1. What critical-thinking issues are raised by this case?
2. Japanese rice farmers are opposed to Japan joining the TPP. Why?

Now, officials on both sides are attempting to forge a “transformative, 21st-century agreement” hat will reverse the decline and boost the volume of U.S.-EU two-way trade to even higher levels. What’s the point, you ask? The answer is straightforward: A free trade agreement (FTA) that generates more trade will boost economies for all parties. In the United States, business leaders are pressing President Barack Obama to pursue more trade deals. In Europe, German Chancellor Angela Merkel, British Prime Minister David Cameron, and other leaders are pushing for a new agreement that will create new avenues for job creation and economic growth across the region.

As noted in Chapter 2, Europe desperately needs to find new sources of economic growth. What better way to do so than to sign an FTA with the United States? That is exactly what European leaders are asking as talks get underway between leaders on both sides of the Atlantic. Even though tariffs on goods imports and exports average only about 3 percent, the volume of two way trade is very large—some $500 billion in goods alone. If tariffs were eliminated, even a small increase in trade could yield substantial benefits. As an executive at GE explained, “This could be the biggest, most valuable free-trade agreement by far, even if it produces only a marginal increase in trade.”

Before an agreement can be reached, however, major differences will have to be worked out between the two sides. One sticking point is agriculture. For example, the EU restricts the import of most genetically modified crops, which are common in the United States. Tariff reduction is another key issue. Although tariffs between the trading partners currently average between 2 and 3 percent, further reduction could result in significant savings. A third issue concerns a variety of regulations that hamper cross-border investment and purchasing. Such regulations are sometimes called nontariff barriers, and many observers agree that they are harder to remove than tariff barriers. For example, the EU would like an easing of restrictions on U.S. government purchases of European goods. However, that matter is complicated because some of those buying decisions are made at the state level, and some states have passed “Buy American” laws.

Tariffs are only one part of the picture. Various types of nontariff restrictions create bureaucratic obstacles that affect a variety of industries. Europe has blocked imports of genetically modified agricultural products such as corn and soy. Another issue concerns product labeling. Some food companies that market dairy products in the United States use terms such as “Parmesan” on their labeling. However, according to EU law, the name “Parmesan” should apply only to a cow’s milk cheese known as “Parmigiano-Reggiano” that is produced using traditional methods in the Parma/Reggio region of Italy. The Italian cheese bears symbols for protected geographical indication (PGI) and protected designation of origin (PDO). The only ingredients besides milk in true Parmigiano-Reggiano are salt and an enzyme. By contrast, Kraft 100% Grated Parmesan Cheese contains cellulose powder (for a smooth texture), potassium sorbate (a preservative), and other ingredients. Because of EU regulations, Kraft cannot sell its cheese in Europe.