WASHINGTON (AP) — After years of battling each other on trade issues, U.S.
and European officials are contemplating a dramatic change in direction:
joining together in what could be the world’s largest free trade pact in an
attempt to boost their struggling economies.
Discussions are in the most preliminary of stages and there would be
significant obstacles to overcome, including sharp differences on
agriculture, food safety and climate change legislation. Still, top EU and
U.S. officials have said they want to see it happen. And America’s main
labor group, often the biggest opponent of U.S. trade pacts, says it
wouldn’t stand in the way.
Last month, Secretary of State Hillary Rodham Clinton signaled the Obama
administration’s interest during a speech on trans-Atlantic relations.
“If we get this right, an agreement that opens markets and liberalizes trade
would shore up our global competitiveness for the next century, creating
jobs and generating hundreds of billions of dollars for our economies,”
European officials, including EU Commissioner for Trade Karel De Gucht, have
also expressed enthusiasm. Both sides are awaiting a report within weeks by
a working group they appointed to study the issue. A positive recommendation
could lead to negotiations early next year.
The interest in Washington to take on a big free trade deal is somewhat
surprising. U.S. free trade negotiators have had a tough slog since the
politically fraught debate over the NAFTA agreement with Mexico and Canada
in 1991. Since then, it has become increasingly difficult to push big deals
through Congress amid opposition from labor groups. Smaller deals with
individual countries, including Peru and South Korea, have been approved.
Efforts to negotiate further reductions in tariffs between the more than 150
countries in the World Trade Organization also have stalled in recent years,
in part over disagreements between the U.S. and the EU.
Negotiators would face a host of tricky issues that have previously led to
trans-Atlantic trade spats. The two sides currently are fighting over the
EU’s carbon trading scheme that could penalize airlines not meeting EU
standards. There are also substantial disagreements over intellectual
property enforcement and food safety issues. More broadly, agricultural
issues, including EU restrictions on the use of genetically modified foods
and pesticides, are likely to challenge negotiators. Tyson Barker, who
directs trans-Atlantic relations at the Washington office of Germany’s
Bertelsmann foundation, said the agricultural issues are particularly
sensitive in France.
“This will not be smooth sailing in Europe, by any stretch of the
imagination,” he said.
In the U.S., the negotiations do appear to have the backing of both big
business and big labor.
Labor unions have opposed previous U.S. free trade deals with developing
countries, arguing that American workers would be at a competitive
disadvantage because inferior environmental and labor standards in those
countries allow for lower wages. But the giant U.S. labor umbrella
organization, the AFL-CIO, says it wouldn’t have those concerns in a deal
with the EU, arguing that European social welfare and environmental
standards exceed those in the U.S.
“The AFL-CIO believes that increasing trade ties with the EU could be
beneficial for both American and European workers,” the union said in a
statement about the working group studying a potential deal.
Less surprisingly, the idea has the backing of the U.S. Chamber of Commerce,
which says a deal could have sizeable economic benefits for both sides.
Tariffs between the EU and the U.S. are already relatively low, averaging 5
percent to 7 percent. But because of the sheer size of the markets, even
marginal reductions could have a big economic impact. A study by the
European Center for International Political Economy estimated that
eliminating tariffs could boost U.S. exports to the EU by up to 17 percent
and EU exports in the other direction by 18 percent. The chamber says a deal
could add $180 billion to the U.S. and EU economies over five years, with
the U.S. seeing larger gains than the EU. A potential deal could also ease
trade by streamlining regulations and expanding the mutual recognition of
product standards that the two sides use.
“The opportunity is there. It is golden. We should take it,” said Peter
Chase, the chamber’s vice president for Europe. Chase said it’s very likely
the two sides will launch talks next year, but he sees challenges for
He said both sides have previously negotiated deals, but with much smaller
economies, and have therefore become used to negotiating from the strong
position. In this case, they will be roughly equals.
But Jeffrey Schott, a fellow at the Peterson Institute for International
Economics, sees a potential roadmap in trade deals already in place with
South Korea. He said the EU used the U.S. deal with Seoul as a guide for its
own deal, which is quite similar.
“What is notable is that each side has been able to make these commitments
to Korea, but not to each other,” Schott said.
If they follow the Korean agreements, Schott believes the U.S. and the EU
could have a deal.