US Still Needs to Bridge Gaps on Ag Barriers in FTA Negotiations, Says Industry at Hearing

The U.S. agricultural industry continues to face a multitude of non-tariff trade barriers, such as unscientific sanitary and phytosanitary (SPS) measures and geographical indications, to exporting agricultural goods to the European Union and Asia-Pacific region, industry representatives told lawmakers at a June 11 House Ways and Means Subcommittee on Trade hearing. The representatives urged the lawmakers to apply pressure on the Obama administration to remove the barriers through Transatlantic Trade and Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP) negotiations.

Dispute Resolution Touted as Method to Address SPS Barriers

The pacts must include dispute resolution mechanisms in the text in order to properly and expeditiously safeguard U.S. industry interests, particularly regarding SPS measures, said Subcommittee Chairman Devin Nunes, R-Calif. “All the other areas of the economy and all the previous free trade agreements all are subject to dispute resolution,” said Nunes. “Agriculture, however, has always been left at the table without dispute resolution so they’re forced to go to the [World Trade Organization (WTO)] which many times can take years and years to become a resolution.”

But the real problem lies in identifying terms and conditions in the dispute mechanisms that all sides interpret in the same way, said Terence Stewart of the law firm Stewart and Stewart. “The challenge that we face at the WTO, an example where there is dispute settlement, is that we are the subject of 8 of 41 challenges that have been made,” said Stewart, in reference to SPS disputes. “If you were to step back and ask yourself, ‘would you expect the United States to be one of the worst offenders in terms of SPS measures?”, I think your answer would be the same as mine. Obviously not. So part of the challenge is whether the rules actually work to conform practice to what you agreed to or whether it becomes a forum for people to achieve that which they haven’t achieved through the negotiations themselves.”

The most consistent SPS barrier the Californian Almond industry faces is EU sampling requirements for alpha toxins, said witness Ryan Turner, president at Westside Trading Company, which deals in almonds, pistachios and walnuts. The EU only permits products with lower alpha toxin levels, so almond exporters are required to complete a voluntary alpha toxin sampling program (VASP), said Turner. “Every single load that is going to Europe has to have additional tests,” said Turner. “When we ship product all of it has been certified [and] inspected by the USDA," he said. "Europe requires the product VASP. If we have product that we ship to the Middle East, we have to redirect it. It can’t go to Europe.”

EU Pushing Aggressive Geographic Indications, Industry Contents

Meanwhile, the EU also continues to impose the “most aggressive” geographic indication policies in the world, said Stewart. The geographic indication regulations have generated a relative firestorm on Capitol Hill over recent months, with lawmakers claiming the EU is increasingly aiming to restrict U.S. dairy sales abroad. U.S. importers of feta and parmesan, among other products, may be prohibited from exporting the goods to third countries that the EU forces to adhere to the geographic indication requirements through its FTAs, said lawmakers recently (see 14031221).

In a letter submitted to Nunes prior to the June 11 hearing, EU Ambassador to the U.S. João Vale de Almeida said, however, the EU is only seeking to impose geographic indication regulations on limited products in order to protect intellectual property. “We do not protect in the EU a whole series of names you will immediately recognize -- camembert, brie, cheddar, edam, emmental, gouda, mascarpone, mozzarella, provolone, blue and bologna -- despite the fact that these names are undisputedly of European origin and often refer to a specific place in Europe,” said the letter, originally submitted in May to Congressional Dairy Farmer Caucus co-chair Reid Ribble, R-Wis. “We have therefore been perplexed to see media reports stating that we are looking to protect names such as chorizo, ricotta, salami, kielbasa, chevre and prosciutto. This is simply wrong, as these terms are generic and are not protected within the EU.”

The EU already protects non-EU geographic indications, such as Napa Valley wines, and is open to registering additional U.S. products, said de Almeida. The protections are outlined in a 2006 agreement between the U.S. and the EU on trade in wine (here). The U.S. also recognizes geographic indications on a host of EU wines (here).

TPP Tariff Barriers Still Pose Formidable Obstacle to Negotiation Conclusion

U.S. agricultural exporters still continue to face prohibitive tariff barriers, as well, particularly among Asian economies. In the context of TPP, the U.S. and Japan have battled over tariffs on rice, beef and pork, wheat, dairy and sugar for months in highly-publicized dispute. Canada also continues to resist dairy and poultry concessions. “Canada and Japan today … both impose astronomically high tariffs on imported dairy products. The tariffs we face every day are between 250 and 300 percent of the value of the product we ship into those countries,” said Andrei Mikhalevsky, president of California Dairies Inc. at the hearing. “With proper negotiation, we can get Japan in. And it’s very important. Japan is a highly developed market in the area. It’s very important to us.” Mikhalevsky said $1 billion in U.S. agricultural export generates 6,800 domestic jobs, as opposed to the 5,500 jobs created through $1 billion in U.S. manufacturing exports.

The Obama administration has publicly called for comprehensive elimination of agriculture tariffs in the agreement, but many analysts and lawmakers argue that is infeasible (see 14060404). Japanese officials are still protesting tariff elimination on more than 500 tariff lines. “I don’t think there’s a specific target line right now,” said Rep. Ron Kind, D-Wis., co-chair of the Friends of TPP caucus, in an interview outside the hearing. “But clearly we’re hearing from our own agriculture sector what is out there now is unacceptable and a lot more progress has to be made. And we need to feel more confident that at the end of the day there’s going to be increased agriculture access to the Japanese market.” U.S. negotiators may not be able to get to zero tariffs with their Japanese counterparts, said Kind, admitting that there has to be a “high bar” set in the negotiations. Five dairy groups recently called for Japan's ouster from the negotiations due to its market access intransigence (see 14052922).

TPP and TTIP indisputably represent tremendous export opportunities for U.S. companies, however, said witnesses at the hearing. The U.S. exported $6.1 billion worth of beef in 2013 globally, with $1.4 billion of that going to Japan despite the tariff barriers, said Bob McCan, president of the National Cattlemen’s Beef Association, at the hearing. But USTR needs to muscle significantly more concessions to sell an agreement to Congress, said Rep. Aaron Schock, R-Ill., a member of the Ways and Means Trade subcommittee, during a June 10 event at the Center for Strategic and International Studies (here). “If the administration goes forward with excluding certain lines within agriculture, I think that bill will be dead on arrival in the House of Representatives,” said Schock. “We cannot unilaterally exclude products like pork and beef which are extremely important to the constituencies in rural America.” -- Brian Dabbs

Email ITTNews@warren-news.com for a copy of the EU letter to Congress.