T-TIP offers hope to end Europe’s backdoor trade moratorium

Farm Forum

Nov. 6 marked an unfortunate anniversary in the complex relationship between the European Union and the United States on agricultural trade: the date was the one-year anniversary of the last import approval issued by the EU for a biotech crop. Although it was not recognized at the time, this action a year ago was the beginning of a de facto default on the EU’s World Trade Organization (WTO) obligations – not to mention the EU’s own nominal regulatory requirements.

The U.S agricultural sector – particularly the grain sector – and the European Union have had a turbulent history. Once the largest foreign supplier of coarse grains to the EU, the United States has essentially been denied access to the European market for more than a decade. While the dramatic rise in production in Ukraine, which enjoys a competitive advantage as a regional supplier, is one factor, it is clear that manipulation of non-tariff trade barriers is also a significant issue.

The collapse of U.S. market share for corn in the EU coincided with the widespread commercialization of genetically modified varieties in the United States. The first U.S. introduction of corn biotech traits occurred in 1996. The U.S. market share of corn exports to the EU dropped immediately from 58 percent to single digits in 1997, and it remains at very low levels today.

The introduction of biotech varieties, whether for planting or for import, is regulated by both producing and importing countries. The EU’s regulatory discretion is constrained, however, by its obligations as a WTO member and by its own formal regulatory standards, on which other stakeholders are entitled to rely. The EU, unfortunately, habitually ignores its own deadlines and skirts its commitment to a transparent, science-based regulatory system. In the 2011-2013 period, the EU increased its timelines for biotech approvals to 48 months, well beyond the timelines prescribed by EU law.

U.S. producers are not the only injured parties in this scenario. As long ago as August 2003, a WTO panel decided in favor of a complaint against the EU brought jointly by Argentina, Canada and the United States alleging that the regulatory slow-walking amounted to an illegal de facto moratorium on biotech approvals. Three years later, the WTO determined that the EU was in non-compliance with its treaty obligations.

While that WTO action prompted some limited regulatory relief, the pattern of non-compliance has continued and is, in fact, worsening. More biotech applications are currently pending in the EU system (67) than have been approved cumulatively (50) since the introduction of modern biotechnology almost 20 years ago. As of Nov. 6, 11 of these events have passed all safety reviews and are ready for final import approval, meaning ongoing delays are political in nature, not scientific or technical.

Despite this challenging history, a successful conclusion of the Trans-Atlantic Trade and Investment Partnership (T-TIP) offers an opportunity to open a new chapter for U.S.-EU grain trade.

The U.S. Grains Council recently commissioned a study by Informa Economics to assess the opportunities and challenges presented by a trade agreement with the European Union. The study concluded that removal of the tariff and non-tariff barriers, the latter of which includes biotechnology, could lead to 1.5 million metric tons (59 million bushels) annually of corn exports by 2023, as well as an additional annual sales 73.2 million gallons of ethanol exports, 332,000 tons of distiller’s dried grains with solubles (DDGS), and 155,000 tons of corn gluten products.

Taken together, the European Union presents a significant potential market for the U.S corn products, provided the U.S. government is able to secure firm commitments from the European Union to reduce both tariff and non-tariff barriers, chief among them barriers related to biotechnology.

Without meaningful changes in EU regulatory behavior, however, T-TIP will not yield any benefits to U.S. corn farmers, who will continue to be cut out of the market. This is among the most significant outstanding issues to be addressed in the T-TIP negotiations.