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An historic trade pact between America and Europe needs saving
Apr 27th 2013 |From the print edition
IN AN age of small-bore politics, America and the European Union have a chance
to achieve something large: a transatlantic pact that would, at a stroke,
liberalise a third of global trade. At a time when emerging powers are closing
fast on a fretful West, a free-trade area covering America and the EU would
offer something more. Done right, it could anchor a transatlantic economic
model favouring openness, free markets, free peoples and the rule of law over
the closed, managed visions of state capitalism.
Right now, the pact is in trouble, beset by small-mindedness and mutual
suspicion. This is madness. A free-trade pact has never had such support in the
chancelleries of Europe, as well as in the West Wing of the White House. It is
backed by compelling logic. Yet supporters also know that time is desperately
short: this political window may close in just 18 months, says a European
official at the heart of the process. This must be done swiftly, on one tank
of gas , says a senior American.
The risks all involve thinking small. European governments recently sent trade
officials to Brussels to a first meeting on their offer to America. Led by the
French, envoys from southern and eastern Europe called for a long list of red
lines. These covered the usual stuff: agriculture, public services and
audio-visual content (eg, bungs for French cin astes, airtime quotas to keep
Flemish hip-hop on the radio). That appals Team Obama, though not because
Americans are blameless. From financial services to air passenger services,
America maintains lots of barriers to trade. The real fear is that if Europe
starts setting out red lines, trade sceptics in America will draw their own.
What s more, American trade bureaucrats are Eeyoreish and petty, says an
insider: a trade pact with Colombia is the summit of their ambition. Then there
is Congress to worry about.
Members of the Senate Finance Committee last month quizzed the acting US trade
representative, Demetrios Marantis, about EU access for ethanol, biodiesel,
beef, pork and poultry from their respective states (for every person in my
state, noted a senator from Delaware sternly, there are 300 chickens ). The
chairman, Senator Max Baucus of Montana, grumbled about Europe s non
science-based regulations . That glanced at an old philosophical dispute, with
American regulations weighing costs and benefits and punishing lapses through
market forces and litigation, while the European precautionary principle
distrusts products or new technologies until they are proved safe.
Some of these disputes are genuinely hard to resolve. But the prize in sight is
large. With vast transatlantic trade flows, even a bit of liberalisation would
bring rewards. More to the point, this may be America and the EU s last, best
chance to craft open, liberal rules for the world economy. Leaders must take
charge.
The tragedy is that a deal is doable. Barack Obama yearns to leave office with
the economy growing strongly. With his domestic options narrowed by Washington
gridlock, boosting overseas trade represents a rare chance to take action.
Though a study in caution on trade in his first term, the president is now
ready to take risks, officials say. To cheers from European governments, Mr
Obama used this year s state-of-the-union message to announce talks on a
Transatlantic Trade and Investment Partnership (TTIP), along with work to
conclude a trade pact with Asia.
It took time for Mr Obama to be convinced that Europeans were serious. Britain,
sundry Nordics and the European Commission (which runs trade talks on behalf of
EU members) spent years lobbying the president on free trade, but their zeal is
slightly taken for granted in Washington. Chancellor Angela Merkel of Germany
was decisive in convincing Mr Obama, it is said. American contacts with other
capitals confirmed a big change. Drowning in public debt and knowing that only
growth can save them, a critical mass of European leaders are ready to deal
even in France. The view at the top matters: EU trade talks are a technocratic
affair, run by Eurocrats and approved at leaders summits.
Faced with a rising China, the Atlantic looks less wide
American trade policy is more messily democratic, with Congress able to thwart
presidential ambitions. But there are reasons to hope that Congress can be won
round. EU-American trade is very large, at almost $1 trillion a year, and more
or less balanced. Because EU labour and environmental standards are high,
leftish Democrats and their trade-union allies can hardly grumble about
American workers being undercut. Republicans like to dismiss Europe as a
useless relic. But their business allies know that millions of American jobs
depend on EU trade and investment.
Europe and America have converged since the last time a trade pact was tried,
say senior officials from both sides. Airbus and Boeing once triggered terrible
trade wars in the aircraft industry, for instance, leaving Europeans and
Americans at daggers drawn over state subsidies and market access. Now nobody
can afford lavish state aid for struggling champions, Airbus is building a
factory in Alabama and both firms are more worried about breaking into emerging
markets. Regulatory approaches have also converged, with American officials
talking about humanised cost-benefit analysis, and Europeans fretting about
the price of too much precaution.
Finally, crucially, there is China. Europeans tell Americans they wish to unite
as standard-setters, for fear of becoming standard-takers in an economic
order controlled by emerging giants.
Others can see the audacity of what is being tried. Turkey has asked America to
help it secure a seat at the TTIP table (in vain). Brazil is suddenly
interested in a long-dormant regional trade pact with Europe. Yet a pivotal
figure on the American side is only cautiously optimistic that a deal can be
done. Time, then, for a big push on both sides; this pact can still be saved.