences the economic environment for 7.3 million commercial farms and over 6 million smallholdings many of which are in the most recently acceded members such as Romania and Bulgaria. According to Eurostat, over 16 million people are employed in the agricultural sector, some 5.6 percent of the labor force. The OECD reports that the average EU farm size is 22 hectares, and the total value of production is 304 billion ($403 billion).

The European Commission makes its case for the CAP based on the need for food production, sustainable management of natural resources, and balanced territorial development.

A Transatlantic Partnership Agricultural Issues

U.S. programs were designed to support rural incomes by boosting low prices for farm goods while ensuring food availability at affordable prices.

CAP expenditures have been quite stable for the last 20 years at around 80 billion ($100 billion). However, the share of the EU budget devoted to agriculture fell to 41 percent in 2011 down from more than 70 percent in the mid-1980s. Despite this reduction, these cash transfers matter hugely to the farm economy. According to the OECD, CAP transfers account for about 24 percent of the gross revenue from farming. While the euro crisis will likely push CAP spending down in the future, the continuing political strength of agricultural interests in certain EU states will likely keep this number relatively high for the foreseeable future. United States The United States modern agricultural policies date back to the 1930s. Created during the Great Depression and the Dust Bowl, U.S. programs were designed to support rural incomes by boosting low prices for farm goods while ensuring food availability at affordable prices. U.S. policy is marked by a clear divide between program crops that are covered by the price support programs and the other products that do not enjoy the same support. For example, livestock and meats are not covered under price support programs, although they are protected by tariffs and other measures. Like the EU, U.S. policy is also heavily influenced by farm interests. While in Europe this comes from national governments, U.S. farm spending is driven by Congress, whose members are deeply connected to local and regional constituencies. This issue is especially important in the U.S. Senate, where farm interests are overrepresented as a proportion of the population. U.S. agriculture production has increased sharply over the last few decades. As it rose, the emphasis first moved to the disposal of surplus commodities overseas. Politically, this arrangement worked because it aligned farmer interests with the international development community and those

seeking to bolster the United States strategic relationships overseas. By the 1980s, the model of government-supported prices and limited commercial exports had run out of steam. Like in Europe, government stocks of commodities piled up and spending had become unsustainable. As a result, farm legislation in 1985 and 1990 reduced supply controls along with income and price supports. The United States increasingly moved toward market-friendly measures while focusing increasingly on the development of new export opportunities for U.S. farm products. Current U.S. agricultural policy focuses primarily on preserving the safety net for U.S. farmers. Interestingly, the current farm law the Food, Conservation and Energy Act of 2008 does not identify any overall objectives. There are only some consumer and environmental goals embedded in the bill. It merely states that its purpose is to provide for the continuation of agricultural programs through fiscal year 2010, and for other purposes. As a result of its policies and geography, U.S. agriculture has a very different structure than Europes. In the United States, the number of farms is lower than the EU (2.2 million) and the average size is much larger (418 acres or 169 hectares, seven times as large as an average EU farm), while the total production area is around two times the EU total. But the total value of output is $287 billion, only 70 percent of the EU value. According to USDA, more than 3 million people are employed in the agricultural sector, accounting for some 2 percent of the labor force. In the 2012 Farm Bill now taking shape, a key question has been affordability. The Congressional Budget Office (CBO) projected that the annual average expenditure on commodity programs alone for FY2011-FY2020 under current legislation is $14.9 billion. OECD data show that all transfers

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to U.S. farmers account for just below 10 percent of gross revenue from farming. Both relative to production and in absolute terms, U.S. spending is less than half the EUs. Despite this, farm spending is a target for budget cuts. The Future In the near future, there may be an opportunity for change as the EU prepares for further changes in the CAP and the U.S. Congress continues work on a new Farm Bill. However, strong vested interests will make it difficult for both sides to engage in fundamental reform, without a compelling reason to move ahead. A look at the timetables on both sides of the Atlantic makes reform most likely in 2013. In the United States, the Farm Bill continues to advance in Congress but time is rapidly running out on the 2012 legislative calendar. In addition, the debate is complicated by intense partisanship and disputes over crop insurance and funding crops in the South. On top of this, most Farm Bill spending (80 percent) is dedicated to feeding programs such as the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps). Bitter disagreements over SNAP could bring progress on the Farm Bill to a halt. While passage of some legislation is almost inevitable to prevent a return to an unworkable 1949 permanent law this year, the most likely outcome is a one-year Farm Bill extension into 2013. The EU is considering CAP changes to be implemented from 2014-2019. While the debate continues to move forward, it has been slowed down by arguments over defining an active farmer, payment limits, the complexity of the program, and the lower level of subsidy payments to new states such as Poland and Hungary. It is also very likely that the euro crisis will influence the debate. On top of this, a recent EU Court of Auditors decision criticizing many aspects of the

reform program will also complicate matters. This makes it likely that CAP change will be postponed until 2013. The Role of Agriculture European Union Both the EU and the United States have very different views of agriculture. The EU vision is dominated by the idea of multifunctionality that envisions a farming sector driven by far more than just supply and demand considerations. Multifunctional agriculture is not just about producing food, but it supports many other priorities such as preserving a rural way of life, improving animal welfare, ensuring climate stability (reducing greenhouse gas emissions and increasing carbon storage), empowering farmers as stewards of the rural environment, and even contributing to aesthetic and recreational needs. To preserve production and a rural way of life, EU policy supports the expansion of agricultural activity to benefit the environment. The multifunctional role of agriculture is one of the major reasons why EU agricultural and trade policy is dominated by so many non-trade concerns. In fact, some in the EU see NTC-related barriers as a way to level the playing field to protect local producers who face higher costs because of EU rules. EU agricultural spending is not just about the farmers, but is seen as a way to address environmental and social concerns by creating public goods. However, in practice the concept also raises issues of how to define good practices, measure performance, ensure conformity, and carry out enforcement consistently across sectors. United States While U.S. policy also seeks to preserve rural life in theory, the reality is that most U.S. farmers are expected to adjust to markets far more than in Europe. With the exception of some long-protected

