European Union countries authorized the start of talks with the U.S. on a free-trade agreement after bowing to French demands to exclude the film industry.
EU governments gave the European Commission, the bloc’s regulatory arm, a mandate for negotiations with the Office of the U.S. Trade Representative to expand the world’s biggest economic relationship. The goal is to remove tariffs, ease regulatory barriers and expand access in investment, services and public procurement.
“It represents a really substantial opportunity,” Irish Trade Minister Richard Bruton told reporters late yesterday in Luxembourg after he and his EU counterparts struck a deal on the scope of the negotiations at a 13-hour meeting. Bruton chaired the gathering and brokered the accord because Ireland holds the 27-nation bloc’s rotating presidency.
With the EU in a recession, the U.S. in a slow recovery and the World Trade Organization in deadlock over efforts to open markets, European and American policymakers are seeking commercial deals with individual countries or groups of nations to spur growth. Trade will feature at a June 17-18 meeting of Group of Eight (EUGNEMUQ:US) leaders in the U.K.
Chancellor Angela Merkel of Germany, Europe’s biggest economy, said she would throw her “full political weight behind” a free-trade pact between the EU and the U.S.
“We need big projects together that unite us,” Merkel said in an interview yesterday in Berlin. “We ought to use this window of opportunity.”
An accord between the EU and the U.S. would outrank all others because both sides already have goods and services trade valued at $2 billion a day. A deal, which might take at least two years to reach, could bring annual economic benefits of 119 billion euros ($159 billion) to Europe and 95 billion euros to the U.S., the Brussels-based commission said.
Beyond that, the world economy would get a 100 billion-euro boost through extra demand and governments around the globe would be encouraged to embrace EU-U.S. models for everything from regulatory cooperation to technical standards, says the commission.
“There’s enough good will on both sides to realize this is the moment to push ahead,” U.K. Prime Minister David Cameron said in a June 13 interview in London.
The U.S. said it would aim for “as broad and deep an agreement as possible” when negotiations with the EU get under way in the coming weeks.
“It’s important that this be a comprehensive agreement,” Andrea Mead, a spokeswoman for the USTR in Washington, said by e-mail after the EU ministerial go-ahead in Luxembourg. “We recognize there will be sensitivities. That’s what negotiations are intended to deal with.”
The current momentum for an accord masks both trans-Atlantic and internal EU differences that may end up scaling back or even scuppering any deal. The planned accord will be called the Trans-Atlantic Trade and Investment Partnership.
The green light by European trade ministers came after France threatened to wield its veto power unless audiovisual policies were fully excluded from the commission’s negotiating mandate. The French government cited the principle that culture can’t be treated as a normal commercial item.
The commission and most EU nations including the U.K. and Germany opposed that hard-line stance and pressed France to show flexibility. They proposed instead to fix so-called “redlines” for the talks to ensure European policies to promote cultural works wouldn’t be jeopardized, while allowing for the possibility of some concessions to the U.S. in this area so the EU would have greater leverage over other matters such as American public procurement.
In their accord, the trade ministers carved the audiovisual industry out of the mandate to win French support while leaving the commission the right to request permission to negotiate for this issue at a later stage.
French Trade Minister Nicole Bricq had said she would “refuse any mandate that doesn’t include protection of cultural services and the clear and explicit exclusion of the audiovisual sector.”
EU Trade Commissioner Karel De Gucht said the concession to France was acceptable because he is free to raise the issue again with European governments after sounding out U.S. officials on it.
“I can live with this,” De Gucht said. “I’m going to listen to what the American friends have to tell us on this, what is their vision on this, and then if we judge it appropriate we will come forward with an additional demand for a mandate.”
De Gucht said that, while the question of how to treat the audiovisual field dominated the EU trade meeting, the issue represents only around 2 percent of the overall remit proposed by the commission. Ireland’s Bruton echoed the point.
“This is a mandate of very considerable scope,” Bruton said. “It opens up not only negotiation in respect of tariffs and non-tariff barriers but also the development of rule-making and standards and mutual recognition.”
Other potential areas of discord are public procurement, where so-called Buy America rules represent barriers for Europe, and agriculture, including genetically modified foods that the EU regards more skeptically than the U.S. The EU says data protection, highlighted by recent revelations of American government surveillance programs, isn’t covered by the planned negotiations with the U.S.
Olivier Garnier, chief economist at Societe Generale in Paris, urged caution about the economic benefits of a deal being touted by both sides because the European and U.S. economies are already so integrated.
“A free-trade pact is certainly positive for growth over the long term, but by how much is almost impossible to measure,” Garnier said in an interview in Paris yesterday. “If you begin talks with a lot of barriers in place, then a trade pact can result in a big jump in growth. But the U.S. and the EU are already in a pretty open situation, so I wouldn’t expect a massive effect (EUGNEMUQ:US).”
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