Discussion on US/EU trade deal highlights opportunities, challenges

Posted by on April 7th, 2013, 9:07 pm

On March 26th, the Center for Business and Public Policy (CBPP) hosted a Georgetown on the Hill event entitled “Europe/US Trade Deal: Promise and Reality” in the Rayburn House Office Building.  Led by CBPP Senior Industry Fellow, Bob Vastine, the panel included: John Hermann, Partner at Kelley, Drye & Warren, LLC and former Special Assistant to the President and Senior Director for International Trade at the National Security Council; Thea Mei Lee, Deputy Chief of Staff and Policy Director & Chief International Economist at AFL-CIO; Dave Solmonsen, Senior Director of Congressional Relations at the American Farm Bureau Federation; and Michael Smart, Vice President at Rock Creek Global Advisors, LLC and former International Trade Counsel to the Senate Committee on Finance. The panel addressed the benefits and challenges that lie ahead for a EU-US trade deal.

John Hermann started the discussion by highlighting the importance of the EU-US relationship.  Transatlantic trade represents half of total GDP, one third of global imports and a quarter of global exports.  He then explained that a comprehensive trade deal addressing services and non-tariff barriers would increase GDP in both regions by 1.5% while increasing GDP by approximately 3% though the elimination of tariffs.  Mr. Hermann then explained the history behind efforts to strengthen the EU-US relationship by highlighting previous attempts.  The first occurred in 1998 via the Transatlantic Marketplace, initiated by Great Britain.  The second, entitled the Transatlantic Economic Council (TEC), was established in 2007.  The third and current attempt is the Transatlantic Trade Investment Partnership.  The TEC made progress primarily in areas including infringement on intellectual property rights, financial markets, innovation, health, and investment issues specifically related to sovereign wealth funds.  Nonetheless, the TEC’s limit on the number of issues to be discussed created a zero sum negotiation environment, causing progress to be difficult.  The timing for this EU-US trade deal seems apropos as both economies are experiencing slow economic growth.  Mr. Hermann also believes that this agreement will establish standards when negotiating trade deals with emerging economies, especially in light in the stale state of the Doha round.  Yet, tensions still linger, for example, around geographic indicators.  Additionally, a two-year timeline for completion is aggressive for a broad, comprehensive agreement shadowed by other large-ticket trade agreements, such as the Transpacific Trade Partnership.  Mr. Hermann concluded his remarks by explaining that despite challenges, there is still a plethora of incentives to reach an agreement on trade.

Thea Mei Lee opened her remarks by saying she was skeptical about the trade agreement for she sees that it is more promise rather than reality.  She then detailed both the benefits and challenges of a EU-US trade agreement.  An attractive component of a EU-US trade agreement is that the EU is a major market for the United States with good enforcement of solid labor laws.  Additionally, the EU regulatory regime is robust with protections that do not undermine US regulations or standards.  Yet, Ms. Lee also sees three issues with the proposed EU-US agreement, the first of which is developing an enforceable chapter on labor standards across many countries.  The second is the prospects for net job creation, which may be limited due to non-tariff barriers.  Lastly, Ms. Lee foresees issues with regulatory harmonization. Nonetheless, the AFL-CIO remains open-minded about the agreement.

Dave Solmonsen followed Ms. Lee’s remarks by addressing agricultural concerns with the EU-US trade agreement.  Despite the long and extensively trade history in agricultural goods, there are several issues with a potential EU-US trade deal.  The first issue is differing food safety standards, such as the EU restriction on chemicals used in US pork exports.  Second, tariff rates between the two countries could be lowered.  Third, the EU biotech approval process is slow in comparison to the United States.  Last, the United States is largely against geographic indicators whereas the EU strongly supports them.  Mr. Solmonsen concluded his remarks by saying that the trade deal will certainly address tariff rates; however, to be effective, it must also address non-tariff barriers.

Lastly, Mike Smart spoke, conveying that he was a cautious optimist about the agreement.  Mr. Smart believes that EU and US governments made the right choice to address bilateral trade issues via a trade agreement.  He believes that Mr. Hermann’s observation that the limited TEC discussion topics caused silos, which prevented progress.  To ameliorate this issue, the governments expanded the number of trade issues to be discussed, thus creating space for negotiation.  Mr. Smart then proffered that a EU-US trade agreement provides a venue to build upon commitments made in other trade agreements.  Additionally, Mr. Smart believes that if the United States and the European Union can debate and resolve issues under a bilateral trade agreement it would be better for future multilateral agreements.

 

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