Both the EU and the United States have very different views of agriculture. The EU vision is dominated by the idea of multifunctionality that envisions a farming sector driven by far more than just supply and demand considerations.

A Transatlantic Partnership Agricultural Issues

In the United States, attitudes about food are first focused on safety and then on price, novelty, and variety.

commodities such as sugar and dairy, producers are supposed to produce what consumers want since the share of farm revenue from the government is lower. The long list of agricultural policy priorities held in the EU is less important in the United States. In other words, the U.S. vision is far less multifunctional. This has allowed economic forces to transform the face of U.S. agriculture in a more radical way. For example, U.S. farm size has expanded from 200 acres in 1950 to over 400 acres as farm numbers have fallen dramatically from 6 to 2 million over the decades. There are other major policy differences across the Atlantic. Where the EU sees production as a key part of environmental preservation, U.S. programs focus more on land set-asides and cutting the costs of complying with regulation, especially for green rules. While the United States focuses more on improving the environment by taking land out of production, the EU tries to improve it by keeping land in production. In economic terms, the United States aims to reduce the negative environmental externalities caused by agriculture, while the EU seeks to expand the potential positive externalities generated by farming. Food and Culture European Union Another issue linked to multifunctionality is the prevailing European attitude toward food. In the EU (especially in Western Europe), agricultural production is generally seen as more of an artisanal undertaking linked to tradition, place, and culture. These values tend to favor customized production, which is often perceived by consumers as a signal of higher quality but at a higher cost. To many Europeans, EU products with certain names, made by special processes and certified in specific ways, are often signals of a better product that are worth a price premium. The boundary between food safety and food quality is often blurred by the

activity of food retailers, who have both responded to and encouraged consumer concerns about new technologies to increase sales of more expensive products. The activities of non-governmental organizations (NGOs) also tend to reinforce this linkage between perceived quality and more traditional modes of production. These drivers lie at the base of EU support for Geographical Indications (GI), a type of intellectual property that identify a product as originating in a region or a locality in a particular country. While much of the EUs ability to get higher returns comes from subsidies, some of it may come from their ability to sell products for higher prices because of a premium image. This could suggest that U.S. farmers might learn from the EU about the benefits of niche farming. It also implies that Europes comparative advantage could be in high-value added products and away from commodity production. If this were to happen, U.S. and EU agriculture could complement rather than compete directly with each other. United States In the United States, attitudes about food are first focused on safety and then on price, novelty, and variety. Outside of organic or higher-end products (such as wine), Americans generally care less about a foods provenance than Europeans as long as the product is seen as safe. This generally explains why Americans are more comfortable with the use of modern technology and larger-scale food production. Since most Americans are generally less attached to artisanal production, they are less inclined to care about GI than Europeans. Confidence in Regulation European Union EU attitudes are marked by a lack of confidence in food safety regulation. Much of this skepticism comes from a history of serious crises including

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the BSE denial in Great Britain, where more than 400,000 infected cattle entered the food chain during the 1980s (followed by ghastly scenes of burning carcasses dotting the landscape), dioxin contamination in German and Belgian chickens (most seriously in 1999), and one of historys deadliest outbreaks of E. coli (O104:H4) in Germany in 2011. These regulatory failures have led people to doubt modern technologies and production methods. Instead of welcoming new technologies, they are often seen as potentially harmful to consumers, animals, and environmental health. NGOs such as Greenpeace and Friends of the Earth have also fueled doubts about regulation. Since these entities are more highly respected in Europe than in the United States, their opinions have real impact on policy. This skepticism has fueled a post-modern tendency to precaution before accepting science in agriculture. As a result, to gain acceptance in Europe, the bar for a novel technology is much higher than in the United States. United States While there have been occasional food safety crises (such as E. coli or BSE), most Americans

basically believe their regulators are competent and trustworthy. Another very important issue is transparency, which strongly reinforces confidence. When an outbreak or food safety problem arises in the United States, the U.S. Department of Agriculture and the U.S. Food and Drug Administration report openly about it and act immediately. In contrast, EU regulation is fragmented between the member states, meaning that regulators tend to react with less coordination, more slowly, and with decreased transparency. While faith by the U.S. public can fall quickly during a crisis, trust in the safety of most food products tends to rebound fairly quickly as long as firms and regulators continue to act swiftly. This modernistic view, which essentially sees science as positive, has led U.S. policymakers to use sound science as their regulatory touch stone in decisionmaking.

