The objective is to conclude talks before October 2014, though experts believe that an agreement will not enter into force until January 2016. Given the importance of this kind of partnership, negotiations between the EU and US governments, together with important international pressure groups, could well be ongoing for the next two years.
Trade between the United States and Europe now represents a third of imports and exports worldwide. An exchange that last year was worth 645 billion dollars, with foreign direct investments between the two areas amounting to almost 4 trillion dollars. This business could grow further with the creation of a free trade area between the USA and Europe, with undeniable benefits for the rest of the planet as well. On 12 March, the European Commission asked the 27 Member States to give the green light for opening the negotiations on the Transatlantic Trade and Investment Partnership. Such an agreement would mean better trade integration for the two sides of the Atlantic, and would bring a boost to both economies. To get an idea of what this means in economic terms, just think that trade between the USA and EU accounts for half the world’s production and is worth about two billion Euros a day.
Last March, Obama told the US Congress that the United States was ready to start talks with the EU for the creation of what will be the largest free trade area in the world, capable of increasing the US GDP by nearly 70 billion dollars. A significant amount of money in these times of crisis.
According to Thomas Donohue, president of the US Chamber of Commerce, who took part in a EU-US trade conference last 19 April in Dublin, if Europe and the United States made a deal tomorrow, their companies would be sitting “on a boatload of cash”. Both economies would in fact receive an immediate boost if an agreement were signed. According to estimates by the EU Commission, Europe and the United States could increase their GDP by 0.5 and 0.4 percent respectively, although it could be years before the effects can be perceived.
Yet, despite this, there are several concerns about this partnership, even if it would be able to spur global growth. Some are worried in particular that the deal does not place enough emphasis on lowering of customs tariffs between the EU and the USA, which are very low per se, at around 3%. In fact, the negotiations will cover non-tariff barriers and regulatory restrictions to trade. The aim is to assimilate regulations relating to definition of standards and to eliminate some non-tariff measures, such as those affecting consumer protection.
The thorniest issue is the one concerning food safety and agriculture. In fact, the liberalisation of food products like meat treated with hormones to stimulate growth, chlorinated chicken or GMOs is one of the most significant issues that could prevent a conclusion of a trade partnership agreement between the two regions. As an example, in the EU, it is forbidden to either produce or to import from third countries meat that has been treated with ractopamine. On the contrary, ractopamine is regularly used by American farmers to increase the leaness of their animals. If the deal were made, there is a risk that food such as pork meat treated with ractopamine or other growth hormones could regularly enter into the European market.
The USA believes that this kind of non-tariff measure hinders free trade with Europe, while the EU thinks that this is a crucial issue for the health of European citizens. It is not for nothing that the EFSA (the European Food Safety Authority) has addressed the ractopamine issue on several occasions. These two differing opinions, that of America and that of the European Union, are being heard ever more frequently and in different sectors. More free trade on the one hand, better protection for citizen health on the other.
But agriculture is not the only major sticking point in the forthcoming talks. The USA is not too keen on EU rules on privacy and on some chemical substances, which will be a bone of contention. Not to mention the audiovisual industry : the French have already declared war if this is included in the negotiations.
EU Commission president Jose Manuel Barroso has stated that he will not give up on issues relating to food safety and citizens’ health. However, as noted by the European Commissioner for Trade, the Belgian Karel de Gucht, if the core of the agreement between Europe and the United States is the removal of non-tariff barriers, then a reform of the World Trade Organisation will be needed.
Another important aspect would be that of the isolation of a North Atlantic free trade area from the rest of the world. Mexico and Canada have already expressed their interest in being part of the deal, but the most significant exclusion, not only from an economic point of view, would be that of Turkey. According to experts, excluding the country from the negotiations would be a serious mistake. If Turkey was excluded it could lose around 2.5% of its GDP, not to mention the detrimental effect on international politics and on its accession process to the European Union.
There is one more element to be considered : China. Although the United States and Europe are the most open markets in the world, in 2015 a third of global growth will come from China alone. Thus President Obama is working on a free trade deal similar to the European one with Eastern Asia. For this reason, it is necessary to reconsider the fundamental principles of the WTO to take account of emerging markets.
All in all, there is still much to be discussed before a trade agreement between the United States and Europe can be reached.