The ambitious EU-US trade and investment deal has tripped over France’s demands to exclude audiovisual works from the mandate for negotiation that EU ministers are due to sign on Friday (14 June).

France is asking to exclude movies and digital media from the negotiating table with the United States. French Prime Minister Jean-Marc Ayrault told Parliament: "France will go as far as using its political veto. This is about our identity, it's our struggle."

The European Commission has tried to reassure France that it will preserve the European culture sector, but that it was wrong to take dossiers off the table even before negotiations had started.

"The total exclusion of the audiovisual sector from the negotiating mandate is not necessary to achieve our goals, particularly on the ‘cultural exception,’” said  European Commission José Manuel Barroso.

"To the contrary, excluding an entire sector is to limit our ambition for all negotiation. This may jeopardize the European interest in an area where the EU also has offensive interests,” he added.

A French diplomatic source said there was a “real difficulty” with the assurances given by the Commission as excluding the audiovisual sector from the negotiation had become all the more crucial as the sector was undergoing a profound technological transformation caused by the internet revolution.

“No-one today with the best faith in the world can tell what will be the future contents and media supports for audiovisual and cultural policies. So, the partial exclusion of this sector does not make much sense with regards to the reality of this sector.”

The source added that France was “not convinced” that the exclusion of audiovisual services from the negotiation would lead to retaliation on the US side, saying the argument was “legitimate” but “a bit simplistic”.

Tit for tat

Washington has warned Brussels that if the EU concedes to take the cultural exception off the mandate to placate France, the US might indeed retaliate.

“If a mandate is released that constrains negotiators – whatever you want to call it, a carve-out, a red line, an exception – if it’s not a clean mandate, it will increase the pressure on our side to do the same,” US ambassador to the EU, William Kennard said in an interview with the Financial Times. “That’s only natural. There is a quid pro quo here, and there will be a price to pay."

The decision to launch negotiations followed the recommendations by a joint EU-US High level working group on growth and jobs.  Politicians and businesses on both sides of the Atlantic have said an agreement would benefit both economies. 

EU companies are expected to sell an additional €187 billion worth of goods and services a year to the US, which is good news for creating new jobs, at a time when both Europe and the US look to underpin their economic recovery.

Both sides, however, have reiterated repeatedly the need to keep all sectors on the table and maintain the ambition of a comprehensive deal.

With France’s urge to remove the cultural sector from the negotiating mandate, the US could indeed retaliate, cooling down the ambition of negotiators.

Maritime cabotage and financial services

Peter Chase, vice-president for Europe of the US Chamber of Commerce told EurActiv he would not be surprised if Washington wanted to take maritime cabotage off the table.

At the moment, the US Jones Act prevents foreign companies from domestic cargo freighting. A ship leaving the EU cannot deliver to New York and then move on to another US port.

“I suspect that if the French succeed to take cultural exception off the table, the US might take the Jones Act on maritime cabotage off the table. If I were an EU maritime country I would not be very happy,” he said hinting at the divide between EU member states.

“I tend to think that when you create walls to protect an industry, almost always the long-term impact of that is to usually weaken that industry,” he said.

The US may also push to exclude regulation of financial services. The US and Europe, for example, appear to be moving in opposite directions in the treatment of systemically important financial institutions, other sources said.

Many key US officials, including at the Federal Reserve, address the too-big-to-fail issue with limitations on size as much as boosting capital requirements, which goes against the EU inclination to limit the size of financial institutions.  

Seeking a compromise

The Irish presidency of the EU is trying to find a compromise, as the mandate needs unanimity. If no solution is found, it may cause a delay in launching the negotiations.

On the US side, the 90-day legally required consulting period will end on June 20th.

If EU trade ministers do not find a compromise, the lack of agreement will most likely sour next week's G8 Summit, when US President Barack Obama and EU leaders are supposed to kick-off the negotiations and give them important political momentum.