British businesses face uncertainty from a US- EU trade pact which will open new markets but threatens to undermine key regulations. By Nick Hughes.
As the frenzy builds around the forthcoming EU referendum, a treaty with potentially just as significant ramifications for UK business is quietly coming to fruition.
The stodgily named Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU is likely to be ratified in 2016 after years of sensitive, and secretive, negotiations. The aim is to remove both the direct and indirect barriers to trade, particularly in agricultural commodities, that prevent businesses from accessing the transatlantic market.
On the face of it TTIP should mean that UK businesses get easier access
to the US market of 300m consumers and a source of cheaper supplies, particularly in areas such as energy and food where US production costs are cheaper than those in Europe.
But the negotiations have been mired in controversy, with critics fearing
a watering down of food and environmental standards that will serve the interests of US agribusiness giants at the expense of small- and medium- sized EU producers.
The anti-poverty charity War on Want describes TTIP as a “toxic trade deal”, while a Stop TTIP petition from a group called the European Citizens’ Initiative has garnered more than 3m signatures.
So what are the implications of TTIP for the UK and in particular for food businesses?
The first point to note is that the benefits of TTIP are fiercely contested. The UK government, which is strongly in favour of the deal, claims that TTIP represents a significant economic and geopolitical opportunity that could add up to £10 billion annually to the UK economy or up to £100 billion over 10 years.
Opponents argue that such estimates significantly overstate the gains and that the alignment of regulatory standards in areas such as consumer safety, environmental protection and public health could have unforeseen social costs.
‘Negotiations have been mired in controversy, with critics fearing a watering down of food and environmental standards’
There is also evidence that the deal will benefit the US far more than the EU. A recently published US Department of Agriculture report on the implications of TTIP for the agricultural sector concluded that the US would gain much more in food exports, with significant increases in beef and dairy in particular. The increase in US imports would also deflate EU agricultural prices, according to the report, damaging the prospects of European farmers.
Other concerns include the potential weakening of EU environmental regulations and food standards that are mostly stricter than in the US. GM crops, for example, are strictly regulated in the EU, which also has directives prohibiting the sale of meat treated with certain growth hormones and chicken washed with chlorine – both common practices in US food production.
A House of Commons briefing paper on TTIP published in December
2015 notes that the US has previously disputed such rules at World Trade Organisation level, and has called the bans “unscientific” and part of a protectionist strategy to shut US farms out of EU markets. Barack Obama is on record as saying that one of the major objectives for his country with TTIP is the elimination of food standards that the US believes are not based on science.
The UK government has repeatedly stressed it does not intend to allow TTIP to undermine the UK’s ability to set its own welfare and regulatory standards when it comes to animal health. Critics remain unconvinced, with even impartial observers urging caution. The chair of the Commons environmental audit committee, Joan Walley, says: “The focus in TTIP has been on its potential for boosting transatlantic trade, but that must not be at the expense of throwing away hard-won environmental and public health protections.”
Concerns have also been raised that TTIP could erode the protection offered to European regional food specialities, resulting in the US exporting cheaper versions of products such as parmesan cheese, olive oil or prosciutto – descriptions the US argues are generic but many EU food producers rely on to sell their goods at a premium.
If a race to the bottom does materialise, Mintel is predicting a consumer backlash against a flood of low-quality food imports. In a report setting out five key European consumer trends set to affect the market in 2016, it predicts that fears surrounding TTIP will cause consumers and brands to react by favouring purer and more natural products. “For some consumers, this will trigger a reaction where they opt to go local, go natural or go DIY instead,” says Mintel’s senior trends consultant Richard Cope.
The momentum behind TTIP appears irresistible and a deal is expected to be agreed by the end of the year before going before Congress and the European Parliament in 2017.
Once implemented, the food landscape as we know it will almost certainly have changed forever.