International Trade and Global Business


Trade Agreements in Limbo

A number of new trade agreements are being discussed, with some significant ones in the early stages. One is between the US and the EU. One was within reach and known as TTIP.
Now, it seems negotiators are starting over with disagreements arising even about what to negotiate. The US wants agriculture to be included, but that topic has been a hot potato for Europe’s elected leaders and their farmer constituents. Farmers are a powerful lobby there and are quick to take to the streets in noisy tractor protests. The French in particular are protective of their farmers and fear that more competition will drive them out of business or into the boulevards of Paris where they could potentially cause a political crisis.
This fear and its political manifestations are repeated across the continent. Should any sector that caters to consumer needs be off limits in a trade agreement? We think not. If free and fair trade means anything, it should apply to all products. If the US can sell chickens for less, French consumers should have a choice, including whether to buy them if they’ve been washed in chlorine to kill any harmful bacteria. Ditto for US consumers who want French “stinky cheese.”
Of course, the US and French producers must abide by WTO rules that prevent producers from selling below production costs. That’s called dumping and it’s not allowed. Quotas are another tool to protect native producers without banning imports altogether. The US forced Japanese vehicle makers to limit exports in order to protect American car makers. Some of these restrictions, on light trucks, for example, are still in place and were negotiated in to the misnamed US-Korea free trade agreement. You can argue governments have a responsibility to prevent important industries from collapsing. In such instances, quotas may be an acceptable tool until the native industry figures out a way to be more competitive.
In the US, a new and some say improved North America Free Trade Agreement is waiting for Congressional approval, which due to recent changes in the law must voted up or down. That doesn’t stop Congress from asking US negotiators to make changes before a vote. Mexico and Canada have signaled no interest in renegotiating specific provisions of the revised deal. If Congress votes not to approve the agreement, the President can take the country out of the existing agreement. The US will be seen as less than a reliable partner, with future agreements negatively affected.
US Farmers Plight
A third potential agreement between the US and Japan is also up in the air. Japan, having signed agreements with other countries in the face of the current administration pulling out of the Trans Pacific Partnership Agreement, is being pursued by the President to sign a bilateral deal. US farmers, in particular, are upset over a loss of market access as competitors from Canada, Australia and elsewhere successfully capturing US lost opportunities.
Finally, the UK would like to strike bilateral trade deals, if it leaves the EU or otherwise changes its status with its EU partners. If the UK also opts out of its customs union deal with the EU, it will likely not make up what it loses in access to the continent.


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