What will the EU-US agreement mean for trade in seafood?

In June 2013, the European Commission and the U.S. government launched negotiations for a Transatlantic Trade and Investment Partnership, known on both sides of the Atlantic by the unexciting acronym “TTIP.” The proposed agreement is all-encompassing – covering goods, services, and investment throughout the economy, and it will be years in the writing and even more years in the enacting. It will be the largest free trade agreement in the world, covering more than half the global economy.

 Although its final form is unclear, it is worthwhile to become familiar with some aspects of TTIP early on, for if existing EU or US trade agreements are any indication, there will be winners and losers from the TTIP in the seafood industry and market. No matter its final form, this trade and investment agreement will be huge, affecting billions of euros/dollars in annual trade and capital flows in every sector of the economy, from soup to nuts to financial derivatives and copyright law. Consumers of nearly every product and service will be affected; in addition, millions of jobs in the EU and the U.S. depend on EU-US trade, and the agreement will also concern them.

The agreement will include seafood products, the means to produce them, and the marketing regulations under which they are sold. Well over €1 billion in EU-US two-way seafood trade (nearly one-third being EU exports to the US), and the accompanying direct jobs and jobs in ancillary industries, will be affected. The effects will also be felt by seafood sectors in countries outside the EU-US agreement.

 

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The Transatlantic Trade and Investment Partnership currently being negotiated between the US and the EU will affect well over €1 billion in EU-US two-way seafood trade (nearly one-third being EU exports to the US), and the accompanying direct jobs and jobs in ancillary industries.

Tariffs and non-tariff barriers to EU-US trade

The trade-related focus of TTIP negotiations will be on two areas: import tariffs, and so-called non-tariff barriers (a sort of an all-else category) such as excessive regulations and essentially duplicate product standards – standards that may be administered in both economies but with separate paperwork – among an array of other barriers to trade. The reduction or elimination of import tariffs will be perhaps the most visible result of the TTIP. Tariff elimination will probably result in minor gains compared with reduction of non-tariff barriers, because tariffs applied by the EU and US on each other’s products are already low (less than 4 percent, on average). But there are some notable exceptions, which will undoubtedly be the topic of lengthy negotiations.
For example, processed products (for example, canned fish) tend to be dutiable at higher rates than unprocessed products (e.g., whole fish). This is often done to protect an importing country’s domestic processing sector, which may or may not rely on imported raw inputs but in any case competes with imported finished products. Seafood processing jobs are often lower-wage, and sometimes in rural communities with scarce employment alternatives, and governments may feel the need to support such jobs. Such higher tariffs are typically the ones whose phase-out is done over the longest time frame.

Therefore, implementing the tariff-elimination part of the agreement will take many years. Typically the tariff reductions and other changes are “phased in” over time, so that affected industries (whether sellers or buyers of products) can have time to adjust to the new marketplace conditions. Changes that are small, such as elimination of already low tariffs, may be implemented immediately, while more sizeable adjustments may be made gradually over as long as a decade.

 

What TTIP will do and what it will not

TTIP addresses both trade and investment between the EU and the US; here we are discussing only its trade aspects. As described by the European Commission and the U.S. Trade Representative – the parties to the negotiations – TTIP is a proposed free trade agreement. That is, the goal of both sides is the elimination of tariffs and unnecessary non-tariff barriers to EU-US trade. Tariffs are well-known to exporters and importers: they are monies collected at the border usually in one of two forms (and, rarely, in both forms!), either a percentage of the value of the import shipment, or a fixed currency amount per physical unit of the imported good.

Non-tariff measures are sort of an “everything else besides tariffs” category and are not so transparent: they include annual quotas (which, when filled, cause the import market to close); consumer health and safety regulations; product (or production method) standards; rules on dolphin protection, genetic modification, and ingredient lists; and all sorts of other rules and regulations that are usually very important but also create paperwork, increase importing/exporting costs and consumer prices, and possibly impede job creation. TTIP negotiators have set out to form an agreement that, at the end of the day (and it will be a very long day), eliminates tariffs on all EU-US trade and reduces or eliminates unnecessary rules and regulations that create non-tariff barriers to EU-US trade. Both economies have several free trade agreements already in place with other nations and economic blocs, and in principle, TTIP will resemble them in everything but size.

What TTIP will not do – and this is stressed by the negotiators – is require the relaxation by either party of necessary rules and standards, such as those protecting healthy and safety. Nor will it replace the existing means, in either the EU or US, by which their own laws are made and enforced. Of course, if either side of the trade agreement takes offense by the action (or inaction) of the other, it can protest in one form or another, including by imposing sanctions on the other party. But – and this is an important but oft-forgotten point – countries have always been able to protest and impose trade sanctions. What well-crafted trade agreements do is provide a more orderly means for settling such disputes.

