Hurdles to EU-US trade pact

This (17.02.2014), EU trade chief Karel de Gucht and his US counterpart Michael Froman are scheduled to meet in Washington to discuss the Transatlantic Trade and Investment Partnership (TTIP), a transatlantic free trade area. They are expected to make a political assessment of the past three rounds of US-EU trade talks and to discuss the upcoming fourth round of negotiations in March.

The pact would unify standards and licensing procedures across a EU-US trade zone and would waive tariffs on goods traded between the EU and the US. According to the Munich-based IFO institute, the treaty will create up to 400,000 new jobs in Europe - 110,000 of them in Germany alone. A done deal, it would seem.

But the deal is far from done: the EU and the US differ over a wide variety of issues, one of which is genetically modified food. Last week, a new type of genetically modified corn from the US won EU approval amid great controversy after the EU's Council of Ministers failed to gain a clear majority to block it. The decision paves the way for compromise over one of the differences in EU-US consumer attitudes that has been a stumbling stone in TTIP negotiations.

But opponents of the trade pact are becoming more vocal, and more debates over standards, consumer protection, cultural protectionism threaten to erupt when EU-US negotiators get down to the deal's fine print and put the agreement up for domestic scrutiny.

Rising opposition

Jan Techau, director of Carnegie Europe, the European center of the US think tank the Carnegie Endowment for International Peace, thinks there's a storm brewing in the EU at the moment. "There's enormous opposition forming at the moment," he says. He thinks the increased EU opposition has been a long time coming: "Interest groups, NGOs, environmental groupings and so on now have gotten their act together and have gotten organized on this [issue] and are posing a formidable challenge."

Of course there are many issues that the US and EU could disagree about, as Techau explains. "The potential sticking points, the ones that could undermine TTIP are the ones where we have real cultural clashes," he says. "Wherever you have a conflict, a real cultural difference in consumer patterns, consumer protection ideas and cultural issues - that's where we're not only talking about regulatory affairs and legal questions but about real political challenges. And those are the ones that could undermine [TTIP]."

Luisa Santos, director of international relations at Businesseurope, an advocacy group for competitiveness in Europe that represents European businesses, puts the European opposition to TTIP down to a lack of public awareness rather than to fundamental differences between the EU and the US. "We need to provide people with information on what effective impact this agreement will have on the day to day life of citizens," she says, adding: "If we manage to eliminate duties, products will be cheaper. And this is a benefit for consumers."

More common ground than differences?

Santos is one of the members of a group of experts from a variety of fields set up this year to advise the European Commission and represent different interest groups during the EU-US trade talks.

Santos admits that it will be necessary to compromise on some of the issues being negotiated in the trade pact. "In this case," she says of the trade agreement, "we have two models that sometimes are not exactly the same. The big challenge will be to try to reach a common ground where we are both happy."

But she also points to the economic common ground that the EU and the US share. "It's a fact that the EU and the US - maybe contrary to other partners with whom we are negotiating free trade agreements - are quite integrated in terms of economies, there is a lot of investment from EU companies in the US and vice versa," she says.

Pacific or Atlantic?

But there is another US trade deal running alongside the Transatlantic Trade and Investment Partnership that could pose an even more significant challenge to TTIP than policy details: the Trans-Pacific Partnership. The TPP is a free trade deal just like its transatlantic counterpart. It includes the US, Australia, New Zealand, Japan, Singapore, Malaysia, Brunei, Vietnam, Chile, Canada, Mexico and Peru. Talks on the TPP began in 2010 and the trade pact will surely be on the agenda when US President Barack Obama meets his Canadian and Mexican counterparts next week.

A study conducted by the Center for Economic Policy Research (CEPR) for the European Commission places the estimated potential economic gains by 2027 as a result of TTIP at 95 billion euros ($130 billion) for the US, and €120 billion ($164 billion) for the EU. According to a report by the Peterson Institute for International Economics, a private non-profit institute, the Trans-Pacific Partnership, could yield 57 billion euros ($78 billion) annually in income gains for the US.

In theory, there doesn't have to be a choice between the two economy-boosting deals. But significant political obstacles lurk beyond the figures and beyond the policy details.

"The problem is of course for the US president to actually push these things through Congress. Congress is very reluctant to embrace these kinds of [trade deals] at the moment - on both sides, both the Republican and the Democratic side," says Techau. "And if the president has to pick his fight and only has political energy for one of the two, either TPP or TTIP, then everybody expects him to prefer TPP over TTIP, prefer Asia over Europe. So the entire domestic debate in the US is a huge obstacle."

Domestic obstacles

With the American public focused on slow economic recovery and high wages, critics of both the Pacific and the EU-US free trade deals argue they could cost US jobs by raising competition and flooding the market with cheaper imports. Last week, Democratic Senate majority leader Harry Reid added his voice to the clamour against the trade deals, when he said that he opposed giving Obama "Trade Promotion Authority." "TPA" guarantees that trade legislation agreed with trading partners cannot be amended in Congress.

Luisa Santos thinks that the US government's mistake has been to make the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership into one issue for US congress.

"The level of development and the level of integration of the economies is quite different," she says. "It's clear that TPP is not the same as TTIP and the countries involved are not the same. The stakes are not the same either. So that is something that we have to point out in the US congress."

At the end of the day, Techau is convinced of the potential of the EU-US TTIP. "First of all, it would bring us closer together in terms of shared objectives and a shared fate. When you share a stake in trade questions, in questions of standardization, in questions of quotas, in questions of how you position yourself vis-à-vis other trade powers - all of a sudden you start to act together politically."