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Harmonisation of standards seen as important area of benefit to third countries under EU–US agreement

16 November 2013

In September 2013, the EC posted both the summary and the full report of an economic analysis of the proposed Trans-Atlantic Trade and Investment Partnership (TTIP) between the EU and the USA carried out by the Centre for Economic Policy Research (CEPR). The study sought to identify the specific impacts of a TTIP agreement by using a computable general equilibrium model stimulation.

In terms of the agro-food sector, the CEPR study found that “overall output in agriculture, forestry and fisheries taken together is expected to increase by 0.06%, though there may be limited negative impact in certain subsectors.” However, it was highlighted that the “TTIP will be beneficial not only for the US and the EU but also for their trading partners around the world, to the tune of €99 billion.” This arises “because economic growth in the US and EU means more purchases by consumers and business of other countries’ products” and “because any common regulatory approaches between the EU and the US will reduce costs for exporters from and to those markets”.

The EC emphasises that the simulation used provides “a ‘ballpark’ indication of the economic effects rather than precise predictions of exactly what will happen”.

Section 3 of the summary report deals with the impact of the TTIP on the rest of the world, and provides detail on “the benefits of removing regulatory barriers to trade” arising for third countries. The section argues that “the improvement in regulatory compatibility between the US and EU” should make it easier for third-country suppliers to serve both markets, by requiring compliance with only one set of common standards and regulations. The EC argues that the effects would be similar to those which arose in the EU as part of the completion of the European single market. This process of harmonisation could also lead to a reduction in some regulatory barriers faced by third-country suppliers.

However, the EC acknowledges that analysis carried out by the Munich-based Institute for Economic Research (IFO) and published by the Bertelsmann Foundation has argued that “many other countries will lose out heavily from TTIP.” The EC summary notes the conclusion of the IFO analysis that “the high-income OECD economies will face an impact that is almost unprecedented from a trade agreement,” with significant losses, but it contrasts the findings of this study with the EC-financed CEPR study, which predicts “a collective gain for the rest of the world in the region of 99 billion euros”.

Significantly, the EC attributes the wide difference in the findings to the omission by the IFO study of “the direct and indirect spillover effects that result from greater regulatory compatibility between the EU and the US”. The EC implicitly argues that the gains to third countries arising from EU–US standards harmonisation outweigh direct trade diversion losses for third countries.

Editorial comment

The gains for ACP exporters from EU–US standards and regulatory harmonisation in the agro-food sector will be sector- and product-specific and will depend on the basis for harmonisation agreed. This suggests that close monitoring of the process of EU–US negotiations on standards and regulatory harmonisation in the agro-food sector will be required, on the basis of a clear identification of current areas of divergence in EU and US standards and regulatory frameworks and the specific interests of ACP exporters in the sphere of standards and regulatory harmonisation.

ACP governments in close association with private sector exporters’ associations could also usefully seek briefings from US and EU negotiators on the progress and developments in standards and regulatory harmonisation.

This would then facilitate an early identification of the likely impacts of the EU–US process of standards and regulatory harmonisation on ACP exporters, with this providing scope for the identification of possible remedial measures where action may be required.

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