March 29, 2023

U.S.-European Trade Talks Inch Ahead Amid Flurry of Corporate Wish Lists

Ocean Spray wants an easing of pesticide regulations.

DuPont wants greater protection of trade secrets.

Negotiations have barely begun for a potentially sweeping trade pact between the United States and Europe. But the lobbying is already well under way by corporations on both sides of the Atlantic. And the sometimes parochial nature of their demands is sure to further complicate the trade talks, which no one expects to proceed quickly or smoothly, given the geopolitics involved.

Companies from an array of industries have made their wish lists known, according to a review of their public filings, as well as documents obtained via the Freedom of Information Act in the United States. The comments from European companies include one from the Italian carmaker Ferrari urging the American government to drop customs duties on cars and parts, while DHL, the German shipping company, wants airlines to be able to bid on public-sector shipping contracts, regardless of their nationality.

The records provide windows onto how companies hope to shape the talks, and how barriers on both sides of the Atlantic have hindered business — or protected the public, depending on the perspective. But the filings also show how high the hurdles might be to reaching a deal by the negotiators’ self-imposed deadline at the end of next year, at least one of any substance. The next negotiating session is set for early October in Brussels.

“Generally everybody is very excited by the promise of these talks,” said Robert Mack, a Brussels-based executive who is the head of the public affairs practice at Burson-Marsteller, the public relations and lobbying giant. “In a context of economic recession or slow growth, these talks represent a good way to create some drivers of growth.”

Then again, he added, “when you get down into the issues, everything gets a little more complicated.”

The deal, if an agreement is reached, would apply to nearly a billion people who live in the combined markets and make it easier for products to be traded between Europe and the United States, as they would presumably have to pass only one regulatory test instead of two. The negotiations could also become de facto global standards, given the size of the combined trans-Atlantic market. The United States and the European Union are already the world’s two largest trading partners, with $2.6 billion in goods and services exchanged daily, according to a European estimate.

“It will be one of the greatest boons to economic development on both sides of the Atlantic,” said Stuart E. Eizenstat, a former senior trade official at the Commerce Department, who now works as a partner at the law firm Covington Burling, which has American and European corporate clients that are closely following the trade negotiations. “What is clear is that it will touch everyone in one way or another — their jobs, their health, their safety.”

That said, an overriding fear in Europe is that the talks are a far lower priority for the United States, especially for an Obama administration that is already enmeshed in Asian trade talks.

“Both American and European companies think this is still a negotiation that is considerably more important for the European political interests,” said Jacob Lund Nielsen, a partner and co-founder of cabinet DN, one of the largest lobbying firms in Brussels, the seat of European Union power. When corporate delegations trudge up to Capitol Hill in Washington, Mr. Nielsen said, it is “very hard to engage lawmakers on this issue, which makes it more difficult to have controversial or substantial talks.”

L. Daniel Mullaney, the chief American negotiator, was more upbeat. “I see a lot of enthusiasm on our side for this agreement,” he said. “President Obama himself made it part of his State of the Union address announcing that he is interested in this, and he was there in Northern Ireland at the end of our consultation period” to make a joint announcement with top European officials.

A few general trends emerge from the hundreds of comments sent to regulators in Washington and Brussels over the last year. Many companies are seeking greater harmonization in regulations coming out of Washington and Brussels, as well as lower tariffs on both sides of the Atlantic.

Danny Hakim reported from London, and Eric Lipton from Brussels.

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Economix Blog: A Look Behind the U.S. Decline in Global Competitiveness



Dollars to doughnuts.

For the fourth consecutive year, Switzerland is the most competitive economy in the world, according to a ranking from the World Economic Forum. And, for the fourth consecutive year, the United States fell in the rankings — largely because of worsening criticism of the American government — and is now in seventh place.

The interactive map below shows how each of the 144 countries analyzed ranked. Click on any country to see how it stacks up on different dimensions of competitiveness.

