EU and US announce trade deal talks -
EU and US announce trade deal talks
The EU plans to complete negotiations on a trade agreement with the US within two years, an ambitious timescale for a transatlantic project that boasts huge commercial potential but is also rife with complications.
The two sides issued a joint announcement on Wednesday that they would initiate negotiations hours after Barack Obama, the US president, touted a transatlantic trade agreement during his State of the Union address.
The idea for such a trade pact has been discussed for decades, although it never gained traction on both sides of the Atlantic simultaneously. What appears to have changed is that politicians in Washington and European capitals are now desperate to present voters with tangible plans to revive growth and create jobs – the central focus of Mr Obama’s address.
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Speaking to reporters in Brussels, José Manuel Barroso, the European Commission president, described an agreement uniting two parties that account for nearly half of world economic output as “a game-changer”.
“Together, we will form the largest trade zone in the world,” Mr Barroso said, adding: “It is a boost to our economies that does not cost a cent of taxpayer money.”
In addition to the pure economic benefits, such an agreement could also help the two to retain their clout at a time when they are being eclipsed by China, India and other emerging economies. In particular, any technical and legal standards they adopt for intellectual property, for example, would stand a better chance of becoming the de facto global benchmark.
“If we are in a position to set standards together with the US, they have a chance of becoming global standards. And that is of foremost importance for our industries,” said Karel De Gucht, the EU trade commissioner.
Such bilateral free trade agreements have become an increasing emphasis for governments around the world as they acknowledge that the Doha talks – aimed at creating a global deal through the World Trade Organisation – have become bogged down.
But securing a meaningful EU-US deal will be easier said than done. The two sides have already waged epic battles over everything from aircraft subsidies to chlorine-rinsed chicken and hormone-treated beef.
The tariffs between them are actually quite low – averaging only about 4 per cent, according to the commission. The real value – and complication – in agreeing a deal will be harmonising a slew of competing regulations and technical standards that tend to interrupt the flow of goods and services.
Some should be straightforward. The US and EU, for example, have distinct but similar safety standards for motor vehicles, requiring companies to repeat examinations, costing time and money. It should be easy to hammer out some sort of compromise on a uniform standard, according to trade analysts.
But others are far more complicated and deep-rooted, such as Europe’s near-religious aversion to genetically modified organisms or hormone-treated beef – despite scientific tests confirming their safety.
It is a boost to our economies that does not cost a cent of taxpayer money
- José Manuel Barroso, European Commission president
In an effort to build confidence, Brussels has made some pre-negotiation concessions to Washington. It has accepted, for example, the use of lactic acid as a way to clean beef carcases.
Still, many others remain, and Mr Barroso made clear in his remarks that the bloc would not lower its standards.
“These negotiations are not about compromising the health of our consumers for commercial gains,” he said. “We will not negotiate changes that we do not want of the basic rules on either side – be it on hormones or GMOs.”
Hugo Paemen, a former EU ambassador to Washington, who now serves as a senior trade adviser to law firm Hogan Lovells, pronounced himself sceptical.
The two sides have launched a slew of transatlantic trade initiatives since the end of the cold war that have largely disappointed. Mr Paemen worried that the US might invest more effort in boosting trade links in Asia, noting that in his address on Tuesday night, Mr Obama touted a separate project known as the trans-Pacific partnership before he mentioned the EU-US deal.
“Clearly, the motivation on the European side is bigger than on the American side,” Mr Paemen said.
Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels think-tank, argued that it would be vital for both sides to determine which areas are ripe for progress at the outset of negotiations and then take the others, such a GMOs, and “park them on the sidelines”.
“What we have right now are inflated ambitions on both sides where they are simply aiming for too much,” Mr Erixon said.
Mr De Gucht acknowledged that there was “no low-hanging fruit” for negotiators to harvest. But he argued that the familiarity between the two sides, a dose of pragmatism and a focus on the potential benefits could ultimately carry them through.
“We are focused on the future,” Mr De Gucht said. “This is not a negotiation that has as a prime aim to find, for example, a solution for chlorine chicken. What we want to do is make an internal market between the US and the EU.”
Mari Pangestu, Indonesia’s former trade minister, who is vying to be the next head of the WTO, urged the two sides to be transparent and inclusive in any efforts to set global standards, telling the Financial Times earlier this month: “What works in the US and EU – does that work in the rest of the world?”
An EU-US agreement could ultimately provide a jolt to the cause of a multilateral trade pact like Doha, she argued, especially if it were constructed so that others could eventually join.
But, Ms Pangestu noted, there would be much work to complete before then. “They have to resolve some very complicated issues,” she said. “It’s not really the trade negotiators, it’s going to be between the regulatory bodies.”