© Natural Resources Institute Finland

Ellen Huan-Niemi (Luke) Jyrki Niemi (Luke) Janne Niemi (VATT)

The impacts of the TTIP agreement on the EU and Finnish agricultural sector

EU-US Agricultural Trade • The EU is the world’s largest importer of agricultural and

food products, followed by the US and China.

• US exports of agricultural and food products to the EU accounted for only 10% of EU’s agricultural imports in 2015, down from 17% in 1995.

• EU agricultural imports more than doubled over the past two decades, reaching a robust $126 billion in 2015, however US exports to the EU increased at a slower rate – rising only 17% over the same period.

• US exports of consumer-oriented products have been a key propeller of the growth, but EU tariff and non-tariff measures (NTMs) continue to challenge US export growth to the EU.

(USDA 2016)

3

Bulk

Bulk

Consumer

Consumer

4

Composition of US exports to the EU in 2015

Source: European Commission 2016

Total = 40%

(USDA 2016)

17%

Brazil & Argentina

5

Five different scenarios for the TTIP

• Business as usual with no TTIP agreement;

• A complete removal of tariffs between the EU and US, but all the non-tariff measures (NTMs) are still in place;

• A complete removal of tariffs between the EU and US plus the non-tariff measures (NTMs) are lowered by 25%, but excluding beef and dairy products;

• A complete removal of tariffs between the EU and US plus the non-tariff measures (NTMs) are lowered by 25% for all agricultural products;

• A complete removal of tariffs between the EU and US plus the non-tariff measures (NTMs) are lowered by 25% for all agricultural products; however, there is a strong preference for domestically produced products and labels by consumers only in the EU.

US Total Exports of Agricultural Products to the EU in 2025 Million US Dollars

2713

1434 2022

99

2862

593 998

3030

717

3028

530

9339

3501

1725

1153

1753

82

2124

435 565

1088

601 996

344

6915

2858

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000Business as usual

Tariff removal only

NTMs -25% excluding beef and dairy

NTMs -25% all sectors

NTMs -25% all sectors with preference forEU domestic products

7

US Total Exports of Bovine Meat to the EU Member States in 2025

0,8 3,3 31

0,1

79

4,3

503

275

28

73

1 0

100

200

300

400

500

600

Business as usual

Tariff removal only

NTMs -25% excluding beef and dairy

NTMs -25% all sectors

NTMs -25% all sectors withpreference for domestic products

Million US Dollars

8

US Total Exports of Poutry and Pig Meat to the EU Member States in 2025

1,4 40 3,5 58 27 11,3

1683

25 49

1128

4,2 0

200

400

600

800

1000

1200

1400

1600

1800

Business as usual

Tariff removal only

NTMs -25% excluding beef and dairy

NTMs -25% all sectors

NTMs -25% all sectors withpreference for domestic products

Million US Dollars

9

US Total Exports of Dairy Products to the EU Member States in 2025

3,6 22 23 3,4

828

3,6

867

1101

94 77

5,8 0

200

400

600

800

1000

1200

Business as usual

Tariff removal only

NTMs -25% excluding beef and dairy

NTMs -25% all sectors

NTMs -25% all sectors withpreference for domestic products

Million US Dollars

10

US Total Exports of Other Food Products to the EU Member States in 2025

101 216 268

98

1543

293

2641

2007

254

1677

242

0

500

1000

1500

2000

2500

3000Business as usual

Tariff removal only

NTMs -25% excluding beef and dairy

NTMs -25% all sectors

NTMs -25% all sectors withpreference for domestic products

Million US Dollars

11

12

US Agricultural Production in 2025 compared to BAU

Million US Dollars

643

1 704

1 650

535

1 167

6 048

1 229

2 547

2 183

795

1 990

9 732

0 2 000 4 000 6 000 8 000 10 000 12 000

Bovine meat

Poultry and Pig meat

Dairy products

Beverages and Tobacco

Primary Agriculture

Processed Food Products

NTMs -25% all sectors

Tariff removal only

13

EU Production of Primary Agriculture according to region in 2025 compared to BAU

Million US Dollars

-12

-18

-330

-261

-292

-719

-1 678

-27

-38

-479

-364

-336

-1 353

-2 789

-3 000 -2 500 -2 000 -1 500 -1 000 -500 0

Finland

Denmark

Germany

UK and Ireland

Benelux

Mediterranean EU

EU28

NTMs -25% all sectors

Tariff removal only

14

EU Production of Processed Food Products according to region in 2025 compared to BAU

