Commentary: U.S., Europe talks may indicate the future of free trade
By Josh Rolph
Flags of European Union nations fly outside the European Parliament building in Brussels. California farmers and ranchers could benefit if the EU and the United States pursue plans for a free-trade agreement.
I've heard it said many times the last few years that agriculture has been the bright spot in California's lagging economy. All data suggest that fair and open trade with foreign markets plays a significant role. In fact, the U.S. Department of Agriculture just announced—in its words—"an astonishing trend" for U.S. farm exports, which are on track to grow to $145 billion in 2013, up from $96 billion in 2009, or more than 50 percent in a relatively short period of time. California agriculture represents an equally impressive 13 percent of that total. While there are many factors that contribute to this surge in foreign trade, the move toward free-trade agreements is one that cannot be overlooked.
The last two decades of FTAs have been turbulent ones. Per the rules, a negotiated free-trade agreement must pass both chambers of Congress and receive the approval of the president before ratification, a high hurdle to meet within the highly partisan environment in Washington. Even with a Republican-controlled federal government in the early 2000s, trade votes such as the Central American Free Trade Agreement passed Congress with only razor-thin majorities.
For the strongest proponents of free, fair and open trade, the lowest point began in 2008, when a broad protectionist sentiment swept across America almost in tandem with the sinking economy. At that time, three bilateral FTAs negotiated by the Bush administration seemed to be indefinitely tabled by a new Democratic majority in Congress. Meanwhile, presidential candidate Barack Obama's campaign pledged to renegotiate the North American Free Trade Agreement. All things considered, it would have been easy to believe that the two-decade trend toward free-trade agreements had drawn to an end.
Things began to change shortly after President Obama took office. He almost immediately backed away from the tough NAFTA talk, and in his 2010 State of the Union speech he announced the National Export Initiative, an effort to double exports in five years as a way of providing a boost to the ailing economy. By June, the administration began the first round of negotiations as part of the Trans-Pacific Partnership, an FTA covering nine nations that will likely expand in the near term.
These promising signs were somewhat overshadowed by news of other nations aggressively entering into trade agreements. One such agreement that is nearing ratification is a negotiation between the two largest trading partners for the United States: Canada and the European Union.
As we compete with Canada and developing nations for a share of the EU market, we are encouraged by free-trade talks between the U. S. and the EU during the past year. Unlike many earlier FTAs, there is almost no one who is severely opposed. Businesses and trade groups want the deal. If anything, these groups understand that a successful FTA with the EU would address tariffs as well as non-tariff barriers such as subsidies, sanitary and phytosanitary issues, and maximum residue limits that have stifled agricultural trade.
Overall, California farmers and ranchers have benefited from robust European trade for years. With a firm place as our second-largest export destination, the European Union purchases more than $2 billion of California-produced agricultural products, roughly 20 percent of its agricultural exports from the U.S. Almonds lead the commodities exported to Europe by a large margin, accounting for nearly 40 percent of that total, while wine is at 20 percent and walnuts come in at more than 10 percent. The Europeans love our pistachios and raisins, with a broad swath of grains, fruits, vegetables and nursery crops rounding out the list of top exports to Europe.
In October 2011, United States and EU officials created a High Level Working Group to discuss improving trade relations. Since then, the group has made progress toward defining the possibility of a free-trade agreement as one of its primary objectives. The working group plans to release its findings by the end of the year.
We are watching the development of these talks, being especially mindful of any problems that might arise. The largest problem came up last month after questions arose on whether agricultural trade would be included in the talks. It has since become clearer that agriculture must be part of discussions, with no exclusions as we've seen in other agreements.
The discussions occur as some EU member countries stand on the brink of collapse. But that provides the U.S. and the EU extra motivation to stimulate both economies. That said, an agreement with 27 nations involved will perhaps be more complicated than any agreement to date. If you think U.S. regulations are bad, imagine navigating the web of ours plus theirs in negotiations, which will make agreement all the more challenging.
Fortunately, we have strong allies in Congress such as the incoming chair of the House Ways and Means Trade Subcommittee, Rep. Devin Nunes, R-Visalia, who recently introduced a bill to authorize the administration to enter into negotiations with the EU. We look forward to working with the new 113th Congress and the administration on ways to be aggressive in opening and expanding new markets for California agriculture.
(Josh Rolph is director of international trade, farm policy, taxation and plant health for the California Farm Bureau Federation. He may be contacted at email@example.com.)
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