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Uncompromising fronts regarding new giant market

Håkon Mageli

Group Director Håkon Mageli

The EU and the US want to get back in the driver’s seat in international trade through the Transatlantic Trade and Investment Partnership (TTIP). However, strong forces on both sides are rendering the negotiations extremely challenging. A free trade agreement between the EU and the US could also have major consequences for Norway, as Group Director Håkon Mageli wrote in a feature article in the grocery trade journal Dagligvarehandelen on 4 August 2015. Read the entire article here.

The current TTIP negotiations address such issues as improved market access through tariff liberalisation in most areas and harmonisation of EU and US rules and standards.

US presidential candidate Hillary Clinton has called the TTIP “an economic NATO”, and a common marketplace for the EU and the US is likely to become so dominant that it will set the standard for global trade. This will have an impact on countries like China and India in particular, which are vying to take over the role of global economic engine. Russia will also be affected by an economically united EU and US.

A TTIP agreement will affect Norway indirectly through the EEA Agreement. Norwegian politicians must weigh whether Norway should join this type of free trade area in order to gain corresponding market access. The basic standpoint of the EU and the US will be that Norway must relinquish its regulation of agricultural imports, and that we must otherwise adhere to the content of the TTIP agreement to the closest possible extent. This therefore confronts Norwegian politicians will an important dilemma: should Norway say yes to close collaboration and integration with the US and the EU in order to improve conditions for our export industries, or should we continue to protect our agricultural sector, as at present?

Whether we like it or not, the TTIP negotiations may determine the conditions for our own food industry. An analysis of the consequences of a TTIP agreement, which the Norwegian Agricultural Economics Research Institute (NILF) carried out for Orkla, shows that our industry must prepare for changes in our framework conditions. Competition will increase on our domestic market, particularly for the part of the industrial sector that has been protected from international competition.

If the goal is still to maintain extensive production of agricultural raw materials in Norway, our politicians must increase transfers to Norwegian farmers, and ensure that the Norwegian agricultural sector and food industry are competitive in a market where national borders have steadily dwindling significance. The alternative is that Norway’s production will be outcompeted by far cheaper raw materials from the EU and the US when the borders are opened completely.

EU and US representatives recently completed the tenth round of negotiations in Brussels. The greatest progress was made on issues related to trade in services, where both parties presented their offers. Perhaps the most difficult point of contention, however, is the Investor State Dispute Settlement, whereby companies could sue countries that threaten or could potentially threaten the company’s commercial interests.

Sources in Brussels point to growing opposition in the EU Parliament and scepticism is also spreading amongst a not inconsiderable fraction of special-interest organisations. The majority of the 150,000 consultation comments submitted to the EU Parliament have expressed opposition to the TTIP. Skeptics fear that a joint free trade agreement with appurtenant regulatory frameworks for the US and the EU will lead to lower environmental and health standards in Europe, among other things.

Several persons with close knowledge of the negotiations now doubt that a political resolution will be reached on TTIP before the US presidential elections in 2016. Due to comprehensive approval processes and transitional arrangements, we are hardly likely to see any effect of the agreement until 2020. But even if an agreement may seem a remote prospect, the parties have reached a point where so much political prestige has been invested that the agreement is too important to fail. In that respect, it is more a question of “when” and not “if” an agreement is adopted.

Source: Dagligvarehandelen, 4 August 2015