SPECIAL REPORT / A green light to start talks on a transatlantic free trade agreement (FTA) is likely to come early next month, EurActiv has learned, lifting European industries' hopes that increased demand from the US will help turn around its fortunes.
Analysts believe that an EU-US FTA could deliver a 2% boost in GDP for both parties, providing a much needed fillip for European industries, but complications remain over the scope and commitment to a deal.
A senior industrial source – who preferred to remain anonymous – told EurActiv that a EU-US High Level Working Group is ready to report to Trade Commissioner Karel De Gucht and US Trade Representative Ron Kirk “in early February”.
The EU and the US economies account together for about half the entire world GDP and for nearly a third of world trade flows.
“There is a very good chance that we will start negotiations for a US-EU comprehensive trade deal in the very near future,” said Fabian Zuleeg, the European Policy Centre’s (EPC) chief economist.
Negotiations under way during Irish presidency
Irish Prime Minister Enda Kenny indicated earlier this month that the High-Level Group report would be favourable to launching negotiations on a trade deal. Ireland currently holds the six-month rotating presidency of the EU Council of Ministers and has a special role to play in the negotiation.
“With 26 million unemployed in the European Union, trade and investment are opportunities to boost growth and jobs,” Kenny said after meeting European Council President Herman Van Rompuy in Dublin earlier this month.
Diplomatic sources believe negotiations can start before the end of the Irish presidency, but obstacles remain. Bilateral trade policy cooperation has been less than optimal in the past years, analysts say.
Obstacles remain, primarily in the form of non-tariff barriers and disparities in some regulations. And there are questions over the extent to which industries want to see more trade protections rather than open access.
“We need some [trade policy] that is more proactive, defensive of industry, European interests, rather than simply looking at the academic purity of the WTO rules and the need for Europe to be first in class,” said Gordon Moffat, the director-general of Eurofer, the European Steel Association.
Behind the diplomatic good intentions there are concerns that on the larger commodities markets, regional trade blocs are pushing a protectionist agenda, and the EU is losing out as a result.
“I think they [the EU] need to do something along the lines of what the Americans, the Indians and the others do. Everyone else is defending their interests in a way that is far more proactive,” Moffat added.
Numerous other bilateral trade discussions between the EU, the United States and third parties could also impede discussions. In particular, Europe is wary of the extent to which the US may be more focused on its Trans-Pacific Partnership (TPP) talks, in which it is seeking to finalise a comprehensive deal covering a range of Asian countries.
The EU is currently trying to negotiate a trade agreement with Japan, but “there may be a race on” for influence in Japan – with its interest in the TPP, said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, a think tank.
EU concerned about Asian developments
“How can the US be equally ambitious both on the TPP and Atlantic [European] side of negotiations,” is one of the questions under consideration by policymakers, Lutz Güllner, an EU official, said recently.
Strong trade and cultural links between Ireland and the US provide a firm platform for talks, however. In October last year Julianne Smith, the US deputy national security advisor, said: “The United States and Europe have never been more strategically aligned than we are today.”
“While it is impossible to predict the outcome, I think there is a good chance that we can successfully conclude such a deal, especially since politicians will not want to give a bad signal to markets and investors,” EPC’s Zuleeg said.
An EU-US FTA could be “a crucial growth impulse at a time when we desperately need more growth”, Zuleeg said.
He acknowledged that for many industries it will create more competition, but says they need to factor in the beneficial effects of increasing their markets.
The EU-US trade relationship is the biggest in the world, with more than €1.8 billion of goods and services traded every day between the European Union and the United States.
The Irish presidency has made it a priority of its seventh presidency of the EU to finalise pending free trade agreements with third countries. Such deals are expected to deliver gains in growth and jobs, at a time when EU domestic demand is stagnant because of the eurocrisis and austerity programmes.
The presidency will hold an informal meeting of trade ministers which is supposed to lead to trade deals with Canada, India, Japan and the United States.
- 7-8 Feb.: European Council
- 18 June: Informal Trade Council
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