Does the EU want GMOs and meat with hormones from the US?

Discussion between Pascal Lamy, Director General of the World Trade Organization (WTO) on the right, and Karel De Gucht, Member of the EC in charge of Trade. Dialogue on Aid for Trade, organised by the OECD (16/01/2013). (EC Audiovisual Services).

Discussion between Pascal Lamy, Director General of the World Trade Organization (WTO) on the right, and Karel De Gucht, Member of the EC in charge of Trade. Dialogue on Aid for Trade, organised by the OECD (16/01/2013). (EC Audiovisual Services).

The prospective drafting of a bilateral Free Trade Agreement (FTA) between the European Union and the United States is developing into a major issue and as things evolved last week, it seems that this may lead the EU into a new division, between France on the one side and the free trade lovers Britain and Germany on the other. The core issue is that the two latter countries want a swift conclusion of a full scale Free Trade Agreement with the US, because they are great exporters to the United States.

On the other side of the fence France and many other EU countries will be deeply hurt from an FTA between the two largest economic entities of the planet, if it contains a complete lifting of two major EU import barriers. It’s the bans on imports of genetically modified seeds and of animal products derived from bovines raised with growth hormones. Those two issues haunt the EU-US relations for decades and have caused at times trade confrontations, if not wars. For the Americans however an FTA without the lifting of those barriers it’s quite meaningless. Otherwise import tariffs and restrictions on EU-US trade are already minimal.  But let’s take one thing at a time.

The Doha round

As it is well know the Doha Round collapse in July of 2011 left unfinished the last cycle of World Trade Organisation negotiations, aiming at generously liberalising world trade. The Doha Round was planned to cover a lot more chapters than trade. It was primarily the US that “bombed” the Doha round negotiations at the critical point, where the two burning dossiers, of trade in agricultural products and investments, were on the table. From that moment onwards, the major trading partners of the world changed course, and started thinking about bilateral Free Trade Agreements. The EU concluded its first FTA with South Korea. Now there are pending FTA negotiations with the US, Japan, Canada and India.

EU Council

Last week’s EU Summit apart from the budget had as main item on the agenda the trade agreements. The text agreed by the 27 leaders contained the following paragraph:

“Building on the tangible progress made in recent months in the EU’s bilateral trade agenda, all efforts should be devoted to pursuing agreements with key partners, prioritising those negotiations that will provide most benefit in terms of growth and jobs. In particular, the European Council looks forward to the report of the EU-US High Level Working Group on Jobs and Growth and its recommendations. The European Council calls upon the Commission and the Council to follow-up on these recommendations without delay during the current Presidency. It reiterates its support for a comprehensive trade agreement which should pay particular attention to ways to achieve greater transatlantic regulatory convergence.”

The phrase “transatlantic regulatory convergence” is a direct reference to the two issues that split the two sides for decades, namely the trade in genetically modified products and the use of growth hormones on bovines. France is by far the largest producer and supplier of cereals in the protected EU market. A liberalisation of imports of American genetically modified wheat, corn and soya will trade a huge blow to the country’s large agricultural sector. The same is true for the liberalisation of imports of American products derived from animals raised with growth hormones.

On the other side of the fence Germany, being a great industrial exporter to the US, has a lot to gain from a FTA. The German Chancellor, Angela Merkel has repeatedly asked to start negotiations with the US for an FTA. Last week when the American Vice President, Joe Biden, was in Germany, Merkel expressed again her will to promote an FTA with US. In the same line of thinking the British Prime Minister David Cameron wants a swift conclusion of such an agreement. The old British love of free trade and the huge bilateral economic relations with the US are enough motives.

Seemingly this issue currently plays a very important role in undermining the Franco-German axis and strengthening the relations between London and Berlin. The strong Merkel’s support to Cameron’s proposal for drastic cuts on EU’s budget during last week’s EU Summit, stands as a witness to the rapprochement of Germany and Britain.

However both issues, imports of American GMOs and bovine growth hormones, carry a heavy weight for the wider public interest. Obviously Angela Merkel doesn’t want to appear before the eyes of the German voters as champion of the American GMOs and the doctored animal products. Especially not before the next general election which is to be held in September. It’s equally true though that a potential complete liberalisation of trade between the EU and the US will greatly help the German exports of high value products. That’s why Berlin will not let the FTA with the US to be lost in endless negotiations as Paris would love too.

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