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Outstanding Issues

iffering attitudes about agricultural policy, the role of agriculture, food and culture, confidence in regulation, and agricultural protection lay behind some of the most challenging issues in transatlantic trade. Some of the most important policy issues include tariffs and market access, SPS issues and biotechnology, GIs, nontrade concerns, export subsidies, domestic support, and food aid. In order to facilitate implementation of the TAP, both sides should establish a Consultative Committee. The committee would review implementation and compliance, examine issues not subject to but related to the agreement and create options to resolve disputes. It would be the lynchpin of making this agreement work. Import Duties European Union Relatively high tariff barriers reduce the impact of international competition. To preserve local production and the rural way of life, EU policy is largely focused on excluding imports that compete with EU agriculture. Compared to the United States, the EU has higher duties on agricultural products. Average EU duties are 18.6 percent versus 9.7 percent in the United States. Tariff peaks are even higher: the EU has 81 agricultural duties over 100 percent versus only 25 in the United States. The EU applies particularly high tariffs in certain categories, such as dairy products, beef, and sugar. However, the cotton duty is zero. United States The United States is generally more open to trade with some important exceptions in the sugar and dairy sectors. However, high tariffs do apply to meat (30 percent), dairy products (up to 139 percent), beverages, vegetables (22-23 percent), food preparations (21 percent), fish and meat preparations (19 percent), preparations of

cereal and flour, pasta (15-16 percent), cocoa and chocolates (13 percent), and oilseeds (12 percent). Other duties vary considerably but can be very high. For example, sugar tariffs can be as high as 200 percent and the tariffs for peanuts go as high as 164 percent. These and other trade barriers have a huge impact. Even though the United States is the worlds largest agriculture exporter, it imports over 40 percent more food and farm products by value from the EU than it exports to it. Possible Ways Forward Reducing or eliminating tariffs would probably provide the largest gains for consumers, industry, and agricultural efficiency on both sides of the Atlantic. Under WTO principles, any FTA should eliminate tariffs on substantially all trade, including agricultural goods. The TAP should be much more ambitious. To minimize the difficulties of adjustment, these changes should have long transition periods while allowing both sides to use Special Safeguards (SSGs). SSGs are contingency restrictions on imports taken temporarily to deal with special circumstances. In practice, SSGs allow countries to raise duties if a trade agreement results in an import surge that threatens local industry. It also could facilitate trade liberalization for products that are politically sensitive. However, the key issue with SSGs is that they should be limited to very few products and subject to disciplines something that has not always happened in the WTO. One promising way is to use the current Doha Round approach that links more flexible treatment on lowering tariffs with the possible introduction of tariff rate quotas (TRQ) to ensure some substantial improvements in market access. If used prudently, long transition periods, Doha sensitive product treatment, and SSGs would allow both the United States and the EU to better prepare for lower duties as they direct resources into more economically and socially profitable types of agricultural production.

Differing attitudes about agricultural policy, the role of agriculture, food and culture, confidence in regulation, and agricultural protection lay behind some of the most challenging issues in transatlantic trade.

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Action Items Progress on import duties is possible, especially if spread out over time. To that end, a TAP should include:

EU opposition to the use of some modern agricultural technologies arises from an attachment to local production, support for multifunctionality, and a lack of confidence in regulation.

Five- to ten-year phase-out of all import duties, starting with the least sensitive products. Create SSGs and disciplines to limit abuses. Liberalize substantially all trade to make the TAP consistent with WTO principles on FTAs. Biotech & Sanitary and Phytosanitary Issues United States In general, the United States takes a science-based approach to the use of agricultural biotechnology and other technologies such as hormones in beef and pork production. This is possible because of U.S. consumers confidence in regulation and technology. Since the United States sees items produced from modern technologies as substantially equivalent in health, nutrition, and safety with other items, the United States and many firms have resisted attempts to add special labels to products derived from new technologies. In the eyes of many U.S. producers and policymakers, labeling biotech products creates a distinction without a difference that ultimately misleads consumers. WTO dispute settlement rulings have generally supported the U.S. position on these issues. However, Americans do not have unanimity on SPS. In November 2012, the Right to Know Genetically Engineered Food Act will be on the ballot in California. If it passes, it will be the first law in the United States to require biotech labeling. European Union EU opposition to the use of some modern agricultural technologies arises from an attachment to local production, support for multifunctionality, and a lack of confidence in regulation. A common

EU view is that the United States has rushed into new technologies and has approved these products without giving consumers a chance to decide between biotech and non-biotech products. There are also concerns that biotechnology may undermine biodiversity and is interfering too rapidly in natural processes. Fundamentally, Europeans are worried that the United States has set the bar too low for technology approvals. A 2010 FDA advisory panel support for genetically modified salmon only deepened these worries although this product has still not been approved. According to USDAs Economic Research Service (ERS), surveys of consumer attitudes toward biotech products conducted in the United States and EU show that U.S. consumers have voiced little objection to genetically modified foods, while EU consumers have been vocal in their disapproval. This sentiment is behind the EUs decision not to open its markets in response the WTOs ruling on its restrictions on biotech products (WT/DS291) and hormone treated beef (WT/DS26). The widespread belief within Europe that these products are harmful has led the EU to pay compensation instead of allowing entry of these products. On the biotech front, the EU has only permitted the marketing of nine biotech products. Critics of the EU policy have called these measures disguised protectionism created without basis in sound science. Some of these critics include European scientists who see biotechnology as critical in meeting the demands of a growing world population. Possible Ways Forward Compromising on these issues will be difficult. Any agreement would need to meet the most compelling concerns of both sides. The EU will need to give ground in favor of science. This could mean allowing the sale of biotech and other products based on science-based