The World Economic Forum defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country” and thereby lead to sustainable growth. The report graded economies based on an index of categories like over-regulation, property rights, tax burdens, transparency and trustworthiness of both the government and the financial sector, infrastructure, inflation conditions, the health and educational attainment of the population, access to technology, and research and development.

The main reasons the United States has been slipping in the rankings appear related to distrust of and lack of confidence in government leadership.

Here’s an excerpt from the report; the numbers in parentheses refer to America’s ranking on that category in relation to all 144 countries:

The business community continues to be critical toward public and private institutions (41st). In particular, its trust in politicians is not strong (54th), perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts. Business leaders also remain concerned about the government’s ability to maintain arm’s-length relationships with the private sector (59th), and consider that the government spends its resources relatively wastefully (76th). A lack of macroeconomic stability continues to be the country’s greatest area of weakness (111th, down from 90th last year). On a more positive note, measures of financial market development continue to indicate a recovery, improving from 31st two years ago to 16th this year in that pillar, thanks to the rapid intervention that forced the deleveraging of the banking system from its toxic assets following the financial crisis.

Note also that the map shows a sharp divide in competitiveness between Southern Europe (Greece, Italy, Spain) and Northern and Central Europe (Finland, Sweden, Germany, etc.). This is a divide that has been growing,

Separately, Gallup on Wednesday released a new metric looking at the share of adults in each country who are working full time for an employer (as opposed to being unemployed, out of the labor force or self-employed). The United States came in 16th place, with 41 percent of its adult population working at least 30 hours a week for an employer. Worldwide, the share is 27 percent.

This metric is closely correlated with economic growth, as well as with a country’s competitiveness rating:

Source: Gallup, World Economic Forum Global Competitiveness Report. Gallup results are based on telephone and face-to-face interviews with 187,119 adults, aged 15 and older, conducted in 2011 in 148 countries and areas. World Economic Forum data are from the 2012-13 rankings report.Source: Gallup, World Economic Forum Global Competitiveness Report. Gallup results are based on telephone and face-to-face interviews with 187,119 adults, aged 15 and older, conducted in 2011 in 148 countries and areas. World Economic Forum data are from the 2012-13 rankings report.

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Economix: Fiscal Forecasting at S.&P.

In cutting the rating of the United States government, Standard Poor’s complained that “the predictability” of American government actions is not what it used to be.



Notions on high and low finance.

It based its decision in part on a forecast of how much the federal government would owe 10 years from now.

Excerpts from Standard Poor’s report, “United States of America Long-Term Rating Lowered To ‘AA+’ On Political Risks And Rising Debt Burden; Outlook Negative,” Aug. 5, 2011:

The downgrade reflects our view that the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges. …

We have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon. …

Under our revised base case fiscal scenario … we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021.

Oh, for the good old days when a Republican House and a Democratic president were united in working toward a common goal. Then there was predictability.

Excerpts from Standard Poor’s report, “U.S. Federal Debt Reduction Plans,” Feb. 28, 2000:

U.S. debt has been paid down significantly over the past two years, and it is estimated that U.S. publicly held debt will have been reduced by about $300 billion by the end of 2000. Additional debt reduction initiatives are planned at the federal level before the end of the year. …

On a broader scale, the president and the speaker of the House of Representatives have both called for the elimination of federal public debt by 2013 and 2015, respectively. Both plans would eliminate publicly held debt over about the same time frame, but through different means. …

Speaker of the House J. Dennis Hastert has called on the House Budget Committee to develop a budget that would accommodate eliminating the federal debt by the year 2015. Speaker Hastert believes this can be accomplished through maintaining the Social Security Trust Fund, weeding out wasteful government spending, and prudently spending surplus tax dollars to pay down outstanding debt and invest in other national priorities (such as strengthening Social Security and Medicare).

