Bridges Weekly Trade News DigestVolume 16Number 20 • 23rd May 2012

US, EU Trade Chiefs Mull Options for Deepening Trans-Atlantic Ties

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The US and EU should be open to pursuing a modest agreement on selected trade issues, should a broad, over-arching deal appear out of reach, US Trade Representative (USTR) Ron Kirk said on 22 May. The comments from the US’ top trade official come just weeks after European Trade Commissioner Karel De Gucht made a public call for the two sides to finalise a comprehensive bilateral trade pact by mid-2014. (See Bridges Weekly, 16 May 2012)

Brussels and Washington, which already boast strong trade ties, have examined options for lowering trade barriers on previous occasions with mixed results.

However, the prospect of a trans-Atlantic deal was revived in November, when leaders from both sides launched a High Level Working Group on Jobs and Growth - led by Kirk and De Gucht - that would evaluate areas for deepening the bilateral trade and investment relationship.

The group is expected to review, among other options, the feasibility of a US-EU trade deal. (See Bridges Weekly, 30 November 2011)

Shared interest in jobs, differences in rhetoric

As the US and EU examine options for expanding trade between them, contrasting pictures have begun to emerge from recent comments made by the two sides’ respective trade chiefs.

While De Gucht has advocated for a broad, comprehensive deal, undertaken as a single package, Kirk has been more guarded in his comments, though noting - like his EU counterpart - that greater trans-Atlantic co-operation is indeed key to creating growth and jobs.

“Right now, the United States and the European Union face common economic challenges that require us to work even harder to enhance the competitiveness of our economies and workers, and to support more and better jobs for our peoples,” the US official told a London audience on Tuesday.

However, he cautioned, “with so many jobs at stake right now, neither the US nor the EU can afford to leap into open-ended negotiations on faith alone.”

Should the Working Group’s deliberations deem that full-fledged trade negotiations are not likely to achieve the most ambitious outcomes, Kirk said, Washington “will be ready to explore how the US and the EU could reach agreements in areas where we have shared ambitions.”

Comments from EU officials, however, have been more optimistic. “I believe that our priority should now be to move towards a new comprehensive initiative to further liberalise trans-Atlantic trade and investment,” De Gucht told an audience in Hamburg, Germany earlier this month.

“It is my firm view that our objective needs to be both ambitious and realistic. Ambitious enough to include all areas of economic importance, and realistic enough to be successful within a limited period of time,” the EU official said, calling for trade deal negotiations to be launched early next year and concluded within 18 months.

The two trade chiefs, in their respective comments, both expressed an interest in addressing regulatory issues with regards to both food and non-food products in their Working Group discussions. Regulations, product standards, and health protections have been common sticking points in the US-EU relationship for years.

Both sides also plan to discuss services trade, along with possible tariff cuts in goods.

EU national leaders push for US trade deal

With Europe struggling to overcome its sovereign debt crisis, some EU national leaders - including UK Prime Minister David Cameron and German Chancellor Angela Merkel - have advocated for increased bilateral deals, including a US-EU pact, as a way to prop up economic recovery.

In an article published prior to last weekend’s summit of G-8 leaders - where Europe’s financial woes was, as expected, the headline item on the agenda - UK Prime Minister David Cameron echoed an earlier call made during this year’s annual World Economic Forum in Davos, Switzerland for a Brussels-Washington deal.

“We must work together to give the world economy the one big stimulus that would really make a difference: an expansion of trade freedoms - breaking down the barriers to world trade and getting global trade moving again,” Cameron said.

“Where there are coalitions of the willing, we need to seize the opportunities to forge ahead with ambitious deals. So I will be pushing for progress on the trade deals that the EU is pursuing with three of our G-8 partners - Japan, Canada, and the US.”

The US and EU have the world’s largest trade relationship, with bilateral trade amounting to over US$500 billion annually. The European Commission for Trade estimates that EU and US economies account for nearly a third of world trade flows.

The UK prime minister stressed that the leaders of the world’s largest economies “have a role in driving [the economic recovery] forward,” promising to use the 18-19 May Camp David gathering and the upcoming G-20 summit and European Council gatherings next month as opportunities to advocate for a 2013 start to negotiations.

Business leaders on both sides, for their part, have also been calling for a US-EU deal, with the US Chamber of Commerce and its European counterpart, BusinessEurope, being vocal supporters of such a plan. Business groups had hoped that meetings between US and European national leaders at the G-8 summit would yield a political commitment to launching trade negotiations; however, while US and EU leaders reportedly met on the sidelines of the G-8 summit to discuss the Working Group’s progress, such a commitment did not emerge.

Single undertaking or piecemeal approach?

“Many in Europe have already voiced support for a comprehensive free trade agreement pursued as a single undertaking,” Kirk noted on Tuesday, ostensibly referring to De Gucht’s suggestion in Hamburg that a US-EU deal should be pursued as a comprehensive package.

“While the United States agrees that this approach presents many exciting opportunities, we want to ensure that its outcomes could be at least as broad and ambitious as those contained in existing US trade agreements,” the US trade chief said.

While not ruling out a single undertaking approach as an option, Kirk noted that, should an overarching deal seem impossible, the US would be open to concluding smaller deals on selected issues.

De Gucht, for his part, has argued strongly for a single undertaking approach, arguing that anything less could have lacklustre results.

“We all know that a more piecemeal approach will at best allow us to solve only the easy problems while the difficult ones - which have the greatest potential to generate jobs and growth - fall by the wayside,” De Gucht said in his Hamburg speech. “At worst, a piecemeal approach could lead to deadlock before we even get off the ground.”

Next steps

An interim report from the Working Group is expected in June; De Gucht and Kirk are scheduled to discuss the results of the report with trade ministers from EU member states within the coming weeks, Andrea Mead, a USTR spokeswoman, told Bloomberg earlier this month.

A final report from the working group is due by the end of the year.

The subject of US-EU trade ties is also set to feature in this week’s meetings between Kirk, US Commerce Secretary John Bryson, and European officials.

ICTSD reporting; “Broad U.S.-EU Trade Agreement Ties to Growth, Trade Chief Says,” BLOOMBERG, 22 May 2012; “Crisis leads to push for a transatlantic trade deal,” EUROPEAN VOICE, 6 May 2012; “U.S. trade chief says to be “pragmatic” on EU deal,” REUTERS, 22 May 2012.

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