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US and EU governments aiming to agree transatlantic free trade pact

Herman Van Rompuy, Jose Manuel Barroso

Moves within US Congress and 27 member governments to eliminate or minimise barriers to unfettered imports and exports

Source: in Brussels – The Guardian, Wednesday 13 February 2013

The US and the European Union on Wednesday launched their most ambitious attempt to liberalise transatlantic trade following Barack Obama’s commitment to a new pact outlined in his state of the union address.

A joint statement from Obama and the presidents of the European council and commission, Herman Van Rompuy and José Manuel Barroso, said they would kickstart moves in the US Congress and among the 27 EU governments to open negotiations on a new free trade pact seeking to eliminate or minimise barriers everywhere from the car to the pharmaceuticals industries, to services, agriculture and investment.

Britain said the talks should start this year. In Brussels, leaders said they wanted the negotiations launched by June and envisaged a two-year process, although Karel De Gucht, the EU trade commissioner, hoped the talks could be concluded by next year.

In part this is a response to the rise of China in the global trading contest and to the long-running stalemate in the Doha round of world trade talks. Washington and Brussels also hope to boost their flagging economic performance through a breakthrough that is likely to be difficult and complicated to achieve.

“A high-standard transatlantic trade and investment partnership would advance trade and investment liberalisation and address regulatory and non-tariff barriers,” said the joint statement.

European leaders were pleased at the decision to launch the talks, claiming a successful negotiation could result in a boost to annual EU gross domestic product of around €70bn (£60bn) or half a percentage point.

De Gucht described a potential pact as “groundbreaking”, while Barroso called it a “win-win solution” which could generate a bonanza for the European farming, food and car industries.

David Cameron said he would use Britain’s chairmanship of the G8 countries this year to push the transatlantic trade agenda.

“It’s great that President Obama has set out his determination to agree a trade deal between the EU and the United States,” said the prime minister.

The political momentum appears to have shifted in favour of a more comprehensive trade pact, although the devil will be in the detail. A successful outcome could have an impact on the UK debate over whether or not to remain in the EU.

Barroso would not comment on the likely effect but noted that “Britain as an EU member is strongly advocating this kind of agreement”.

The conclusion of any talks could be influenced by the German election in September, followed by European elections next year and the installation of a new commission, and by any potential glitches in the US Congress. The US-EU’s trading relationship is valued at €2bn a day, accounting for 30% of global trade, while the US and the EU make up almost half of the world’s economic output.

Britain and Germany – as a global export champion – are particularly keen to strike a deal, particularly if the German car industry will not have to make different models for the US market. France, traditionally more protectionist, could prove more awkward. For the strong French food and farming sectors to reap the benefits of competing freely in the US market, Europe would have to make concessions to the US Congress on difficult issues such as genetically modified foods, hormone-fed beef and a longstanding row over US chlorine-washed chicken exports.

The Obama statement followed the conclusion of a high-level joint working group led by De Gucht and the US trade representative, Ron Kirk, which reached agreement, several months late, on the potential scope of the trade talks.

The aims are to eliminate or cut tariffs and tariff-rate quotas, dismantle hurdles to trade in goods, services, and investment, make regulations and standards compatible on both sides, and also through an agreement to try to set the rules for the rest of the world.

US and European business leaders were also euphoric. The US Chamber of Commerce and Business Europe, representing EU national employer federations, said: “Eliminating tariffs only would boost US-EU trade by more than $120bn within five years.”

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