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Chrysler Favors Stock Sale by U.A.W. Retiree Trust

Chrysler’s Italian partner Fiat has the option to buy the trust’s shares, which account for a 45.7 percent stake in the company, and forgo a public offering. But while the executive, Sergio Marchionne, acknowledged the possibility of a direct purchase, he said a stock offering appeared to be the most prudent exit strategy for the retirees.

“I still look at the I.P.O. as the easiest way to monetize it,” Mr. Marchionne said of the stake owned by the United Automobile Workers’ voluntary employee beneficiary association, or VEBA.

Speaking after President Obama’s visit to Chrysler’s Jeep assembly plant in this northern Ohio city, Mr. Marchionne also said that a Chrysler stock offering would probably not be done until 2012.

“I think we need an additional track record of performance,” he said.

The president’s visit came a day after Fiat agreed to pay $500 million to the Treasury Department to acquire the 6 percent ownership stake that American taxpayers have held in Chrysler since it emerged from bankruptcy two years ago.

In addition, Fiat paid $75 million to the United States and Canadian governments for the right to buy the big ownership stake held by VEBA.

Fiat’s deal to buy the Treasury shares will give the Italian company a 52 percent stake in Chrysler, and accelerate the integration of the two automakers. It also concluded the American government’s stewardship of Chrysler, the smallest of Detroit’s Big Three car makers. Mr. Marchionne is the head of both Fiat and Chrysler.

Chrysler and General Motors were rescued from financial collapse by the Bush and Obama administrations after the two companies ran out of operating funds in late 2008.

After the sale of its shares to Fiat, the government will have recouped about $11.2 billion of the $12.5 billion that it invested in Chrysler. The remaining $1.3 billion — which went to the corporate shell of “old Chrysler” — will most likely be written off.

The Canadian government also lent money to Chrysler and continues to hold a 1.7 percent stake in the company. Mr. Marchionne said that Fiat was currently in talks to acquire those shares.

Once that is completed, Fiat will essentially own all the Chrysler stock that is not held by the VEBA.

But while Fiat has the resources to acquire the shares of the health care trust, Mr. Marchionne said such a transaction could be prohibitively expensive.

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DealBook: Fiat Raises Chrysler Stake to 30 Percent

Fiat confirmed on Tuesday that it had obtained an additional 5 percent of Chrysler — increasing its stake to 30 percent after the American carmaker reached a sales goal of $1.5 billion in revenue outside of North America.

That target is the second one achieved as part of a 2009 agreement between the two carmakers. The first saw Fiat raise its stake in January from 20 percent to 25 percent, after Chrysler began producing a fuel-efficient engine at a Michigan plant. The third — which would trigger another 5 percent increase in Fiat’s stake — would occur if Chrysler succeeds in producing a fuel-efficient vehicle based on a Fiat platform.

With the latest Fiat increase, a United Auto Workers trust known as Veba now holds 59.2 percent of Chrysler, down from 63.5 percent in January; the American government owns 8.6 percent, down from 9.2; and Canadian authorities hold 2.2 percent, down from 2.3 percent.

In this change, Fiat did not acquire any new shares, nor did it spend money to purchase them. The transfer of interest was structured in commensurate decreases in the stakes of other shareholders. The changes in ownership, known as a performance equity event, were put in place to encourage a long-term partnership between Fiat and Chrysler.

After the Fiat stake reaches 35 percent, the carmaker will have the option to buy another 16 percent of Chrysler, but only if Chrysler has succeeded in paying off $5 billion of loans from the American and Canadian governments. The total loan facility from the two governments is $7.1 billion, with $2.1 billion remaining to be drawn down if necessary. While Chrysler has kept up with its interest payments, it has yet to pay down any of the principle, a person with knowledge of the matter said.

In addition to raising its stake, Fiat said it had agreed to increase Chrysler’s distribution in Brazil and the European Union through its dealers there and to compensate Chrysler for Fiat’s use of its technology outside of North America. Fiat also said it would pool Chrysler cars with its own for the purposes of European Union carbon dioxide emissions ratings.

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