Million US Dollars

20

68

-64

-425

-620

224

-922

17

75

50

-521

-498

538

-446

-1 000 -800 -600 -400 -200 0 200 400 600 800

Finland

Denmark

Germany

UK and Ireland

Benelux

Mediterranean EU

EU28

NTMs -25% all sectorsTariff removal only

15 15.12.2016

Composition of EU exports to the US in 2015

Source: European Commission 2016

Total = 50%

EU Total Exports of Agricultural Products to the US in 2025 Million US Dollars

9 143 15 5

1013

74 6 50

997 505

34

2951

10941

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

Cereals Fruit &vegetables

Oilseeds FibreCrops

OtherCrops

AnimalProducts

BovineMeat

Poultry &Pig Meat

VegetableOil

DairyProducts

Sugar OtherFood

Products

Beverages& Tobacco

Business as usual

Tariff removal only

NTMs -25% excluding beef and dairy

NTMs -25% all sectors

16

Total Exports of Beverages & Tobacco from the EU Member States to the US in 2025

Million US Dollars

17

14 48

438

22

582

165

1634

1356

40

5896

746

0

1000

2000

3000

4000

5000

6000

7000

Business as usual Tariff removal only NTMs -25% excluding beef and dairy NTMs -25% all sectors

more than 30 times compared to Finland

Total Exports of Other Food Products from the EU Member States to the US in 2025

Million US Dollars

18

10 85

52 31

519

117

262 290

197

1332

55

0

200

400

600

800

1000

1200

1400

1600

Business as usual Tariff removal only NTMs -25% excluding beef and dairy NTMs -25% all sectors

more than 8 times compared to Finland

Total Exports of Dairy Products from the EU Member States to the US in 2025

Million US Dollars

19

18 18 2 3 8

40

9 14

78

309

6 0

50

100

150

200

250

300

350

Business as usual Tariff removal only NTMs -25% excluding beef and dairy NTMs -25% all sectors

(USDA 2016)

US Trade Deficit in Agricultural Trade with the EU

20

US Trade Surplus in Agricultural Trade with the World

21

EU Agricultural Trade Balance with the US in 2025

Million US Dollars

7963

33

-3822

-5243

6042

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

Business as usual2025

Tariffs removal only2025

NTMs -25%excluding

beef & dairy2025

NTMs -25%all sectors

2025

NTMs -25% allsectors with

preference for EUdomestic products

22

23

GDP in 2025 compared to BAU

1,5 %

1,5 %

1,5 %

1,8 %

1,5 %

1,4 %

2,2 %

2,2 %

1,8 %

1,5 %

1,4 %

1,7 %

1,6 %

1,7 %

1,7 %

1,6 %

2,1 %

1,6 %

1,5 %

2,4 %

2,5 %

2,0 %

1,6 %

1,5 %

1,8 %

1,9 %

0,0 % 0,5 % 1,0 % 1,5 % 2,0 % 2,5 % 3,0 %

Finland

Denmark

Sweden

Baltic

Germany

Poland

UK and Ireland

Benelux

Balkan

Mediterranean EU

Central EU

EU28

US

NTMs -25% all sectorsTariff removal only

24

Contribution of the changes in terms of trade until 2025 to welfare

Million US Dollars

195

187

2 120

1 470

1 340

3 865

10 378

-10 585

912

826

7 776

5 766

3 552

14 155

38 822

-24 364

-30 000 -20 000 -10 000 0 10 000 20 000 30 000 40 000 50 000

Finland

Denmark

Germany

UK and Ireland

Benelux

Mediterranean EU

EU

United States

NTMs -25% all sectors

Tariff removal only

• The US agenda in the TTIP negotiations will definitely include the total liberalisation of agricultural tariffs and partial removal of non-tariff measures (NTMs) in order to propel the export growth of consumer-oriented agricultural products to the EU market and close-up the trade deficit with the EU.

• The US will experience a dramatic increase in the exports of agricultural products to the EU with the implementation of the TTIP, especially for meat, dairy and other processed food products.

• In contrast, the EU agricultural exports to the US will grow at a slower pace compared to the US with the implementation of the TTIP, and the growth is concentrated on beverages, other processed food products and dairy products.

Conclusions

• The total liberalisation of agricultural tariffs and partial removal of

non-tariff measures will push the EU agricultural trade balance into a large trade deficit, however the strong preference for domestically produced products and labels by the EU consumers will maintain the long-term trade surplus for the EU.

• The gains for Finland in the upsurge of agricultural trade between the EU and the US will be minimal due to the implementation of the TTIP.

• The increase in trade between the EU and US will generate GDP growth both in Finland and the rest of the EU in the period of ten years. In addition, the improvement in the terms of trade will generate positive welfare effects for both Finland and the EU, thus the TTIP agreement as whole will be a stimulus for the economies of the EU member states.

Conclusions

27 15.12.2016 Teppo Tutkija