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risk assessments. While the best way forward could be to work though the Codex Alimentarius Commission, this process has encountered difficulties. Codex was established by the FAO and WHO in 1963 to develop international food standards, guidelines, and codes of practice to protect consumer health and ensure fair food trade practices. As a supposedly impartial arbiter, Codex is charged with resolving the scientific issues and serving as an international standardsetting body to assist in establishing the rules of trade. Unfortunately, it has become more difficult to set some standards because Codex has become politicized in some cases. This result was probably inevitable, given the gravity of the trade issues and the fact that membership is by country. This has been complicated by the claim by some consumer groups that Codex has been captured by commercial interests. While the other standardsetting bodies such as the World Organisation for Animal Health (OIE) and the International Plant Protection Convention (IPPC) are not as politicized, countries still often do not accept their standards. In any case, the importance of using sound science in determining sanitary and phytosanitary standards is absolutely central to any agricultural trade agreement. Since these measures can be very damaging to commerce, open to abuse, and are not always well-regulated by current trade agreements, they need new and stronger disciplines. Since the WTO has repeatedly rejected the EU position on modern technologies in the context of the SPS agreement, this change would bring the EU into alignment with its international trade obligations and expand consumer choice there. The EU consumer would have a choice between biotech and conventional foods. In moving forward, the goal would be to establish transatlantic regulatory equivalence on as many SPS issues as possible before concluding a trade agreement. The goal

would be to further strengthen the WTO SPS provisions, especially in the area of risk assessments and other important provisions ensuring that they are based on scientific principles and have strong enforcement mechanisms. The United States will need to give ground on labeling and traceability by recognizing the strong aversion many Europeans have to biotech and other products of new technology. While this may seem irrational to scientists, regulators, and U.S. industry, the goal is to get agreement by giving EU consumers the opportunity to buy the products of their choice. Since the debate can often be emotional rather than scientific, the closest parallels might be to religious food restrictions and the dietary requirements of vegans and vegetarians. Given these ethical concerns, the best way forward would be to agree to a labeling and traceability regime that empowers choice. There will be many implementation issues for labeling, especially related to the issue of conformity assessment. The details will be complex, which is why a TAP should include a Bilateral Scientific Dialogue to encourage cooperation on technology and better approaches on risk communication. As for labeling itself, there are few precedents but some possible general principles: To prevent discrimination against imports, any regulations should conform to the WTOs Technical Barriers to Trade Agreement. Vital considerations include ensuring national treatment for imports, and ensuring that the label is not derogatory (no skulls and crossbones for GMOs, for example) and does not mislead the customer by confusing safety, quality, and ethical concerns. Labels will need to be neutral, or could use a symbol. There will need to be agreement on when to label and discussions on, for example, the threshold for a GMO or hormonetreated ingredient. While this may create issues with consumer perceptions and weaken market access, this approach could be a workable way to

The United States will need to give ground on labeling and traceability by recognizing the strong aversion many Europeans have to biotech and other products of new technology.

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move to a mutual vision that combines respect for science and consumer choice. In extremis, for the truly unsolvable issues, the United States and EU could do some quid pro quo horse trading on specific products. While this is extremely undesirable because it undermines the creation of a rules-based and enforceable transatlantic trade regime, it might be the only way to resolve the hardest issues. In this process, negotiating parties could agree to open markets in excess of negotiated levels in exchange for setting aside certain other issues. In the long-term, both the United States and EU need to come to some meeting of the minds about agricultural technology, which is another reason to create the Bilateral Scientific Dialogue. This should include a farmer-to-farmer agriculture dialogue to find ways to strengthen the bilateral partnership. This will hopefully find a way to connect policy with both sound science and consumer concerns. However, groundless objections to new technologies could undermine achieving this aim. The best way forward would be to have more cooperation between industry, governments, NGOs, retailers, and third party certifiers. With nanotechnology and other innovations on the horizon, policymakers need to establish a commonsense approach to the agricultural technologies of the future. Action Items These issues are extremely complex, but there may be ways to resolve them. Bill Westman of the American Meat Institute has called for a Consumer-Oriented trade policy that addresses consumer concerns while reducing trade barriers. Such a policy would not only be consistent with WTO principles, but also provide the best opportunity to move beyond the transatlantic agriculture technology wars. The recent agreement

on organics could show both sides a way forward. To that end the TAP should include: Agreement to follow international (Codex, OIE, and IPPC) standards on SPS issues. Harmonization and mutual recognition of SPS standards based in science, including measures such as equivalence and recognition of inspection systems. Require advance notice of all new, nonemergency SPS measures. Increase transparency for new SPS measures by requiring sharing of background data along with comments and responses. Ensure consistency with the existing WTO SPS agreement. Agreement to depoliticize the Codex or supplement it with an alternative process based in science. Create a bilateral scientific dialogue on new technologies such as nanotechnology. This should also include risk communication and outreach. Agreement on non-derogatory but clear labeling. The specifics would be negotiated in the scientific dialogue. As a very last resort, create product set-asides and give compensation for the truly unsolvable issues. Geographical Indications United States Geographical Indications (GIs) identify a product as originating in a region or a locality in a particular country. This kind of intellectual property right (IPR) has particular value where

In the long-term, both the United States and EU need to come to some meeting of the minds about agricultural technology.

