The Transatlantic Trade and Investment Partnership (TTIP) has the potential to transform agricultural trade between the United States and the European Union. TTIP could potentially lower tariffs and non-tariff barriers on a range of agricultural goods. While the impact of this on U.S. and EU food and farm systems has been heavily debated, there has been much less discussion of its possible impacts on developing countries. Could TTIP make it more difficult for developing countries to export, particularly goods which many communities have come to heavily rely on for their livelihoods?
TTIP is at the forefront of the “new era” of trade deals in that it seeks to move beyond simple reduction in tariffs towards regulatory harmonization on issues such as labor and environmental standards. In an agricultural context, tariff barriers and regulatory harmonization in areas where the U.S. and the EU differ, such as pesticide use, have garnered the most attention in the negotiations. While many states are implementing innovative pesticide regulations, in general, U.S. standards are lower than those in the EU. However, the push for regulatory convergence within TTIP—advocated by lobby groups such as CropLife America—would push standards to the lowest common denominator, while reducing individual U.S. states’ ability to regulate pesticides, as well as future efforts to regulate pesticide use within the EU.
One question that remains is how will this deal affect other countries which currently export to the U.S. and Europe? While the projected benefits of TTIP are heavily disputed, the scale of TTIP, which would cover 40 percent of global trade, is not. As such, the potential that exports from developing countries could be displaced by increased trade between the U.S. and EU must be taken into account when analysing the potential impacts of TTIP.
Kenya’s horticulture industry provides an empirical example of how this could play out in practice. Total horticulture exports from Kenya total 350,000 metric tons or 0.2 percent of the global market share, 80 percent of which are green beans and peas. Furthermore, 60 percent of these exports are grown by small holders who farm using low technology and labor intensive techniques. Could TTIP lead to U.S. agricultural exports undercutting Kenyan exports due to privileged access to EU markets? This could happen if U.S. exports are directly competing for the same market space at the same time as Kenyan exports.
The Kenya export market for green beans falls into two seasons. The low demand period from June to September is characterised by a supply surplus in Kenya, during the ”long rains” season and low demand from the EU market, as EU member states can produce their own crops during this period. The high demand period runs from September to March. During this period, the EU market cannot produce enough to satisfy domestic consumption and supply in Kenya is typically low because the ”short rains” season doesn’t allow for effective farming, meaning extensive irrigation is necessary to maximize production. The U.S. growing season, while varying from state to state, runs from May to October, so Kenyan growers could be facing increased competition from U.S. producers at a time when EU demand is already low.
The issue of tariffs
U.S. firms, which already export 11 percent of their domestic green bean production to the EU, stand to substantially benefit from a reduced tariff under the TTIP. The current tariff stands at 11.2 percent, which could potentially fall to zerp. The likelihood of this happening is significant because U.S. negotiators, mindful of the fact that U.S. agricultural exports to the EU have fallen from 15 percent in 2000 to seven percent today ($10.1 billion) in relation to the rest of the world, are prioritising access to the EU agriculture market as a key objective in the negotiations.
The EU has held out full tariff liberalization of horticulture and other products as a ratification condition of the pending Economic Partnership Agreement between the EU and the Eastern African Community, which includes Burundi, Kenya, Rwanda, Tanzania, and Uganda. For a brief period, when Kenya balked at ratifying that controversial deal, tariffs were raised to the level used under the EU’s preference program for developing countries, the Generalized System of Preferences (6.9 percent on horticultural goods). Once Kenya agreed to join, tariffs were lowered to zero as a temporary measure pending expected ratification of the deal, possibly in October 2016.
The issue of pesticide regulations
A key issue in the TTIP negotiations concerning regulatory harmonization is the question of pesticide use in agriculture, with the U.S. advocating for lower pesticide controls on U.S. exports entering the EU. If this happens, there could be considerable pressure on growers in developing countries to modify their use of pesticides so that they remain cost competitive when exporting to this new trading bloc.
The U.S. and the EU take very different approaches to pesticide regulation and environmental management, with the EU using the precautionary principle, which leads to stricter requirements of food safety standards. This difference can be seen in Maximum Residue Levels (MRLs), where the residues allowed on agricultural products are in some cases 5,000 percent higher in the U.S. than the EU. While it is difficult to discern the exact direction of the TTIP negotiations, the proposals put forward by CropLife America and the European Crop Protection Association point to a move towards U.S. pesticide regulations. This could subsequently increase MRLs compared to the more stringent pesticide standards currently in place in the EU and in individual U.S. states.
Kenya’s horticultural industry is very dependent on exports to the EU market. As such, if TTIP drives down EU pesticide standards, will Kenya have to follow suit to continue to be cost competitive with new U.S. imports into the EU? In terms of what chemical pesticides are actually banned and in what quantities, Kenya surprisingly displays a similar pesticide regime to the U.S. rather than the EU. For instance, pesticides such as Atrazine, Diphenylamine (DPA), Acetochlor, Simazine, Acephate, which are currently permitted for use in agriculture within the U.S. and Kenya, are banned under EU law. It could well be that the effects of lowering pesticides standards in TTIP would not directly affect the regulatory regimes in countries such as Kenya. However, this does not give us a full picture of pesticide use within Kenya, where companies that do export to the EU in practice, are required to comply with significantly lower MRLs. If standards were to change under TTIP, Kenyan horticulture producers, such as green bean farmers, could be put under pressure by the changing EU regulations to increase pesticide use. This could also open the door for fewer and larger farms, which would employ greater pesticide use, to substitute for the production currently provided by smallholder farms.
Assessing the potential knock-on effects of TTIP on developing countries is conjecture until we know the makeup of the regulatory harmonization and the final text is released. However, the changes that have been proposed by corporations, in addition to impacting trade between the U.S. and the EU, could have significant effects on developing countries such as Kenya, especially around the standards used in the production of export crops. If these changes do result in increased use of questionable pesticides in developing countries, what would be the impacts on public health or the environment in those communities? The impact of TTIP on developing countries has not been part of the TTIP debate and more space is needed to further analyze how this massive trade deal will affect the developing countries who already export to the U.S. and the EU.
