March 21, 2013
The enthusiasm of the European Union and the United States for the forging of a bilateral trade agreement, while it may be good news – largely for multinationals involved in transatlantic trade – bodes ill for the future of multilateral trade liberalisation. Such agreements are as important for what is excluded as what they may include. In no sector is this more important than in trade in agricultural products. Both Europe and north America have massively expensive agricultural protection policies much of which they will no doubt strive to preserve in any eventual agreement.
The labels give the game away: ‘bilateral trade agreement (BTA)’, ‘preferential trade agreement (PTA)’ and ‘regional trade agreement (RTA)’; the new EU-US arrangement is to be called the ‘Transatlantic Trade and Investment Partnership(TTIP)’. The PTA is probably the most revealing; trade between the two partners is preferential and by implication excludes anyone else except on special , carefully controlled terms.
The TTIP probably marks the pinnacle of a marked retreat from the multilateral trade liberalisation achieved in the numerous GATT rounds which have taken place since WWII. For agriculture, the most important of these was the 1994 Uruguay Round, which concluded in the 1994 Marrakech agreement. This forced both Brussels and Washington to scale back excessive agricultural protectionism and begin the process of (slowly) winding down their gross agricultural support policies. Prior to the UR, while steadily scaling down industrial tariffs, neither the EU nor the US had been prepared to make any concessions on agricultural trade. Despite the post Marrakech progress, import charges on agricultural products worldwide still average out at over 60 per cent, while average industrial tariffs are little more than 3 per cent.
The lack of progress in multilateral trade negotiations, most notably in the now barely breathing Doha Development Round, has undoubtedly been an important factor in the growth of bilateral and regional free-trade agreements. These have proliferated since 1995. More than 60% of the trade in Asia is now likely to be taking place within the framework of such arrangements. The World Trade Organisation records that there were 186 such agreements in force in 2005, compared with 50 just prior to the completion of the Uruguay Round in 1994, less than 25 in 1985, and only thirteen such agreements in 1975. The share of world trade now taking place within BTAs is estimated by the WTO to have risen from 22 per cent in 1975 to over 50per cent in 2005. The effect on the agricultural export trade of the EU and the US would suggest an element of retaliation in the latest EU-US moves. As such, they bode ill for the future of global trade liberalisation.
It is not without significance that the refusal of Brussels and Washington to give significant concessions on market access for agricultural products has been one of the major obstacles to achievement of any progress in the Doha trade round. The losers from the growth of bilateralism will be competitive, but unsubsidised, agricultural exporters in both developing and developed countries. <21/03/2013>