Europe, America and the Transatlantic Partnership
The United States and Europe are poised to create the world’s largest Free Trade Area under the proposed Transatlantic Trade and Investment Partnership (TTIP).
The negotiations have been underway since July 2013 after the November 2011 US-EU Summit. In February 2014, the EU Trade Commissioner Karel De Gucht and the United States Trade Representative Michael Froman met in Washington D.C. to review progress before launching the fourth round of talks in Brussels this month.
De Gucht informed the media that “things are on track,” though the next phase of negotiations would be challenging in view of the bilateral differences in standards on labor and environment issues.
Already the world’s largest bilateral trading partners accounting for 40 percent of the world’s GDP, the US and the EU expect to benefit substantively from enhanced trade and investment opportunities by reducing non-tariff barriers and fostering regulatory cooperation. As such, the acid test of the TTIP will lie in the fulfillment of these expectations, especially from the perspective of the Obama administration that has attempted to renew friendly ties with the EU.
As is known, the US-EU relations were strained under the Bush administration in the aftermath of the latter’s unilateral approach to the “war on terror” in disregard of “transatlantic unity.” Moreover, then US Secretary Donald Rumsfeld’s use of the words “problems” and “old Europe” for France and Germany, on account of their opposition to the war in Iraq, had added fuel to the fire.
New era of US-EU relations
Of course, President Bush sought to bring ties back on track through his tour of Europe in May 2005. On his part, as a US presidential candidate, Obama addressed a vast crowd in Berlin in July 2008 to highlight his distinctively warm and friendly approach to Europe. Obama averred:
“True partnership and true progress requires..allies who will listen to each other, learn from each other and, most of all, trust each other..America has no better partner than Europe. Now is the time to build new bridges across the globe as strong as the one that bound us across the Atlantic.”
Interestingly, since Obama assumed the presidency on January 20, 2009, America has not filed a single case against the EU at the World Trade Organization (WTO), while bringing up as many as 14 cases–the bulk against China–against developing countries. On the other hand, the EU filed a case against the US in April 2011 in connection with the latter’s anti-dumping duties on imports of stainless steel sheet and strip in coils from Italy, which are stated to have been in place since 1999.
The matter is in the consultation stage. Barring this case, however, the EU has not filed any case against the US during the Obama administration. As a matter of fact, the post-financial crisis scenario is a significant factor propelling the Obama administration to bolster trade and economic cooperation with the EU in a spirit of mutuality of interests.
Hence, through the proposed TTIP, America hopes to boost its international competitiveness, jobs and growth, while the EU seeks a “long-term recovery” by gaining enhanced access to the US market for its agricultural and industrial goods as well as public contracts for its firms, among other benefits. Importantly, it will be critical for the US to correct its trade deficit in goods with the EU that amounted to $107 billion in 2012.
There is, however, skepticism in certain quarters regarding TTIP’s concrete benefits for the US. As pinpointed by the American Federation of Labor and Congress of Industrial Organizations, the “rosy predictions” by the International Trade Commission and free trade advocates about export and job growth have been belied in several cases.
For instance, America’s grant of Permanent Trade Relations (PNTR) status to China, which paved the way for the latter’s entry into the WTO, came to exhibit pitfalls. In 1999, the year before PNTR conferment, America’s trade deficit with China amounted to $68 billion. In 2013, it was as high as $471.5 billion, though witnessing an improvement over the preceding year’s deficit of $534.7 billion.
Furthermore, the story of US trade deficit has replicated in the cases of the US-Korea FTA and the North American Free Trade Agreement. In this context, Robert E. Scott, an economist at the Washington D.C.-based Economic Policy Institute, suggests: “This is not the time for massive trade deals that cost jobs and depress wages. The United States should stop negotiating new trade deals such as the [Trans-Pacific Partnership] TPP, and fix the ones we have.”
The US leadership owns a critical responsibility to ensure that the country gets a fair share in the fruits resulting from the TTIP, which requires an adequate assessment of the deal under consideration and inclusive participation of a wide variety of stakeholders beyond the business lobbies. It is apt to quote de Gucht’s statement on one of the EU stances:
“We need to make absolutely sure that transatlantic trade and investment supports, rather than undermines, our high standards on these [labor and environment] sustainable development issues. We will not sacrifice them for commercial gain.”
In a similar vein, the US will need to carefully articulate what is most integral to its expectations and acceptable to its negotiation compass.
Romi Jain is a published poet, novelist, and Vice President of the Indian Journal of Asian Affairs.