Trade talks signal cheap loins from the US

Pig producers throughout Europe could gain a brand-new set of challenges and opportunities if transatlantic trade talks between the EU and the US are successful. Digby Scott looks at the issues under discussion

Major trade talks between the United States (US) and the European Union (EU) are likely to start by the end of this month (June), and life might never be the same again for Europe’s farmers.
One of the outcomes could be cheap pork loins from the US flooding the European market from time to time as North America’s large-scale pig producers gear up to exploit a market that until now has looked relatively unattractive because of a 4% tariff wall.
There’s widespread support in the US and EU for a general freeing up in trade between the two blocs. It’s been estimated that a comprehensive transatlantic trade and investment agreement could bring significant economic gains for the EU (£100 billion annually) and US (£80 billion).
This translates to an extra £458 in disposable income each year for a family of four in the EU, on average, and £550/family in the US, according to a report titled Reducing Transatlantic Barriers to Trade and Investment — An Economic Assessment.
The US is a major exporter of pigmeat. It can produce pork competitively due to large-scale farms, lower feed costs and fewer animal welfare requirements.
But, in the forthcoming trade talks, the EU is unlikely to budge over animal health and food safety requirements, so even when trade barriers come down, US producers will still have significant obstacles to overcome.
It has been suggested they might even have to set up an entirely independent production system to satisfy European requirements.
The US is unlikely to export whole carcases to the EU, but European and American consumers value different parts of the pig, so American producers will be well placed to send certain cuts including loin, belly and hams.
The European farmers’ union Copa is currently investigating the likely impact of greater trade in pigmeat between the US and EU. It sees currency fluctuations as key, with the US having a general cost advantage over EU producers (even when transport is taken into account) when the dollar weakens against the euro.
Copa is likely to recommend to the European Commission that in the free trade negotiations, pigmeat should be considered a “sensitive sector” and this should be reflected in whatever import quota is agreed.
The EU is the world’s largest importer of agricultural commodities and food. In 2012, such imports were up 145% on 2000. But US agricultural exports to the EU in 2012 represented an increase of only 54% in the same period. The US share of the EU market in 2012 was 7%, half the share it had in 2000.
Brazil is the top supplier to the EU with a market share estimated to be almost 14%. Soybean and soybean meal shipments are a major factor in the shift. In 1980 corn and soybeans together accounted for 48% of US exports to the EU. In 2012 they were 15%.
Biotechnology has become the biggest barrier to trade. Speaking to journalists in Strasbourg recently, EU trade commissioner Karel De Gucht was keen to lay some rumours to rest about differences between the US and EU biotech policies.
He said a future transatlantic trade deal would not change the existing GMO legislation. And he spoke of the need to adopt a “pragmatic approach” to go for this “game-changing trade deal” – to seek greater market access, reduce tariffs, cut down on red tape and tackle non-tariff barriers, the so-called “behind the border” barriers.
Both the US and EU are “mature trade partners” and we need to “improve the way we work together”, he said.
The aim of the two sides is to conclude the trade deal by October 2014, which roughly coincides with mid-term elections in the US. An independent study published by the European Commission suggests that in the event of a deal, EU exports of processed foods to the rest of the world would increase by 9%, while car exports from Europe would rise by nearly 42%.
For agriculture, forestry and fisheries, average tariffs are relatively high at about 3.7% on both sides. There are also high non-tariff barriers for biotech exports to the EU. Overall EU exports to the US are expected to increase by 28%.

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