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the reputation for product quality is linked to its geographical origin. It is seen as something collectively owned and preserved in a specific region, and not transferable elsewhere. Examples include Parma Ham, Roquefort cheese, or Champagne. This issue reflects the United States reluctance to enforce GIs, especially in cases where a product name has become generic (such as Parmesan cheese) or where pre-existing trademarks exist that are similar or identical to GIs. In some cases, the enforcement of GIs could be seen as a clawback of generic terms. The major exceptions to U.S. GI policy are wines and spirits, which have been protected domestically since 1988. The GI agreement on wine grew out of a recognition by California wine growers that they had a brand name worth defending, so a future GI agreement could begin with those productsmaybe Idaho potatoes or Vermont cheddar cheese, where U.S. producers have something to gain. European Union GIs are very important in the EU, which has a rich history of local and specialist agricultural production with many famous products closely linked to their geographic origin. In Europe, it is not just about marketing the GI issue connects back to real places, history, and food culture. It is also an attempt to preserve production in specific regions by allowing producers to gain extra value from their GI brand to communicate these qualities to consumers. Allowing products made in other regions to use these names could not only mislead consumers, but could also dilute the GI value and discourage existing producers from making investment decisions or launching expensive marketing campaigns. The EU sees GI transgressors as free-riders who undermine their valuable intellectual property rights.

Possible Ways Forward The best solution will be a transatlantic GI agreement, especially for any future products. This would recognize that GIs are a separate legal category of collectively owned intellectual property rights, marketing products, and communicating signals about quality to consumers. In this way, they are about creating niche markets that allow farmers and food processors to get higher value for their products. Given the long-standing history of European regions and the prestige of many of their products, using these region names to identify generic products from elsewhere is an appealing option for others since it allows others to free-ride off the brand. However, this can dilute the GI by confusing it with products from other origins and undermine investment in the regions of original production since these GIs are a result of tradition and considerable investment in regional branding. This is why GIs are particularly important for highvalue products such as wine, cheese, and spirits. On the other hand, many brands have trademarks and businesses based on what they believed at the time were generic identities, such as Parmesan cheese. Some GIs have truly become generic and should be subject to negotiation. One informal estimate puts this number at around 20 that should stay generic permanently. For these products that need to change, rapid implementation of stronger GI rules would be unfair and painful and greatly limit the ability of firms to adjust. Given the substantial past investment in branding attached to what was seen in good faith as a generic name, creating a new product identity will take time as firms rebrand and change their marketing strategies. This is why the transition period to full implementation of any agreement on GIs should be long, perhaps between five to ten years. For both forward-thinking farmers and firms, the change to GI recognition could be positive by

The best solution will be a transatlantic GI agreement, especially for any future products. This would recognize that GIs are a separate legal category of collectively owned intellectual property rights, marketing products, and communicating signals about quality to consumers.

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While the EU and the United States see the environmental issues somewhat differently, it should be possible for each side to move ahead as long as they follow WTO-type principles.

enabling them to create new and distinct GIs and brands of their own while ending dependence on other identities. This is a chance to create higher-value niche markets to target wealthier consumers instead of being stuck in low-profit commoditization. In other words, GIs could be an opportunity for business on both sides of the Atlantic to build up distinct brands that attract higher prices. For U.S. farmers, it presents a chance to get higher prices for regionally branded products. To ensure that both sides benefit, the EU should extend full GI protection to U.S. products beyond the bilateral agreements on wine and spirits signed in 1996 and 2006. To ensure this happens, the EU should be ready to make its GI system more transparent and harmonize it with other IPRs. One possible way is to make it similar to a system used for trademarks or patents. Under this system, producers could file to obtain a GI right, with clear standards that would make it obvious that these rights are not to be easily granted to everyone for everything. It would come with a form of licensing or royalty that would permit others to use certain GIs if they paid royalties and included proper disclosures. Action Items The GI issue offers some win-win possibilities for both sides. It should be solvable given the earlier U.S.-EU wine agreement. To that end the TAP should include: A transatlantic GI agreement including mutual recognition of GIs and registration bodies. Negotiation of which products should remain generic. A five- to ten-year phase-out of formerly generic product identifications inconsistent with GIs.

Consistency with the existing WTO TRIPS agreement. Non-Trade Concerns United States U.S. policy generally separates agricultural trade issues from other NTCs and sees European attempts to bring environmental concerns, animal welfare, rural life, recreation, and other issues into the discussion as disguised trade barriers. European Union The EU view is strongly linked to multifunctionality, where non-traditional issues are central to its vision for agriculture. In particular, green considerations are a critical part of the CAP, which has become an environmental as well as an agricultural policy. Other NTC priorities still resonate, such as rising concerns about factory farming and animal welfare. In addition, the European Commission recently cited domestic food security as a CAP justification. Possible Ways Forward Given the EUs ability to feed itself, it is difficult to see food security as a real problem today. This justification for local production has been obsolete for decades and should be abandoned. However, other issues have become more important. For example, improving the environmental profile of agriculture has become an increasingly visible part of the agricultural policy debate on both sides of the Atlantic. While the EU and the United States see the environmental issues somewhat differently, it should be possible for each side to move ahead as long as they follow WTO-type principles. Some of these could include providing national treatment to imports, limiting production-distorting practices, and following the least trade-limiting policies. Specifically, any tax structure or regulation of agricultural products

