WASHINGTON – After flirting with the idea of a transatlantic free-trade agreement for several years, President Obama officially announced that the United States would begin formal trade talks with the European Union (EU), eliciting a favorable response from various U.S. groups.
“Tonight I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union because trade that is free and fair across the Atlantic supports millions of good-paying American jobs,” Obama said in his State of the Union address.
U.S. and EU leaders established the High Level Working Group on Jobs and Growth (HLWG) in 2011 to identify policies and measures to increase trade and investment ties. The HLWG released its final report on Feb. 11 outlining some of the group’s findings.
“The HLWG has reached the conclusion that a comprehensive agreement that addresses a broad range of bilateral trade and investment issues, including regulatory issues, and contributes to the development of global rules, would provide the most significant mutual benefit of the various options we have considered,” said the group in its final report.
According to a study by the U.S. Chamber of Commerce, removing tax and regulatory barriers to trade between the U.S. and the EU would lead in five years to an estimated $120 billion increase in annual trade among the 600 million people in these two economies. The U.S. Trade Representative’s Office estimates that the free-trade agreement would “add to the over 13 million American and European jobs already supported by transatlantic trade and investment.”
Sens. Rob Portman (R-Ohio) and Bill Nelson (D-FL) led a bipartisan group of lawmakers in sending a letter to Obama after his speech welcoming the announcement that the United States will pursue the transatlantic agreement with the EU.
“American-made goods and services can thrive in a global economy when competing on a level playing field, and negotiations with the European Union offer us a new opportunity to give a much needed boost to American exporters,” said Portman. “By reducing burdensome trade and regulatory barriers, I am hopeful that this new transatlantic agreement will enable American companies to reach more markets, create jobs, and enhance innovation.”
Business leaders quickly threw their support behind the trade talks.
“This bold, new trade pact holds great promise for both the United States and Europe,” said U.S. Chamber of Commerce President Thomas J. Donohue. “The U.S. business community looks forward to working with the administration and Congress to ensure this agreement delivers growth and jobs for the benefit of all Americans.”
Despite the eurozone crisis and sluggish U.S. growth, the U.S. and the EU still account for half of the world’s gross domestic product and enjoy more than $3 trillion in cross-foreign direct investment. Trade in goods and services between the two accounted for 30 percent of the world total in 2011.
Europe has been pushing the idea in the hope of stimulating its slow rate of economic growth. But the EU’s complex politics could also make for protracted and, perhaps, fruitless negotiations. Of the 27 EU nations, some advocate free trade while others veer towards protectionist industrial policies, making it more difficult to reach a consensus among European nations.
According to the Brookings Institution, world trade is expected to have stalled at a meager 2.5 percent growth in 2012. At a time when protectionism is on the rise around the world, a trade agreement between the U.S. and the EU would reaffirm their stance towards free trade and ensure that western countries set the global trade rules of the future.
Tariffs between the two sides of the Atlantic are already low, averaging two to three percent, though higher on agricultural products. Even if most of these tariffs were eliminated, considerable obstacles to free transatlantic trade would remain since most of what is left is more complex and has to do with reduction of regulatory red tape.
Talks would be aimed primarily at reducing barriers to transatlantic trade in goods, services, investment, and public procurement. EU officials have spoken of creating “something approaching a transatlantic single market in goods.”
One of the major goals for the EU is to open up America’s public procurement market, which is more protected than Europe’s, partly because the federal government cannot force states to open tenders to foreign bidders. The U.S. allowed foreign bidders to access only one-third of the public procurement market in 2007; by contrast, over two-thirds of the EU procurement market is open to international competition.