Bridges Weekly Trade News DigestVolume 16Number 36 • 24th October 2012

Momentum Builds Toward Possible EU Trade Talks with US, Japan

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The prospect of the EU launching separate bilateral trade talks with the US and Japan, respectively, received an additional boost this past week, following the European Council’s public expression of support for the two sets of proposed negotiations. Meanwhile, the European Parliament is soon slated to vote regarding whether negotiations should be launched with Tokyo, after having yesterday adopted a non-binding resolution in favour of possible talks with Washington.

The political signals from Brussels and Strasbourg come as the US continues to struggle with a sluggish economic recovery, while the eurozone is facing its own series of financial hurdles whose impacts have been felt well beyond its borders. Japan, meanwhile, is still recovering from the economic effects of its earthquake and tsunami in March of 2011.

European Council backs possible US-EU talks

Following last week’s highly-anticipated EU summit, the European Council - which is made up of heads of government from the bloc’s 27 members - stressed the importance of trade in creating growth and jobs in the ailing eurozone.

“An ambitious trade agenda could lead in the medium term to an overall increase of two percent in growth and the creation of over two million jobs,” the heads of government said after the 18-19 October meetings, reiterating the bloc’s goal of promoting “free, fair, and open trade” in line with the EU’s interests and in the spirit of reciprocity and mutual benefit.

Notably, EU leaders backed the possibility of a trade deal with the US as one of the ways to achieve this trade agenda. “[The Council] looks forward to the final report of the EU-US High Level Working Group and commits to working towards the goal of launching in 2013 of negotiations on a comprehensive transatlantic trade and investment agreement,” the statement said.

“[The Council] will return in greater depth to EU/US relations and to the contribution trade can make to the growth agenda in February 2013.”

The EU-US High Level Working Group on Jobs and Growth is set to issue recommendations to US and EU leaders in December regarding whether to begin negotiating a trans-Atlantic trade deal. Officials from both sides recently told Reuters that the Working Group will indeed suggest that the two sides launch formal trade talks.

“The report will recommend the negotiation of a comprehensive agreement between the United States and the European Union,” according to one of the senior EU officials quoted by Reuters, whose comments tracked with those of other EU and US diplomats interviewed by the news agency.

The Working Group issued an interim report earlier this year that already foreshadowed what the expected December recommendations might be, noting at the time that a broad, comprehensive bilateral deal was the option with “greatest potential” for supporting jobs and spurring economic growth on both sides of the Atlantic. (See Bridges Weekly, 27 June 2012)

However, the Working Group in its June report also flagged potentially sensitive areas for the two sides - such as intellectual property rights, regulatory standards, and health protections - that proved to be stumbling blocks during past efforts to lower trade barriers between Brussels and Washington. How these issues might be addressed in a bilateral pact remains to be seen.

Members of the European Parliament meeting in a plenary session yesterday similarly backed the possible trade talks, but warned that the EU’s interests must be protected in the process.

“We want to send a strong political signal in favour of opening negotiations with the United States in order to create a real transatlantic market with enormous opportunities for growth. Agreement is not going to be easy and there are very divergent interests between the US and Europe over, for example, agriculture, maritime transport, GMOs and cloned animals, but we believe that these difficulties can be overcome,” said the rapporteur, Vital Moreira before the MEPs adopted a non-binding resolution in favour of launching negotiations next year.

The US and EU together form the world’s largest trading relationship, with trans-Atlantic trade in goods and services worth €700 billion last year alone, according to European Commission data.

Japan trade talks on this week’s European Parliament plenary agenda

EU national leaders have pushed repeatedly over the past year for the bloc to pursue growth via bilateral trade deals, citing the lack of progress in the WTO’s Doha Round of trade talks - as well as the EU’s broad economic struggles - as reason for such an approach.

In this context, the European Parliament is also set to vote tomorrow on whether the 27-country bloc should begin negotiations with another of the world’s largest traders, Japan. A Brussels-Tokyo deal was proposed back in July by the European Commission. (See Bridges Weekly, 25 July 2012)

Earlier this month the Parliament’s international trade committee voted overwhelmingly in favour of the talks; Parliament has asked the European Council to wait on deciding whether to launch these trade negotiations until after it had a chance to vote. (See Bridges Weekly, 17 October 2012)

Council leaders, however, appear to be ready to back trade talks with Tokyo, with their statement following last week’s EU summit calling for an agreement on the negotiating directives for such a trade deal, “with a view to launching negotiations in the months ahead.” The heads of government also urged that ongoing negotiations with Canada and Singapore be concluded within the coming months.

However, officials from some EU member states have expressed concern over what a Tokyo-Brussels deal might mean for the European car sector, with the French ministers for trade and industry saying yesterday that their country’s government intends to “see to it that the upcoming trade agreements between the EU and big industrialized countries preserve the interests of our industry.”

“In this respect, the concerned parties will be consulted in the coming days about the conditions necessary for opening negotiations for a free trade agreement with Japan,”  Industry Minister Arnaud Montebourg and Trade Minister Nicole Bricq said in a joint statement.

The comments come after the European Commission rejected a French request to begin formal surveillance of car imports from South Korea, according to Reuters. The entry into force last year of the EU-South Korea pact has been blamed for a flood of automobile imports into the eurozone, which some fear could worsen should a similar deal be struck with Japan.

ICTSD reporting; “EU, U.S. to negotiate free-trade deal from spring 2013: officials,” REUTERS, 17 October 2012; “France to vet EU trade negotiations with Japan,” REUTERS, 23 October 2012.

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