ttip: implications for european farmers and dairy · ttip: implications for european farmers...

10.11.2014

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Martin Banse, Folkhard Isermeyer

Martin Banse, Folkhard IsermeyerThünen Institute, Braunschweig

Eurotier: DLG‐IPPE WorkshopHannover, November 12, 2014

TTIP: Implications for European Farmers – Pig, Poultry and Dairy


Starting Point, Target, Content

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• The TTIP‐Agreement (Transatlantic Trade and Investment Partnership) is under fierce discussion.

• At the Thünen Institute, we are neither involved in the current negotiations,nor are we aware of the current state of negotiations.

• The final goal of this presentation is to provide a more general assessment of the impact of TTIP and to refer to some sticking points.

• Content:

• Current situation (production, trade and trade policies)

• Analysis of selected issues of TTIP

• General evaluation of potential impact of TTIP

TTIP: Implications for European farmers

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Development of Production, Consumption, Net‐Trade (Agricultural commodities, 1961 ‐ 2011)

Source: FAO, own compilations.

ProductionØ 1961‐66Ø 2006‐11

Consumption Ø 1961‐66Ø 2006‐11

Net‐TradeØ 1961‐66 Ø 2006‐11

Values in US‐$ at constant prices (2004/06)

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Development of World Market Prices Agricultural commodities and crude oil, 1991‐2013

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

200

400

600

800

1000

1200Soybeans, $/t

Wheat, $/t

Corn, $/t

Sugar, $/t

Butter, $/100kg

SMP, $/100kg

Crude Oil, $/10bbl

$/t, $/100 kg, $/10bbl

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Source: World Bank.

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Farm Income in GermanyFull‐time farms, 2002/03 and 2012/13

Source: German Federal Ministry on Agriculture, FADN Data.

Profit including salaries per labour equivalent

Milk Fodder Production

Pork/Poultry/Eggs Crop Production

0

10,000

20,000

30,000

40,000

50,000

60,000

€per LaborEquivalent

2002/03 2012/13 2002/03 2012/13 2002/03 2012/13 2002/03 2012/13

+ 64 % + 74 %

+ 115 %

+ 162 %

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‐6 ‐4 ‐2 0 2 4 6Billion Euro

‐12 ‐10 ‐8 ‐6 ‐4 ‐2 0 2 4 6 8 10 12Billion Euro

Foreign Trade of German Food Products, 2011/12

1) Sum of exports and imports.Source: German Federal Ministry of Agriculture, own compilations.

ExportsImports Net‐Exports1)Net‐Imports1)

Fruits, vegetables and horticulture

Feed, oilseeds, oils and fats

Fish and processed fish

Wine and spirits

Coffee

Potatoes and potato products

Sugar

Meat, meat productions, live animals

Dairy Products

Cereal and cereal products

‐16.8 ‐12.5

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Trade between Germany and the USPrimary agriculture and processed food, 2013

Germany

US

Mainly:‐ Coffee‐ Wine/spirits‐ Chocolate‐ Bakery products‐ Dairy products

Total export value: 1.6 Billion €

Mainly:‐ Nuts‐ Oilseeds‐ Spirits‐ Fish‐ Tobacco products

Total import value: 1.7 Billion €

Source: German Federal Ministry on Agriculture, ITC.

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30.1%

68.90%

0.80%

0.20%

44.4%

52.6%

2.6%

0.5%

0% 20% 40% 60% 80%

Services

Industrial products

Processed food

Primary agricultural products

Germany ‐ US

EU ‐ US

Structure of Exports from Germany / EU to the US(Estimated values for 2021)

Source: Thünen‐Baseline

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(Share in total trade valuein percent)

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Applied and Bound Tariffs, EU and US(Tariffs, trade‐weighted in percent, 2011)

0 10 20 30 40 50 60 70

Wheat

Coarse grains

Oilseeds

Fruits and vegetable

Meat

Pork & poulty meat

Dairy products

Sugar

other processed food

EU applied

EU bound

US applied

US bound

%

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Change in EU Production under TTIP(2021 relative to reference scenario with current tariffs, in percent)

‐1.5 ‐1 ‐0.5 0 0.5 1 1.5

WheatCoarse grainsOilseedsSugarbeetFruits and vegetablesother cropsMeatPork & poultry meatMilkDairy productsSugarFats and oilsother processed food

Source: MAGNET‐Model see Pelikan / Banse, 2014

?

