Thursday 21 September 2017

Look on bright side of US/Canadian trade agreements

While the Obamas max out their photo ops in various Dublin hostelries, and the G8 leaders press the flesh and try to be best friends, the backroom boys are busy.

One of the main goals of this G8 meeting is to kick-start negotiations on a new EU-US trade deal.

The Transatlantic Trade and Investment Partnership, or T-TIP as it's known in the business, is being billed as the biggest bilateral trade agreement in history.

David Cameron claimed this week that it would be worth over €450bn a year.

That's a lot of money and it's the carrot that has led political leaders to this point as they grasp at any straw that could give their economies a shot in the arm.

It's also the only show left in town now that the World Trade Organisation's (WTO) Doha round is dead.

Farm groups here have always decried any moves towards a trade agreement because they feel agriculture will always be the 'sacrificial lamb' in securing a deal.

But how much do Irish agri-business interests have to fear from this latest trade initiative?

The first thing to note is that these free-trade talks tend to break down more often than succeed.

The on-going EU-Canadian trade talks are the latest example. For many, these were seen as a gateway to securing a later agreement between the two richest markets, the EU and US.

The stumbling blocks in these talks are likely to be the same ones that will crop up when the going gets tough with the US.

Agriculture is one of these.

The EU has annoyed north Americans by acquiescing to the demands of the 'anti' lobby – groups who have demanded that the EU block all imports of beef produced with growth hormones, GMO grains and so on.

These bans amount to technical barriers to competing imports for European farmers, so naturally they've been quite happy to the stick with the status quo.

However, during the Canadian talks, Europe was prepared to reduce the 50pc tax it was imposing on up to 45,000t of high value steak cuts. While steaks represent only 7pc of the market, they account for 40pc of the value of the carcase.

In return, the EU was pushing for greater access to the Canadian's highly protected dairy and poultry market where import taxes of 100-250pc virtually eliminate all EU competition.

On the basis that our existing beef trade with Canada is less than 0.1pc of Irish food and drink exports, it appears that the Irish food sector would stand to gain from any easing of food trade barriers.

Dairying, in contrast, accounts for 27pc of current exports, despite the huge Canadian import tariffs.

Yes, we are one of the biggest beef exporters in the EU, and extra competition on EU markets is not going to make life any easier.

But we are also rapidly becoming a key exporter of dairy produce, and as dairy profits continue to dwarf beef returns at farm level, there is a lot more scope for Irish farmers to increase their milk output in the future.

The figures for our exports into the US are almost a mirror image of what we currently sell to Canada, albeit on a much grander scale. In 2012, Ireland exported €510m of food and drink to the US, five times more than our Canadian exports. Crucially, that figure is 9pc higher than the level in 2011.

Key food exporters such as the Irish Diary Board have already carved out highly profitable niches for brands such as Kerrygold.

So it's hard to understand why the main farm groups here lobby so forcibly against any of these deals. The IFA warned our Taoiseach this week that Ireland stood to lose 'thousands of jobs' as a result of the concessions that the EU was prepared to make on a trade deal.

What we never hear from them is the potential upside. The star performer in our existing US and Canadian exports – drinks – account for €410m, or 68pc, of all of our food and drink exports to north America. Why? Probably because they aren't subjected to the same tariffs that our dairy products labour against. It's time for Ireland to be brave and embrace the possibilities that free-trade agreements with north America hold.

Irish Independent

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