LONDON — Forthcoming trans-Atlantic trade talks might offer a fresh incentive for Europe to worry a bit less about protecting past economic gains and focus a bit more on securing sources of future prosperity.
The negotiations, announced last week and due to start in June, are also an important chance for the European Union to reinvigorate political ties with the United States as Washington pivots toward a rising Asia.
The talks will be tough. Successive attempts to pry open markets over the past 15 years made some progress but ultimately failed.
This time around, extensive consultations have convinced officials that an agreement can be forged at a lower political cost.
One reason is that agriculture, a constant thorn in the side of negotiators, is less of a bilateral bugbear than it was even two years ago thanks to changes in the global market for farm produce, said Fredrik Erixon, director of the European Center for International Political Economy, a research institute in Brussels.
What is more, the two sides are eager to tap into new sources of growth. The United States and European Union estimate that by 2027 a comprehensive pact could add 0.5 percent a year to the Union’s gross domestic product and 0.4 percent to U.S. output.
But the belief in Brussels and Washington that they will not have to cross too many negotiating red lines drawn by powerful vested interests will be quickly tested, Mr. Erixon said.
“It will become much clearer that you’re not going to get an agreement that can deliver short and medium-term economic gains or longer-term dynamic gains unless you’re willing to do supply-side reforms,” he said.
Indeed, Mr. Erixon said, the European Commission, the Union’s executive branch, sees the talks as an opportunity to try to push through some deep-seated changes to improve the economic performance of the 27-nation bloc.
Governments have shown a greater appetite for change in response to the global financial crisis, notably in pensions and labor markets. But Ben Noteboom, chief executive of Randstad, one of the world’s largest global recruitment companies, said he would give Europe an overall mark of less than 6 out of 10.
He said Europe had no choice but to keep up the momentum of change, given the challenges it faces from an aging population and, especially, the hollowing-out of medium-skill jobs because of technological change and competition from emerging markets.
“As a society, we must come up with answers to prevent that from becoming both a social and economic problem,” Mr. Noteboom said in an interview. “The question is whether we will do it fast enough. We don’t have a lot of time.”
The United States and Europe are considering a “21st century” agreement that as well as scrapping tariffs would sweep away many nontariff barriers, like differences in technical standards, that are annoying speed bumps in an age when goods that are produced around the globe cross borders at dizzying speed.
Yet earlier this month, the Union showed its 20th century face by concluding a budget for 2014-20 in which farm subsidies still gobble up by far the biggest share of spending. Agricultural handouts were cut, but France and other major farming nations thwarted attempts to shift a greater slice of E.U. spending toward steps to increase investment and competitiveness.
A similar problem is likely to be the Union’s reluctance to lower its guard against U.S. biotechnological food like genetically modified plants or beef from cattle that have been fed hormones.
So even if the good will exists to put such issues on the sidelines, agriculture still has the potential to poison the talks, said Philip Whyte with the Center for European Reform, a research institute in London.
Simon Evenett, a professor of international trade at St. Gallen University in Switzerland, agreed that a way forward would have to finesse differences over agriculture for Washington and Brussels to grasp what both see as the big prize — designing the next generation of business regulations and inducing the rest of the world, notably China, to sign on to them.
For example, jointly recognized rules on car safety or a single trans-Atlantic test for new drugs would cut costs for manufacturers and so should lower prices for consumers.
“That could have serious business payoffs,” Mr. Evenett said.
Richard Baldwin, a professor of international economics in Geneva, said the fear of being excluded from global standard-setting and regulatory harmonization was a main reason why this round of trade talks might succeed.
Washington is negotiating a separate free-trade pact focused on Asia, the Trans-Pacific Partnership, which, if successful, would form the template for rules on “behind-the-border barriers” to trade that are crucial for the smooth functioning of integrated global supply chains, Mr. Baldwin said. These include regulations, the movement of capital, intellectual property rights and competition policy, as well as rules on foreign investment and state-owned enterprises.
“If T.P.P. is the only game in town, the starting point for multilateralization of these rules will be the T.P.P. rules, which are basically being written by the U.S.,” Mr. Baldwin said in e-mailed comments. “These rules are not specifically anti-E.U., but they are naturally slanted to please U.S. business, not E.U. business models and practices.”
Thus, the Union sees a trans-Atlantic pact as a geopolitical counter-balance to America’s Pacific push, he added.
But no matter how solid the business and political case is for the so-called trans-Atlantic trade and investment partnership, Mr. Evenett said, selling an agreement to voters wary of globalization would not be easy.
“The benefits from trade reform are a bit like fitness training — not felt immediately and often accompanied by pain. This partnership will be no different,” he said.
Alan Wheatley is a Reuters correspondent.
Article source: http://www.nytimes.com/2013/02/19/business/global/us-and-eu-hope-to-eliminate-the-atlantic-as-a-trade-barrier.html?partner=rss&emc=rss
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