Obama seeks $5T European trade deal

The Obama administration is poised to launch trade talks with the European Union that would form a $5 trillion trans-Atlantic free-trade zone.

European Union Trade Commissioner Karel de Gucht will meet with Obama administration officials Tuesday and Wednesday to work toward announcing the talks, which many observers expect could happen this week. 

Such a time frame would give President Obama a chance to tout progress in next week’s State of the Union address. 

{mosads}“The business community will be deeply disappointed if it’s not announced by then or, at least, by mid-February,” Stephen Biegun, vice president of international governmental affairs for Ford, told The Hill. 

A free-trade agreement between the U.S. and European Union would boost trade by hundreds of billions of dollars, according to the U.S. Chamber of Commerce.

Just as importantly, it could allow the two powers to set new standards for trade deals going forward in a rapidly globalizing world where China, India and Brazil are increasingly flexing their muscles.

Top U.S. officials including Vice President Biden are making last-minute efforts to ensure that the Europeans are committed to moving forward on a deal. Biden highlighted the talks as a priority during a weekend visit to Germany, where he met with German Chancellor Angela Merkel. 

A free-trade deal is “within our reach” Biden said in a speech Saturday to the Munich Security Summit, according to reports. He added that leaders on both sides of the Atlantic had shown “lots of interest.”

While tariffs on both sides of the Atlantic are already low, cutting tariffs further could boost trade by more than $120 billion within five years and generate gross domestic product gains of $180 billion, according to a 2010 Chamber study. 

“My broad impression is that, because the trade relationship between the U.S. and EU is so big, even moderate efforts to eliminate barriers, conform regulations and facilitate trade could have significant economic benefits for both sides,” said Edward Gerwin, senior fellow for trade and global economic policy for Third Way.

Finishing a deal will be difficult given the range of differences between the two sides, especially on regulatory issues and agriculture, where both sides continue to protect their domestic producers. 

“Many of the remaining impediments to trade are very tough nuts to crack, such as differences on farm programs, intellectual property protection and regulatory approaches,” Gerwin said. 

Agreements on tough issues such as intellectual property rights, state-owned enterprises and environmental protections could also take some time to reconcile. 

Gerwin said the effort to raise standards in the ongoing negotiations of the Trans-Pacific Partnership (TPP) are an example of what could be carried into a U.S.-EU deal that would “give us more influence in the global trading system and evolving trade deals.”

The TPP is an effort to create a free-trade zone between the U.S. and several Pacific countries, including Australia, Vietnam, Singapore, Chile and Peru. 

Japan has also flirted with the idea of joining those talks. 

Biegun said that Ford is going through each and every regulation pertaining to the auto industries, including safety and environmental standards, in the United States and Europe, with the aim to reconcile them and create a single standard that attracts competition, opens global markets and strengthens business. 

“We want to create a roadmap that is mutually recognized around the world,” he said. 

In the end, the hope is that these higher standards would put pressure on other countries to agree to those same standards as they form their own partnerships. China is a keen target.

“It especially puts more pressure on China to raise their standards, too,” Gerwin said.  

Biegun warns the two sides realistically will have only about 12 to 18 months to get a deal done before political issues on both sides of the Atlantic could interfere. In the U.S., midterm elections could make it difficult to make concession by the middle of next year, and the 2016 presidential race will begin to bear down soon after that. 

The European Commission is also set to turn over in 2014. 

Biegun argued the two sides should also set a date to conclude their talks. 

Ford and other business groups want the two sides to be as aggressive as possible. “We would love to see the U.S. government swing for the fence,” Biegun said.  

Biden, whose trip to Europe fueled speculation that the talks are nearing lift-off, said over the weekend that the nations should act soon and move swiftly toward a deal because “it would be good for growth, job creation and be good on both sides of the Atlantic.”  

“And if so, we should pursue a trans-Atlantic partnership. And if we go down that road, we should try to do it on one tank of gas and avoid protracted rounds of negotiations,” he said.