[A2k] The Economist on the TTIP: Transatlantic trade talks

Thiru Balasubramaniam thiru at keionline.org
Fri Jul 12 03:26:48 PDT 2013


http://www.economist.com/news/finance-and-economics/21580512-trade-negotiations-between-america-and-european-union-will-not-be

Transatlantic trade talks

Opening shots

Trade negotiations between America and the European Union will not be smooth

Jul 6th 2013 | Washington, DC |From the print edition

BEGINNINGS have been more auspicious. The roughly 150 European and
American trade negotiators who are due to start work on the Trans-Atlantic
Trade and Investment Partnership (TTIP) in Washington, DC, on July 8th will
do so in the wake of reports that America’s intelligence dragnet targeted
European Union officials. In the ensuing uproar François Hollande, the
president of France, suggested that TTIP talks should be delayed until
questions about the spying allegations were answered. That idea seems to
have been ditched. But the risk that one of the biggest trade deals in
decades could be derailed by mistrust or bickering has been underlined.

Together America and the EU account for around $30 trillion in annual
output, almost half the world total. Freer exchange between them could
boost global GDP by 0.6% a year, or more if knock-on effects on
productivity are included. The impact would be bigger still if a TTIP deal
spurred multilateral efforts to cut trade barriers.

A comprehensive agreement that includes non-tariff barriers (NTBs) would
be especially enticing. Post-war trade liberalisation has mostly meant
slashing tariff rates. Duties between America and Europe are low already.
More cuts wouldn’t hurt, but NTBs are the biggest hurdles to trade.

These non-tariff obstacles include outright discriminatory measures
like import quotas and the sort of “Buy American” government-purchasing
rules so beloved of politicians. But they also include basic regulatory
standards. Separate drug-approval processes in Europe and America add to
the burden of operating across the Atlantic, for example. Different
consumer-product safety standards or inspection procedures have similar
effects. Common standards, or mutual recognition of each other’s regulatory
processes, could deliver an economic boost.

The Centre for Economic Policy Research (CEPR), a think-tank in
London, reckons that current NTBs are far more burdensome than tariffs.
Chemical exporters to America face a tariff rate of 1.2%, for example, and
non-tariff barriers equivalent to a 19.1% duty. European NTBs add what
amounts to an additional 25.5% duty on top of the 8% tariff already levied
on American car imports.

An ambitious trade deal would therefore produce big benefits. CEPR suggests
an agreement that eliminates all remaining tariffs and cuts NTB costs by
25% would lift annual EU output by roughly 0.9% and American GDP by 0.8%
(see chart). Annual exports for each economy could rise by nearly 2%
of GDP. A less ambitious deal that left some tariffs in place and cut NTB
costs by 10% would yield gains around half that size. One that only slashed
tariffs would bring gains less than a fifth of those for a comprehensive
deal.

Achieving a broader agreement will not be easy. Both sides have well-known
sensitivities. Europeans are prickly about American agricultural practices,
like the use of genetically modified foods. Americans will cling to
carve-outs for domestic shipping and transport firms. The recent
revelations about American espionage activities may complicate discussions
on data-protection standards.

Political leaders have tried to keep the scope of talks as wide as
possible, leaving maximum room for compromise and consensus. That strategy
has already encountered hiccups. France refused to support giving a mandate
to EU negotiators until it had secured protection for “cultural
diversity”—code for subsidies to the French film industry. But, in an
encouraging sign for the discussions to come, the French position drew
scorn from normally sympathetic EU members and restraint from American
officials and interest groups.

The opening round of talks in Washington are designed to craft an agenda
that offers the best chance of a comprehensive deal. Early discussions will
focus on things like the sequencing of topics—tariffs must wait, for
example, until America concludes an impact study later this year—and the
frequency of meetings. The wrangling proper may only start in the autumn.

An agreement by November 2014 remains the target, although given the
technical nature of the issues, with teams of regulators niggling over
thousands of topics, talks may stretch into 2015. The important thing will
be to maintain a sense of haste. Trade talks rarely improve with age. The
prize on offer is a grand one; now it’s up to the negotiators to grab it.



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