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EU and US eye prize of transatlantic trade deal

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A new deal to reduce barriers to global trade could deliver huge benefits. Cesare Varallo looks at what is being discussed and assess the chances of success

UK prime minister David Cameron said it “could be the biggest bilateral trade deal in history”. European Commission president José Manuel Barroso said it was “the cheapest stimulus package one can imagine”. The Transatlantic Trade and Investment Partnership (T-TIP), announced by US president Barack Obama at the G8 summit in Northern Ireland on 14 June 2013, could bring invaluable benefits, both in terms of economic growth and employment.

The T-TIP aims to eliminate all tariffs on trade, reduce non-tariff barriers that impede the flow of goods, increase market access for trade in services and cut the cost of differences in regulations and standards between the EU and the US. It also aims to develop cooperation on issues of global concern, including intellectual property. The value of food and drink trade exports to the US from the European Union in 2012 was €13.6bn.

It could be the most ambitious free trade project since the World Trade Organisation’s formation in 1995, and it will create the biggest ever free trade zone. The standards it sets will influence the global market and increase EU and US competitiveness with BRICS countries (Brazil, Russia, India, China and South Africa).

Cameron said the deal would be a “once in a generation prize”, that he is determined to seize. “There is no more powerful way to achieve that than by boosting trade and there’s no better way than by launching these negotiations on a landmark deal between the EU and the US, a deal that could add as much as £100bn to the EU economy, £80bn to the US economy and as much as £85bn to the rest of the world”. He added: “We are talking about a deal that will have a greater impact than all the other trade deals on the table put together.”

Barroso added: “We intend to move forward fast. We can say that neither of us will give up content for the sake of speed, but we intend to make rapid progress. I’d rather see the core challenge, moving our regulatory regime closer and addressing the harmful effect of behind-the-border trade barriers. Huge economic benefits are expected from reducing red tape. The potential economic gains for the EU are estimated at around €120bn a year. And the real beauty of this deal is that it will offer real returns of around €545 per average household in Europe almost for free.”

FoodDrinkEurope President, Jesús Serafín Pérez, reacted positively: “As Europe’s largest manufacturing industry, and the world’s largest exporter and importer of food and drink products, we look forward to playing an active role and providing input to the negotiations on this Agreement, which has the potential to drive growth and facilitate access to a major export market, thereby generating new opportunities for Europe’s food and drink manufacturers”.

However, several regulatory barriers will be difficult to break down: just think about the different positions of the EU and US about hormone-treated beef, GMO (genetically modified organism) and traceability. The EU seems to be very concerned to maintain its high food safety standards and it will be not easy to set equivalence agreements on these points; but the prize for success is huge.

A great example of cooperation between EU and US is last year’s bilateral cooperation arrangement on organic food equivalence. The EU and US recognised each other’s organic production rules and control systems as equivalent under their respective rules. This type of recognition, also referred to as an equivalence arrangement, means that organic products certified to USDA organic or EU organic standards may be sold and labelled as organic in both the US and the EU. As long as the operation is certified by a USDA-accredited certifying agent or an EU member state recognised control body or control authority, this recognition eliminates the need for EU organic operators to have separate certification to the US standards and vice versa.

The first round of negotiations will be in Washington on 8 July and the process is expected to take up to two years.

Cesare Varallo is the writer of the Food Law Latest blog