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should not discriminate against imports or make it overly difficult for them to comply. Environmental regulations should also have clear regulatory objectives that are consistent with these principles. Any other NTC-related changes on issues such as animal welfare or other new emerging issues should also be synchronized and consistent with these principles. In order to ensure that NTCs do not undermine the trade relationship, a Transatlantic Partnership would use the Consultative Committee to resolve these issues. Since the environment and animal welfare do not fit into the SPS framework and may not always fit into a TBT approach, an NTC agreement with enforcement rights could elevate transatlantic trade protections above WTO levels. In fact, a successful NTC agreement could serve as a template for future WTO or other regional negotiations that involve agriculture. To ensure transparency, the Committee should include a private sector engagement process. Action Items Progress on the NTCs is possible, given their growing importance on both sides of the Atlantic. In fact, the movement is more to convergence than divergence on these issues. To that end, a TAP should include: A Consultative Committee to address NTC and other issues. Agreement on desired environmental policies consistent with trade liberalization (e.g. land set-asides). Consistency with the existing WTO SPS and TBT agreements.

Export Subsidies United States & European Union The use of export subsidies has been reduced substantially over the last decade since the successive CAP reforms have brought EU prices closer to world market prices. As a result, export subsidies currently only account for 0.6 percent of the CAP budget. While the United States only has one direct export subsidy in its Dairy Export Incentive Program (DEIP), the new draft Farm Bill will likely end even this one last program. Possible Ways Forward Both sides could commit to eliminating export subsidies within two years. Resolution of this issue should be fairly straightforward since the EU expressed a willingness to do so in the Doha round and the United States may end its last program unilaterally as part of the Farm Bill. To give a boost to the faltering Doha Round, both sides should phase out all forms of export subsidies in accordance with the latest agriculture negotiating text of the Doha Round, which also calls for the elimination of these programs by 2013. The termination of these measures would not only boost the WTO negotiations, but it would reduce the disruption of markets that negatively affects many developing countries. Action Items This is probably the easiest issue to resolve since export subsidies are already being phased out. To that end the TAP should: End all export subsidies within two years. Be consistent with the ongoing WTO agricultural negotiations.

Both sides could commit to eliminating export subsidies within two years. Resolution of this issue should be fairly straightforward since the EU expressed a willingness to do so in the Doha round and the United States may end its last program unilaterally as part of the Farm Bill.

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Domestic Support United States & European Union While the EU and United States have large agricultural subsidy programs, Europes efforts are still more substantial in terms of absolute spending and relative support to agriculture. However, in the United States, larger-sized farms means bigger payments to each one. While both Washington and Brussels have been reducing their use of price supports in favor of direct payments, there are increasing demands from other countries to reduce spending and other activities that distort international agricultural markets. In WTO terms, there is mounting pressure to move agricultural spending from an Amber Box that includes domestic support measures that affect, directly or indirectly, agricultural trade to a Green Box that includes measures with no or minimal tradedistorting effects on production. Both sides target different sectors for support. In the United States, subsidies are focused on wheat, feed grains, cotton, oilseeds, sugar, and dairy. In contrast, the EU supports a broader range of food products, including grains, cotton, rice, oilseeds, peanuts, dairy, sugar, fruits and vegetables, and even livestock products. Possible Ways Forward While agreement on domestic support is not a critical part of a TAP, it would demonstrate global leadership on agricultural issues if both sides can commit to reducing trade distorting support. However, this issue must be considered an optional TAP component since commitments cannot be binding without a successful Doha Round result. Reduction of support ultimately must be solved multilaterally because the United States and the EU could lose overseas market share if they jointly cut subsidies unilaterally without a global agreement.

There is value to pursuing an agreement because a joint vision on agricultural support may facilitate progress on the multilateral round, where production subsidies have been a major source of tension between the United States, EU, and others. This could possibly help break the Doha impasse and strengthen the world trading system.

However, there is value to pursuing an agreement because a joint vision on agricultural support may facilitate progress on the multilateral round, where production subsidies have been a major source of tension between the United States, EU, and others. This could possibly help break the Doha impasse and strengthen the world trading system. If there is effective agreement on reducing subsidies, it would also boost domestic competitiveness and help rationalize agricultural production in a world where rising population and incomes are pushing up demand for food. Rationalizing agricultural support is a critical part of preparing agriculture for the decades to come. The biggest dilemma facing both the EU and the United States is finding politically acceptable alternatives to Amber Box programs that will maintain farm incomes enough to reduce political resistance to reform. Despite this reluctance to change, the shift over the last few decades has been toward Green Box direct payments. As a result of ongoing reforms, Green Box payments account for the vast majority of domestic support on both sides of the Atlantic. However, the current U.S. farm bill draft has sharply reversed direction in favor of the Amber Box which could even result in a break of the Uruguay Round commitments under some conditions. The current WTO proposals envision cutting the EU Amber Box by 70 percent and the United States by 60 percent. A TAP could support implementing these provisions. While estimates vary, such an initiative could reduce current subsidy levels to $7.6 billion in the United States, saving Washington $7.3 billion. In the EU, the marked shift to direct payments has reduced the Amber Box to less than 20 percent of support payments. As a result, Doha would not cut spending for the Amber Box. However, a cut in the maximum trade distorting support limit would prevent backsliding during periods of low prices. (Note: Since both sides spend