!!

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Change in Trade Balance under TTIP(Based on GTAP calculations )

Source: Brockmeier/Engelbert (2014)

‐162

135

‐243

‐42

51

‐146‐1,476

‐209

‐299

‐100

‐887

412

‐354

‐48

71

‐5

‐138

28

‐7

‐76

‐1500 ‐1000 ‐500 0 500 1000

Pork / Poultry meat

Dairy products

Meat

Rice

Fats and oils

Sugar

Fruits/Vegetagles

Oilsseeds

Coarse grains

Wheat

Tariffs Non‐tariff barriers to trade (NTB)

‐448

‐259

‐241

17

‐252

‐35

818

90

199

1

780

‐309

312

54

‐87

‐7

‐78

‐130

‐65

‐14

‐1500 ‐1000 ‐500 0 500 1000

Change in EU‐Trade balance Change in US‐Trade balance

Million Euro Million Euro

?

!

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… further impact (esp. on trade) possible depending on the future of GMO‐debate in Europe

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0% 20% 40% 60% 80% 100%

Corn

Soybean

Cotton

Sugarbeet/‐cane

Rapeseed

90

93

90

95

93

10

7

10

5

7

GMO Non‐GMO

Source: own compilation based on USDA data

Share of GMO and Non‐GMO in the US

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Use of Hormones and Beta‐Agonists,US‐Suckler Cows and US‐Beef Finishing

Beef finishing Feedlots > 1000 capacity

Beef finishingFeedlots < 1000 capacity

Suckler cows

Beef finishing Feedlots > 1000 capacity

Beef finishingFeedlots < 1000 capacity

Hormones

% of all farms

0 10 20 30 40 50 60 70 80 90 100

Beta‐Agonists

Source: Deblitz/Pelikan (2014) derived from USDA (2014)[%]

12

42

79

6

48

Using hormones and Beta‐Agonists creates cost

reductions in U.S. suckler cow and beef

finishing by approx. 10 %.

Data on suckler cows for 2008, on beef fattening for 2011

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Change in Competitiveness of US‐Feedlots (75k) without Growth Promoters

€ / 100 kg carcass weight

Source: Deblitz/Pelikan (2014)

US 1) Full costs in 2012 (incl. growth promoters)US 2) = 1) + transport costs Nebraska ‐ Hamburg

US 3) = 2) + additional costs w/o growth promoters

0

100

200

300

400

500

600

US 1)

US 2)

US 3)

PL‐30

DE285

CZ500

ES‐5500

ES‐490

UK‐90

FR‐200

DE‐280

FR‐60

AT‐35

AT‐120

FR‐70

IT‐910

SE‐150

SE‐230

Additional costs w/o growth promoters

Transport costs Nebraska ‐ Hamburg

Costs 2012 (with growth promoters US)

Meat price in 2012

US‐75,000

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Investor‐state Dispute Settlement (ISDS)?

The scientific assessment of this part of TTIP is primarily the task of legal and

political scientists.

From an economic point of view I would like to complement the following

statements:

• Benefits:More secure investments with a faster achievement of the objectives

of TTIP, e.g. international division of labor and economic growth

• Costs: Additional costs for countries for future policy reform

• The amount of these benefits and costs can not be quantified seriously.

• Time horizon: Benefits are more likely in the near future, while costs are more

likely in the more distant future

Is this recommendable in light of sustainability?

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Summary and Conclusions

• Germany is heavily involved in international agricultural trade and held up well in the wake of liberalization.

• If world agricultural economy continues to grow strongly, German agriculture will maintain its overall competitiveness. However, with a question mark for livestock.

• In transatlantic trade, agricultural and food products play a very minor role in comparison to other commodities.

• Reduction of tariffs within the FTA results in only a small production relocation. Especially beef would be affected, if the NTMs (standards) would be abolished under TTIP.

• The question of how EU food companies respond in terms of sensitive issues (e.g. GMO) seems to be more important than changes in tariff protection.

• From an economic point of view: The introduction of Investor Dispute Settlement has short‐term benefits and long‐term disadvantages.

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ttip: implications for european farmers and dairy · ttip: implications for european farmers...

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