Saturday, January 4, 2014

The Trade Deal

So what could cause me to start blogging again after a two month layoff?  Actually that sounds like I haven't wanted to be blogging during the interim when in reality I have been way too busy with running the store during the holiday season.  For the first time in six years, business seemed to be somewhat normal or at least like what it used to be, pre-recession.  Anyway, back to the question.  In a news article posted 12/31/13, I read about a proposed trade deal between the United States and the European Union that, if it comes to fruition, may impact the wine and cheese industries in a way I think would benefit us all.

Back in 2011 during the depths of the horrendous economic crisis crippling both Europe and America,  bureaucrats here and there came up with a measure that would alleviate some of our shared pain and wouldn't cost us anything.  That proposed measure was a trade deal, the Transatlantic Trade and Investment Partnership (TTIP), which when simplified, would knock down tariffs allowing for increased trade leading to greater demand for products which would, in turn, mean job growth for both parties.  It would be a cheap no-brainer stimulous of certain success because everyone would benefit, a win-win.

What products would be affected?  Basically, everything from soup to nuts, including large products like automobiles down to household cleaning chemicals.  Regarding my purview, the cost of wine and cheese and other saleables would come down minimally or not at all considering the markups of importers, brokers, distributors, and retailers, which range from 30-40% in most cases.  What would be affected would be the new products that would become available from smaller producers in Europe who would now be enabled to export their goods because of new economic feasibility. 

So what are the particulars?  In America small producers of wine and other goods are given tax credits which allow them to market their products affordably to the public, not necessarily enabling them to compete with the big guys but just getting them into "the game".  The effect of TTIP would be like extending these credits to small European producers.  The average tariff in place now is 4%.  Within that figure are "Non-Tariff Barriers" (NTBs) that deal with differences in regulations and standards between the political players.  Eighty percent of the expected economic benefits of the deal would come from cutting into those regulations and bureaucracy.  It is estimated that 10-20% of the retail price of goods lies within internal national regulations and bureaucracy.  TTIP would take just a small bite out of that.

If enacted, TTIP would be the largest trade deal in history.  Trade being a two-way street, US products exported to Europe would be expected to offer more choice and lower prices for European consumers.  But this deal is far from complete.  It is still in a very early stage.  With our economy improving and government action being as lethargic as ever, it could be that it just doesn't happen at all.  But wouldn't it be nice to see a bunch of new European wines on US store shelves?  And did I mention beer?

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