Tuesday

23rd Jan 2018

TTIP: EU offered 97% cut on US tariffs, secret papers show

  • One point of contention could be differences of opinion about the country of origin of goods (Photo: kees torn)

The TTIP negotiations entered a decisive phase on 15 October 2015. That’s when US and EU negotiators laid their cards on the table, exchanging offers for tariff reductions. Up until then, the US had only broached hypothetical reductions; now they were openly offering to reduce 87.5 percent of all tariffs to zero.

That was more than the EU expected. European negotiators had to come up with a better offer or risk derailing the deal. A week later, they came up with a new deal: cutting 97 percent of tariffs to zero.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The EU’s secret offer, which website Correctiv has seen in its entirety, is made up of 181 pages of densely-printed text. It’s got almost 8,000 categories: every species of fish, every chemical has its own tariff category. Importing a parka? Its tariff will depend on whether it's wool, or polyester for example.

Trade deals are like poker games. Europe’s big offer comes with a big hope: that the US will open up its public bidding process to European firms. That way, European construction companies like Hochtief could bid on contracts to build US highways, or BMW could sell cop cars to American sheriffs.

Meat is 'underdog'

For the first time, the tariff offer makes clear what TTIP might do for consumers. Remove duties, and prices tend to drop. With tariffs on parts gone, cars could get cheaper. Per part, tariffs add just a few cents on the euro, but altogether European car manufacturers could save a billion euros each year, according to German Association of the Automotive Industry calculations. Manufacturers could then pass the savings on to consumers.

Some duties are levied on foodstuffs. Right now, peppers from the US have an import tariff of up to 14 percent. Fish caught on US coastlines are charged up to 25 percent; raspberries 9 percent. Take those away, and it could make economic sense for American food producers to export to the EU – putting domestic farmers under pressure.

Grain and meat, on the other hand, are largely left out of the reductions for now. “The meat industry is definitely an underdog,” says Pekka Pesonen, general secretary of the European Farmers Association (COPA-COGECA). Animal feed is produced much more cheaply in the US than in the EU. And for products like meat, “there are a lot of reasons it’s complicated to fully liberalise trade,” Pesonen says – animal welfare is more regulated in Europe, and using growth hormones is forbidden.

Opening the agricultural market completely would be difficult for Europe’s small family farms in particular, as they already struggle to compete against industrial-scale farms. That means the back-and-forth over grain and meat is likely to continue.

But the EU has to make a few offers here, too, because the US is eager to see the European agricultural market open up a bit. Pork or seed corn, for example, could be offered up for tariff cuts. The EU has yet to decide when the tariff cuts come into effect. The process is alarming for farmers, who aren’t eager to have their products used as negotiation tools.

Privileged industries

Both sides have placed conditions on their offers. There are 19 pages of tariffs on clothing, for everything from parkas to shoes, overalls and yarn. Tariffs hover between 9 and 12 percent, but the EU is offering total cuts, with an “R” for "reciprocity". In other words, we’ll cut ours only if you cut yours. The US, on the other hand, has made clear that cuts on textiles depend on opening a discussion over country-of-origin labels.

For example, if a shirt is sewn in Vietnam but packaged in the US, is it “Made in Vietnam” or “Made in the USA”? Once that’s worked out, it’ll be possible to discuss whether the new duties apply to that shirt or not.

Take a look at the EU’s confidential offer and it’s clear some industries have been privileged. Next to the many zeroes on the list are phase-in periods of three or seven years. Some aluminium products, for example, won’t be allowed into the EU duty-free for seven years.

Hydraulic motors, too, have a grace period. Duties on LCD monitors won’t go down immediately; consumers will have to wait seven years for import duties to drop. That, in theory, will give these industries time to adjust to competition. But these measures are still being negotiated.

Thus far, access to the specifics of the TTIP deal was limited to a small circle: Negotiators, government officials, the US Congress, the EU Parliament and 600-odd “trade advisers” in the US.

Public procurement promise

The tariff offer is a milestone for TTIP. Without concrete tariff reductions, concluding a trade deal would be impossible. In theory, such arrangements have to be handled by the World Trade Organisation (WTO); bilateral deals are, technically, forbidden by the WTO. Other states could file to have the deal overturned.

But there’s an exception in the WTO rules: Article 24 of the General Agreement on Trade and Tariffs (GATT) states that a deal like TTIP is allowed when both sides drop their tariffs substantially and show that they’re making trade easier. Both the EU and the US have just done that.

The EU is now waiting for the US to offer a substantial deal on public procurement. In a 15 September report obtained by Correctiv, the EU Commission says “it definitely expects that the US will offer to open public procurement at a future point in time, in exchange for the revised tariff offer”.

That report also indicated that the US “promised to make a proposal regarding public procurement for the first time” when the EU and US put forth their symmetrical tariff reductions, eliminating 97 percent of all tariffs.

Public bids are a major TTIP sticking point. The EU wants the US to finally open its markets to allow firms like Hochtief or BMW to compete when cities put out a call for bids on a new building or fleet of cars. The US is less than eager, because that would subject domestic companies - which are already allowed to bid on projects in the EU - to increased competition.

The 12th round of negotiations started on Monday in Brussels. However, last Thursday the EU Commission indicated that it did not expect a comprehensive offer from the US, and other sources suggested the US would not propose anything concrete before the end of the week.

Justus von Daniels and Marta Orosz are reporters with the non-profit newsroom correctiv.org. This text is published in cooperation with correctiv.org

Berlin: 35 square metres of TTIP transparency

German MPs can access the secret texts of the EU-US free trade agreement in a special reading room set up by the ministry of economy under very strict conditions.

TTIP protesters warn of Trojan Horse

Anti-TTIP demonstrators do not trust European negotiators, who will engage in the 11th round of discussions next week in Miami.

Visa waiver dispute hangs over EU-US relations

People from Cyprus, Poland, Romania, Bulgaria and Croatia still need a visa to enter the US, prompting EU annoyance and reports of potential action against US travellers to Europe.

News in Brief

  1. Auditors criticise EU economic governance implementation
  2. Dutch environment group appeals air quality ruling
  3. Commission opens case into Polish railways state aid
  4. EU remove eight places from tax havens blacklist
  5. UK to keep forces in Germany over Russia fears
  6. Finnish presidential vote could go to second round
  7. Report: EU might pay Brexit residency fees for EU citizens
  8. Puigdemont free to travel around EU

Stakeholders' Highlights

  1. European Free AlllianceNo Justice From the Spanish Supreme Court Ruling
  2. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  3. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  4. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  5. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  6. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  7. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  8. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  9. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  10. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  11. ACCAWelcomes the Start of the New Bulgarian Presidency
  12. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit

Stakeholders' Highlights

  1. EU2017EEVAT on Electronic Commerce: New Rules Adopted
  2. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  3. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  4. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  5. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  6. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  7. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  8. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  9. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  10. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  11. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  12. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City

Stakeholders' Highlights

  1. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  2. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  3. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties
  4. EPSUEU Blacklist of Tax Havens Is a Sham
  5. EU2017EERole of Culture in Building Cohesive Societies in Europe
  6. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage
  7. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla
  8. European Healthy Lifestyle AllianceUnderstanding the Social Consequences of Obesity
  9. Union for the MediterraneanMediterranean Countries Commit to Strengthening Women's Role in Region
  10. European Heart NetworkThe Time Is Ripe for Simplified Front-Of-Pack Nutrition Labelling
  11. Counter BalanceNew EU External Investment Plan Risks Sidelining Development Objectives
  12. Dialogue PlatformThe Turkey I No Longer Know