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Can Trade Agreements Offer Immediate Economic Benefits?

09 February 2015

US - Bi-lateral and multi lateral trade agreements could offer immediate economic benefits.

Mr Sumner gave a primer on trade agreements and key issues addressed at the US–EU Free Trade Negotiations: What Are the Implications for Animal Production?' education programme held during the 2015 IPPE in Atlanta at then end of last month.

This was the view put forward by Jim Sumner, president of both the USA Poultry & Egg Export Council and the International Poultry Council at eh recent International Productions and Processing Expo in Atlanta.

It was part of four presentations at an education programme on the US–EU Free Trade negotiations at the expo.

Mr Sumner introduced the programme, remarking there are now more than 330 preferential trade agreements worldwide with several hundred more under negotiation or proposed.

He said: “This abundance of agreements, some between just two partners and others quite extensive, exists because of their potential to provide immediate net economic benefits.”

According to Mr Sumner, they can also be used as a foreign policy tool, since it is easier to negotiate with a smaller number of countries than participate in the General Agreement on Tariffs and Trade or the World Trade Organization (WTO).

However, these agreements have a negative aspect as well. The existence of many other agreements can weaken the WTO system and result in rival trading blocs. It may also be difficult to enforce the terms of the agreement without the formal mechanisms of a larger organisation, and the workings of the agreement may be less transparent. Further, it is often claimed that smaller or undeveloped countries are left out of these treaties.

Negotiations over the Transatlantic Trade and Investment Partnership (TTIP) began in June 2013, and the eighth round of talks is scheduled for early February. The poultry industry is interested in TTIP because the European Union (EU) is an attractive market for poultry products, but one that has erected barriers to protect its domestic poultry industry.

In his US perspective on TTIP negotiations, Dr Paul Aho, economist with Poultry Perspectives, discussed two future scenarios that could affect the hopes of the US poultry industry – more openness toward globalisation or a protected industry closed to trade.

From Dr Aho’s perspective, if the EU chooses to be more open – for example by ratifying TTIP – it could mean somewhat lower domestic poultry production, a degree of accommodation toward EU standards and an end to non-tariff barriers that currently hinder imports. Going in the opposite direction, a protectionist attitude would lead to higher domestic production, lower consumption, higher prices and trade barriers that block imports.

The comprehensive and complicated TTIP being negotiated by the US and EU could have considerable influence on the global economy, according to Gina Tumbarello [pictured above], director of international policy and trade, American Feed Industry Association.

The US agricultural industry has a number of targets and expectations for this treaty. In addressing the implications for US animal production at the farm level, she described TTIP as difficult and challenging but also expressed hope for what it could achieve.

She said: “I think it is a great opportunity. It has the potential, if successfully completed, to change the agricultural dynamics between these two trading partners in a way that has not been achieved in decades.”

The adoption of TTIP would have an impact on various sectors of the economy and on consumers, suggested Dr Martin Banse, senior agricultural economist and director at the Thünen Institute for Market Analysis in Braunschweig, Germany.

He provided a general assessment of the potential impact of the TTIP for European farmers. He remarked that the reduction of tariffs within TTIP would result in only small production reallocation in the EU, and beef would be one of the most affected commodities if food production standards were modified.

Mr Banse also observed that the response of farmers and food companies to sensitive issues addressed in the proposed trade agreement, such as genetically modified organisms, may be more important.

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