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below their WTO limits, real reductions under Doha would be lower than the 70/60 percent under the draft texts). At the farm level, policy on both sides of the Atlantic should move to replace subsidies with incentives for active risk management and selfinsurance by farmers through crop insurance, forward contracting, futures, and options. While these ideas are major components of the current U.S. Farm Bill draft, it is still unclear how much the final law will incorporate them. While Americas currently proposed Farm Bill will likely save $23 billion, the current CAP proposals do not envision any overall spending cuts. Instead of using subsidies and direct payments, both sides should focus more on improving agricultural competitiveness, encouraging open markets, and strengthening rural development. Since subsidies do not boost competitiveness, they may leave both the United States and the EU vulnerable to new competitors such as Brazil. The funds now used for subsidies would be better directed to farmers looking to improve their competitiveness, facing disruption, or overcoming the costs of adjusting production to new markets. To this end, one of the top priorities should be research and development. Action Items The time is ripe for an agreement on domestic subsidies. Not only have both the United States and the EU been moving to Green Box supports, but budget constraints and the Doha Round are pushing in the same direction. To that end a TAP should: Support proposals to cut Amber Box subsidies to Doha draft levels within five years. Focus funding on research, development, and competitiveness.

Envision the reduction of the Amber Box below Doha levels. Food Aid United States & European Union The United States has been criticized for using food aid exports as vehicles for establishing future commercial exports and disrupting commercial markets in poor countries. The EU, on the other hand, primarily focuses on cash donations as food aid, which is not considered as trade-distorting. In the EU, there is also a preference for sourcing food aid locally in needy nations or in neighbouring countries, a practice that has been in place since 1996. While EU regulation on food aid states that the aim of aid donation is to reduce dependence on food aidto encourage them to be independent in food, either by increasing production, or by enhancing and increasing purchasing power, it does allow the use of in-kind aid if local and regional purchases disrupt markets. And it adds that, Although direct aid has a more important role, it does not completely replace programme aid and food aid in kind. The U.S. in-kind programs such as Food for Progress usually work by allowing recipient governments and NGOs to sell U.S. products in the marketplace, using the funds to run programs. In contrast, cash donations allow recipient governments to purchase supplies from the most convenient source, often another developing country. It also avoids distorting production and markets in recipient countries. However, in-kind aid serves some useful purposes. In the United States, it enables aid to get the support of farm state legislators and the aid community. If the programs were purely cash, they would likely wither especially during the current focus on budget cutting. In the United States, the alternative to in-kind donations may be none at all. In addition, commodity donations can fill gaps in local supplies

Instead of using subsidies and direct payments, both sides should focus more on improving agricultural competitiveness, encouraging open markets, and strengthening rural development.

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Trade policy reform between the EU and United States would enable both parties to move away from a backward-looking agriculture sector to one that is forward-looking, more competitive, globalized, and sustainable.

during a crop failure and serve as a catalyst to develop commodity markets. Many of these issues are addressed in the Food Aid Convention of 1999, which was designed to improve multilateral cooperation as a way of boosting world food security. Possible Ways Forward While commitments on food aid are not central to a TAP, they could play a huge role in establishing leadership and formulating a constructive vision for world agriculture. The United States should avoid using food aid as a way to promote exports. But since in-kind donations boost U.S. political support and fill local supply gaps, they should not be banned. Instead, a new food aid discipline might prefer local sourcing or cash while leaving the door open to commodity donations that do not disrupt local markets. In fact, there is more interest in sourcing locally coming from the U.S. development community. Both sides should look at ways to increase efficiency for recipient countries by reducing shipping costs and reducing conditionality (such as requiring tied purchases of goods and services in the donor country). In the end, all programs should address the food needs of the poorest nations first. On a strategic level, both sides should establish a Global Food Security Committee to coordinate food aid donations in the near term and develop a Doha WTO Global Food Security Agreement to prepare global agriculture production for the world of 2050. Action Items Progress on food aid is not only possible, but could have positive effects in developing countries. To that end a TAP should: Create a new food aid agreement that allows cash and in-kind donations when they would

either fill local demand gaps or ensure markets are not disrupted. Impose disciplines on conditionality and tied purchases. Ensure consistency with the Food Aid Convention. Create a Global Food Security Committee to coordinate food aid donations and prepare global agriculture production for the world of 2050. Other Considerations Resolution of existing U.S.-EU agricultural trade disputes would benefit both parties by allowing the TAP to move forward. It would also reduce collateral damage to international institutions such as the WTO, Codex and non-parties such as Africa, which are often caught in the crossfire of the SPS wars. Promoting equivalence in SPS and other regulations would help open those Western markets that are often closed for exporters from the poorest countries through non-tariff barriers or regulations. This point is especially important for countries that do not have the resources to conduct their own risk assessments. There is another value in embracing change. Both the United States and the EU need to update their agriculture policy to keep pace with the times. Trade policy reform between the EU and United States would enable both parties to move away from a backward-looking agriculture sector to one that is forward-looking, more competitive, globalized, and sustainable. Beyond this, it would help all of us prepare for a future where we must feed 9 billion people.

