A Trans-Atlantic Compact: Are We Synching?

Thursday, 18 April 2013, 12:00pm – 12:30pm

Panelists:

  • Aart De Geus, President and CEO, Bertelsmann Foundation
  • Miriam Sapiro, Deputy US Trade Representative

Moderator:

  • Ed Luce, Chief Washington Commentator, Financial Times

Optimism for a transatlantic free trade agreement

The United States and the European Union are on track to ratify a trans-Atlantic trade agreement in 2014, agreed Bertelsmann Foundation President and CEO Aart De Geus and Deputy US Trade Representative Miriam Sapiro.

The prospects for such an agreement – in the works for several years – enjoyed a significant boost when President Obama in January publicly announced a Transatlantic Trade and Investment Partnership (TTIP) as a means to boost American employment.

The proposed deal was a mere sentence in the president’s annual address to Congress, but still, said De Geus, a serious plan for a pact that is likely to bring much needed relief for the US and EU economies.

“It’s called a game-changer,” De Geus said, choosing the same word used by EU President Jose Manuel Barroso when he spoke of the proposal earlier this year. “Together we will form the largest trade zone in the world,” Barroso said in February.

De Geus cited a Bertelsmann study published this month that shows that 88 percent of stakeholders believe the agreement will come to fruition. Of those, he continued, more than half (55 percent) think it would prove itself moderate in scope, with a significant minority (37 percent) predicting it would be broader.

An agreement, De Geus added, would be a “deficit neutral”, trade-boosting tool.

Sapiro also expressed enthusiasm for the proposed agreement’s prospects for passage and its potential to lift the American and European economies.

“There is strong support for trade in general,” Sapiro said, noting that the US recently entered into three free trade agreements (Panama, Colombia and South Korea, all in 2011) with the blessings of both Republicans and Democrats.

“We have broad support,” she said, and noted that together, the US and the EU account for about one- third of trade globally.

And though, Sapiro added, tariffs between the EU and the US are generally quite low (averaging three percent), the sheer volume of trade across the Atlantic -- $646 billion last year -- means an agreement would translate into a significant economic boost. The goal is the full elimination of tariffs on agricultural and industrial goods, Sapiro said.

A deal, however, is far from certain, and moderator Ed Luce, chief Washington commentator at the Financial Times, asked both panelists what they consider the greatest obstacles to an agreement. Tariffs are not the only topics on the table, and others, the discussion made clear, could prove far more contentious.

Non-tariff barriers, such as disparate regulatory regimes, “are currently a serious impediment to trade”, Sapiro said. Other issues to tackle include variations in intellectual-property law and the regulation of data protection.

Then there is the specter of genetically modified organisms, or GMOs, which are widely accepted among US consumers but inimical to many Europeans and strictly regulated within Europe.

Both sides are ready to roll up their sleeves and do whatever they can to make this work,” Sapiro said of the GMO issue. “The EU does now have a process for accepting GMO,” she added.

Luce suggested that the prospects of having to loosen regulations on GMO could be a deal breaker for a trans-Atlantic agreement. De Geus responded that difficult issues remain to be negotiated, but that the agreement doesn’t have to be perfect to be accepted by both parties.

Sapiro provided some details of the timeline for an agreement. The US is currently in “listening mode”, a 90-day period ending in mid-June during which it is seeking comment on the proposal.

Though there is not hard deadline to finish negotiations, the goal is 2014, in keeping with the EU’s calendar, she said. (The current Commission’s term of office ends Oct. 31, 2014.)

Several audience members asked about the potential impact of a trans-Atlantic free trade agreement on Asia. One questioner worried that a deal would be exclusive, with Asia on the outside: What sort of message about preferential treatment between Europeans and Americans do these negotiations send to Asia?

“The message in my view is that greater trade and investment creates more opportunities for more economies,” Sapiro replied. And the hope, she said, is that other regions and nations will see a trans- Atlantic agreement as a model for more pacts that involve other nations and regions.

Or, as De Geus put it: “The world economy is not a zero sum game.” Neither the US nor the EU has any incentive, he said, to sign an agreement that would hurt their relationships with Asia.