Farm battle threatens to upset EU-US trade talks

Date: 05/03/1998

By Mark Turner

MOVES by the European Commission to forge a wide-ranging trade deal with the United States could run into serious difficulties because of continuing disputes over farm trade.

While the EU initiative has been welcomed in Washington, US Trade Representative Charlene Barshefsky told European Voice this week that it was "inconceivable" to imagine a broad-based initiative which did not address some fundamental questions about agriculture.

The Commission is adamant that farm subsidies and tariffs have no place in a bilateral EU-US deal since they will be discussed in the World Trade Organisation next year. But Barshefsky insisted that although Washington would take "great care not to stymie WTO talks ... certainly aspects of agriculture will need to be discussed".

Her warning came as Trade Commissioner Sir Leon Brittan this week called for a deal to dismantle transatlantic industrial tariffs, liberalise trade in services, align public procurement, intellectual property and investment rules, and overcome regulatory barriers. He added that negotiations could begin at the EU-US summit this May.

It is, however, far from clear how Washington will respond, with a generally enthusiastic administration having to win over a sceptical Congress and the powerful regulatory agencies which almost sank an EU-US mutual recognition deal on pharmaceuticals last year.

Barshefsky said she was broadly in favour of Brittan's proposals, arguing that the past two years of trade disputes had not been sufficiently counterbalanced by positive action. "A two-way trade relationship of a trillion dollars should not be characterised by these arguments," she said.

The US trade supremo said talks on regulatory reform could be "very fruitful", but added that they would need to be "defined with some precision". She was also open to an EU-US agreement on competition policy and intellectual property rights, but stressed that Washington was not talking about the creation of a free trade area.

Barshefsky insisted, however, that she did not feel constrained by the Union's proposals and would be raising areas of concern to the US. "Almost all our disputes centre on agricultural issues - whether sanitary, phytosanitary or biotechnological. Obviously, we would have to look at this in a constructive way," she added, warning that the US Congress would "without question" only approve a deal which addressed agricultural concerns.

While Brittan aides say that they would be willing to improve cooperation with the US over veterinary and phytosanitary regulation, they insist that straying much further into highly sensitive areas of agricultural reform would be politically impossible. "We should only discuss areas which are feasible," said one.

A spokesman for Commission President Jaques Santer hammered home this message, insisting neither agricultural or audio-visual services could be covered by the talks. "This is a point which must be understood by the American delegation. It's only under these conditions that negotiations have any chance at all of reaching a satisfactory conclusion."

The current talks are being watched closely by businesses on both sides of the Atlantic, which have long urged a more coherent and overarching policy within the Transatlantic Business Dialogue (TABD).

Hanns Glatz, head of Daimler-Benz's EU office, said business leaders no longer thought in terms of two trade blocs with competing interests and were clamouring for a more coordinated regulatory environment.

"There is no logic that you can only get certification for one area," he said. "It is in the interests of the consumer to get rid of these obstacles."

Barshefsky said it was important to stimulate transatlantic ties not only on bilateral grounds but because the two powers could then "assist much more effectively the development of the multilateral trading system".

Nonetheless, she stressed that there was some way to go before the US could respond in detail, adding: "I do not want to put any deadline on this. We will see what develops."

See also Section 13.6.