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4
T

A Common Destiny

here is little doubt that transatlantic agriculture trade issues are extremely complex and politically sensitive. Both sides not only have substantial economic and political interests involved, but the food and agricultural issues involved often take on a moral dimension. These disagreements can become acrimonious. The United States sees the EU as anti-science, while the EU sees the United States approach as insensitive to some important ethical issues. Both sides claim to be pro-consumer. Thus it is unsurprising that many disputes go back decades. In fact, the beef hormone issue goes back to the 1980s. It is time to move beyond finger-pointing to solutions. While in some cases it might be necessary to set aside issues and wall off products from liberalization, these approaches should only be taken in extremis and then limited in scope as much as possible. Carve-outs are undesirable because they can create major problems later on and undermine the case for trade liberalization. If they become too large, they may make the TAP inconsistent with WTO requirements that FTAs liberalize substantially all trade. While bilateral agreements almost always refer to the SPS agreement, disciplines on trade measures should not just duplicate current international standards, but should require a higher level of justification, notification, coordination, and scrutiny. It should be a WTO+ model, especially on the SPS issues where the world trading body has had a mixed record in resolving disputes between the United States and the EU and ensuring its decisions are followed. A TAP must have a truly effective enforcement mechanism. The only way forward is compromise. By definition, this means embracing solutions that are not the

best case outcome for each side. The import duties, SPS, GI, NTC, export subsidies, domestic support, and food aid issues will all be challenging to resolve. The art of the possible balances gain and pain for each side sufficiently enough to make a deal. In this case, resolving the agricultural issues could open the way for a Transatlantic Partnership that could greatly benefit both sides. While there is less disagreement between the EU and the United States in the Doha Round on agriculture than between the rich and the emerging economies such as China and India, a TAP could help move things forward on the multilateral side. Compromise is possible. The U.S.-EU organic agreement shows us the way. In the words of EU Agriculture Commissioner Dacian Ciolo, This partnership marks an important step, taking EUU.S. agricultural trade relations to a new level of cooperation. U.S. Deputy Agriculture Secretary Kathleen Merrigan agreed, This partnership will open new markets for American farmers and ranchers, create more opportunities for small businesses, and result in good jobs for Americans who package, ship, and market organic products. The organic agreement could be just a start. A TAP could bring tremendous gains for both sides of the Atlantic while modernizing agriculture to the benefit of farmers and consumers worldwide. It could revitalize the Doha Round and spur economic growth. Beyond economics, it would strengthen our transatlantic relationship and help prepare global agriculture for the future. With economic weakness still prevalent on both sides of the Atlantic, and both sides looking at a new Farm Bill & CAP reform, now is the time to act.

The only way forward is compromise. By definition, this means embracing solutions that are not the best case outcome for each side.

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Notes & Sources

Ahearn, Raymond J., Trade Conflict and the U.S.-European Union Economic Relationship, RL30732, Congressional Research Service, April 2007 Baylis, Kathy, Gordon C. Rausser and Leo K. Simon, Including non-trade concerns: The environment in EU and U.S. agricultural policy, International Journal of Agricultural Resources Governance and Ecology, Vol. 4, Nos. 3/4, 2005 Blandford, David, Tim Josling, and Jean-Christophe Bureau, Farm Policy in the U.S. and the EU: The Status of Reform and the Choices Ahead, Discussion Paper, September 2011 Foreign Agricultural Service/USDA Home Page, http://www.fas.usda.gov Cooper, William H., EU-U.S. Economic Ties: Framework, Scope, and Magnitude, Congressional Research Service, December 2011 Economic Issues in Agricultural Biotechnology, (Information Bulletin No. 762), pp. 28-30, Economic Research Service, February 2001 EU/US deal on organic is historic game changer, Natural Products, February 16, 2012 European Commission Home Page, http:// ec.europa.eu/trade/creating-opportunities/ trade-topics/ Hamilton, Daniel S., Forging a Transatlantic Partnership for the 21st Century, Transatlantic Business Dialogue (TABD) and the Business Roundtable, 2012 Hanrahan, Charles E., Agricultural Biotechnology: The U.S.-EU Dispute, RS21556 Congressional Research Service, April 2010

Johnson, Rene, Randy Schnepf, and Charles E. Hanrahan, Comparing U.S. and EU Program Support for Farm Commodities and Conservation, R40539, Congressional Research Service, January 2011 Josling, Tim, Conflicting Paradigms for a Globalized Agriculture, Institute for International Studies, Stanford University Kuehler, Natalie, EU-US Economic Disputes: There is More to Trade than Goods and Services, The European Policy Centre, January 29, 2010 Normile, Mary Anne, Anne B.W. Effland, and C. Edwin Young, U.S. and EU Farm Policy How Similar? U.S.-EU Food and Agriculture Comparisons / WRS-04-04. Economic Research Service, USDA 2004 Open Letter on Transatlantic Trade, Letter signed by 39 US Agricultural Export Producer Groups, 2012 Raustiala, Kal and Stephen R. Munzer, The Global Struggle over Geographic Indications, European Journal of International Law (2007) 18 (2): 337-365 Tancu, Mihaela-Daniela, U.S. and EUs Agricultural Policies in the Context of GATT/ WTO, Aarhus School of Business, Aarhus University, September 2010 Transatlantic Task Force on Trade and Investment (a joint project of the German Marshall Fund of the United States and the European Center for International Political Economy), A New Era for Transatlantic Trade Leadership, 2012

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What Next for Farm Policy in the U.S. and EU? IPC Policy Focus, September 2011 World Trade Organization Agriculture Page, http://www.wto.org/english/tratop_e/agric_e/ negoti_e.htm

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