US trade agreement implies more Dutch agricultural exports and more competition

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US trade agreement implies more Dutch agricultural exports and more competition

Gepubliceerd op
4 september 2014

The European Union (EU) and the United States (US) are negotiating a Transatlantic Trade and Investment Partnership (TTIP). For the Dutch agricultural sector, this will result in more export possibilities, for instance for dairy products. For the meat sector, however, the TTIP will lead up to more competition with the US. Research conducted by LEI Wageningen UR indicates that a trade agreement with the US will add to economic growth in the Netherlands. Compared to other sectors in the Dutch economy, however, the food industry will gain less from the partnership.

The US is the most important export market for Dutch agricultural products, besides the EU. Access to the US market is hindered by a number of factors, including the US dairy import quota. The EU bans the use of the growth-promoting agents which are widespread in the American meat production sector. These and other regulatory differences add importantly to transaction costs of bilateral trade: current EU requirements imply additional costs of about 50% for American exporters of food and beverages, whereas barriers imposed by the US add 70% to trade costs for EU exporters. Such costs will be strongly reduced if export procedures are simplified and if both parties' rules and standards for food safety can be better harmonised with each other. This will result in an increase in bilateral trade and prosperity in the EU and the US.

Maintain competitive position

The main differences between the two regions in terms of food safety requirements are related to animal products. These products also receive highest protection in terms of import tariffs. As a result, trade liberalisation will have the biggest effect on the dairy and meat sectors. The Dutch dairy industry has a very strong competitive position. Once trade barriers are opened further, the Dutch dairy sector will be able to increase its market share in the US, but the US will also gain more access to the European market and will therefore be able to sell more dairy and meat to the EU. On balance, the Dutch dairy sector will maintain its competitive position, but the meat sector will be unable to do the same in terms of cost price. The study demonstrates that in order to remain competitive on a global level, the Dutch meat industry will need to focus on high-quality  and fresh meat.