Dina Sandholt
Sticking issues in the negotiations could be processed products (for example, canned fish) which tend to be dutiable at higher rates than unprocessed products (e.g., whole fish), to protect jobs in the importing countries processing sector which are often low paid positions in rural areas, where alternative opportunities may be limited.

 

What about seafood specifically?

The implications of TTIP for the seafood sector include the probable elimination of import tariffs for products traded between the US and the EU, with reductions in prices and increases in sales and consumption among the probable results. Also, the agreement could result in increased harmonization of production methods in the two economies – which could affect everything from harvesting of wild fish to genetic modification and feeding of farmed fish.

Seafood products are subject to an array of trade-related measures in addition to tariffs, including requirements applying to foods and other animal products generally (such as health and safety rules), as well as seafood-specific measures such as labelling related to fishery sustainability. These are all potential areas of interest in the TTIP negotiations. There is always room for improvement of existing necessary trade measures and for removal of unnecessary ones.

Some specifics of the TTIP package are, of course, not yet known. No one yet knows if or how illegal fishing will be resolved, or how fishing subsidies will be handled in the final agreement. But we know some of TTIP’s likely seafood-related elements in general form, based on experience with past trade agreements, as well as the rules and regulations of the World Trade Organization (WTO).

Food safety is a vital matter in the seafood business, and the safety of imported seafood is a frequent topic of concern amongst those in the industry, seafood marketing, consumer groups, and others. No EU or US free trade agreement has gone through without provisions for food safety, and the means by which to address such concerns, and TTIP is unlikely to be an exception. Neither the EU nor the US is under any obligation to surrender “sovereignty” in their trade agreements; neither gives up the right to enact and enforce science-based laws to protect consumer health.

However, the EU and the US – and each of the 157 other members of the WTO – have an obligation not to impose trade-affecting rules and regulations that are not science-based. Where there is disagreement about the science – genetically modified foods would be a good example in the EU-US context – there is in the WTO a dispute settlement mechanism (which is routinely employed!) to address and, with good fortune, resolve such disagreements. Free trade agreements – including, no doubt, the future TTIP – likewise have their own dispute settlement provisions.

Likewise, disagreements sometimes arise between free-trade partners over production methods – for example, “dolphin-safe” tuna between the US and Mexico). Another area is product labelling (whether of production methods, sources of fish inputs, added ingredients, or (an old US-EU dispute) what species is a “sardine.” These concerns can either be hammered out in TTIP negotiations, or left until later in a formal dispute settlement process outlined in the agreement. But in any case, national or Community sovereignty remains intact in free trade agreements, and internal laws that are well founded are well protected.

 

What about the seafood industries in other countries?

Countries outside of the EU-US agreement -- non-EU countries around the globe -- will also feel economic effects from the agreement. This is true even for countries, such as Canada, with which both the EU and US already have their own free-trade agreements. Many other countries with agreements only with either the EU or the US, also will probably be affected.
In general, the impact of the TTIP agreement on “the rest of the world” will be positive, because economic growth in the EU and US means greater export opportunities to those two markets for third-country producers. Growth in the EU fish processing sector, as it takes advantage of an open US market, will boost demand for harvested and farmed fish – including from non-EU sources. EU imports of fish from elsewhere will grow, even though the agreement leaves EU tariffs on fish from sources other than the US unchanged. This will benefit the fisheries and aquaculture sectors of non-EU countries.

However, some third-party effects will be less positive, especially for developing economies. For example, developing countries that currently benefit from so-called “preferential treatment” in the EU and US (mainly through lower existing tariffs on their exports to those markets through trade-policy programs such as the Generalized System of Preferences and the Lomé Convention) will see fewer benefits from such preferential treatment.

Canned tuna is an example of potentially adverse TTIP effects on developing countries. Both the EU and the US currently have import tariffs for canned tuna that are several times higher than the average tariffs for seafood products. Those tariffs are waived or sharply reduced for imports from many developing countries, as a way to help their economic development. A complete phase-out of those high tariffs on EU-US trade would end the relative advantage that developing country exporters of canned tuna currently have over US exporters in the EU market, and over EU exporters in the US market.

Other negative effects will be felt by developed countries that already have free trade agreements with the EU or the US, such as Norway (EU) and Canada (US). These countries already have access to their large neighbours’ markets – the TTIP will introduce potentially major competition for them. It cannot be said to what extent these negative effects will offset the more general positive effects of growing EU and US economies (which helps foreign exporters of all stripes), but taking into account the winners and losers from TTIP will probably be an important consideration in TTIP negotiations.

Both the European Commission and the US Trade Representative have more information about the broad goals of TTIP on their respective websites:
http://ec.europa.eu/trade/policy/in-focus/ttip/ and http://www.ustr.gov/ttip/

Roger Corey, This email address is being protected from spambots. You need JavaScript enabled to view it.