EU-US free trade zone

[Hazir]

The EU and US have a lot of trade going on between them. It would be in the interest of both to make that trade easier. And that could be done by lowering tariffs, which would be a good thing of course. But the scope for improvement there is limited; the tariffs simply aren't all that high. On the other hand there are a lot of non-tariff barriers that could be removed. The problem with that is that it would require some sort of standardization between the EU and the US. And that is a process we have seen to cause a lot of bad temper and acrimony inside the EU. So I am seriously wondering if a deal between the EU and US ever could lead to anything fruitful.

What are your thoughts about this?

[Dreadnaught]

Interesting issue. I agree there are huge possibilities here. Apparently there are talks starting in the spring that would likely leave food products out of the mix.

My real question is how one could actually resolve some of the big-ticket non-tariff barriers. I'm no expert in these kinds of deals, but I guess why not try and list some of them-

• Cars- Common crash and emissions testing. This shouldn't be too hard, especially because each industry is highly unionized across the pond so they won't be at each other's throats. My only condition would be that Peugeot must stick to the post-1990 status quo and not re-enter the US market.
  
• Financial products- Presumably we're talking about the ability to easily buy and own property in respective markets at some level, right?
  
• Electronics- Shouldn't be too hard except with different electrical outlets swapped-on. Am I missing something?
  
• Software- I think this could be a potential minefield. The Data Protection dictators will be loath to let go of any power and will be hard to compromise US values on these issues with European values. And US tech companies will resist any compromise because they have very little to gain (and everything to lose) from US laws being harmonized with EU laws.
  
• Drugs- This seems like a high-reward/high-difficulty area. It would be fantastic if regulatory approvals would be harmonized, but the US FDA is far too arrogant and I'm sure their EU counterparts are about the same. These are huge bureaucracies that would have to give up some amount of power. Would we be talking about a joint body? Maybe a single body to approve drugs, but each country's regulators can veto something?
  
• Heavy industry- I have a feeling the EU has emissions requirements on things we don't even really regulate here, like leaf blowers and such.

In fact, the main clash of values could probably broadly fit into issues of labor laws and environmental laws. The EU negotiators would be afraid that US products would have "unfair" advantages unless certain EU labor laws and environmental laws were*also implemented in the US to some extent.

[wiggin]

I think harmonization has its points, and it would definitely be a good idea (for that matter, it would be a good idea for us to scrap food subsidies and protections on both sides of the Atlantic). There's scope for some sort of reasonable agreement that wouldn't cover everything but would still provide a nice boost to trade.

The Economist has been talking this up for a while, but they are all excited about harmonizing drug regulation. I simply don't see this happening. The FDA is still chuffed about the whole thalidomide thing, and that's hardly the only time their caution has been warranted. I just don't see it happening; but then NAFTA didn't include joint drug regulation, but it has worked out all right so far.

Frankly, I'm far more excited about the prospects for the Trans Pacific Partnership; I feel like it would take a lot of wrangling for a US-EU agreement, and while the payoff would be great, it wouldn't be as big as the effect of the TPP.

[Dreadnaught]

How would a TPP work with drug approvals? Between the Chinese and Indian penchants for faking/stealing pharmaceuticals, approvals seems like sort of a sideshow.

[RandBlade]

Isn't the TPP South-Eastern Asia/Australasia and some of the Americas? I didn't think the EU was involved at all. I would like to see that expanded to include Europe.

If a genuine free-trade area could be agreed between the Americas, Europe, Australasia and South-East Asia then (and only then) could I picture the UK leaving the EU.

As a starting point it should be possible to eliminate tariffs from that region. Especially food tariffs are not necessarily that low.

[wiggin]

How would a TPP work with drug approvals? Between the Chinese and Indian penchants for faking/stealing pharmaceuticals, approvals seems like sort of a sideshow.

I don't think the TPP's scope would include harmonizing drug regulation (though they might further common rules about sourcing for manufacturing, which has been an issue in recent years). The trade barriers in the major prospective TPP members are far higher than between the US and EU - notably Japan, if they ever end up joining (I hope they do). Aside from trade issues, it also addresses IP protection which is a huge issue in many of these economies (there are flaws with current drafts, but it's still a step forward). It's also with much more dynamic economies than the EU, for the most part (Japan excepted), giving more scope for trade growth. There's always the benefit of establishing closer economic ties in Asia as well - not as a direct counter to China per se, but as a way to instill an ethic of free trade and common sense regulation in the major economies of the region.

A EU-US free trade agreement is a good idea in principle, but it would involve a lot of negotiations and wrangling and exceptions for a modest gain. We should still go for it, though I doubt many of the outstanding issues will really be worked out. The TPP, though, should be pursued much more vigorously.

Isn't the TPP South-Eastern Asia/Australasia and some of the Americas? I didn't think the EU was involved at all. I would like to see that expanded to include Europe.

Perhaps I wasn't clear earlier; indeed the TPP includes essentially NAFTA and a number of important (and some not-so-important) economies on the Pacific Rim - I was writing from the perspective of US policy, not EU policy. Including Europe would probably be a major headache (they would likely want to include a lot more 'common market' kind of rules, which the TPP is unlikely to accept), though I don't doubt it would be a good idea for Europe. In principle I would like a global free trade agreement that bypasses all of these patchwork regional agreements, but the current Doha round of talks has been stalled seemingly indefinitely. In its absence, the US (and EU) should aggressively pursue both bilateral agreements as well as regional trade blocs (a la NAFTA, the EU itself, the TPP, etc.). Meanwhile, they should 'upgrade' existing agreements to reduce the exceptions carved out for various industries (especially agriculture) and harmonize rules between the different trade agreements. Eventually, that will allow the WTO's global talks to get under way again.

If a genuine free-trade area could be agreed between the Americas, Europe, Australasia and South-East Asia then (and only then) could I picture the UK leaving the EU.

As a starting point it should be possible to eliminate tariffs from that region. Especially food tariffs are not necessarily that low.

I don't think the UK leaving would be a good idea, even in this rosy scenario. No free trade area is perfect, and they almost all fall short of the wonders of the EU's common market (which itself is merely a shadow of the integrated US market). The UK would incur a lot of costs not having unfettered access to the common market rather than just being in a free trade bloc that included the EU.

[RandBlade]

The UK's trade with the EU as a percentage of overall trade is falling year on year (its growing with those you personally labelled dynamic), we also I've heard run a major trade deficit with the EU and a trade surplus with the rest of the world. While in the EU we can't unilaterally make trade agreements (eg joining the TPP even if we want to).

I don't support withdrawal but of those I know that do, that is often one of the big arguments in favour.

[wiggin]

The UK's trade with the EU as a percentage of overall trade is falling year on year (its growing with those you personally labelled dynamic), we also I've heard run a major trade deficit with the EU and a trade surplus with the rest of the world. While in the EU we can't unilaterally make trade agreements (eg joining the TPP even if we want to).

I don't support withdrawal but of those I know that do, that is often one of the big arguments in favour.

Everyone's trade with the eurozone is falling - it's in the middle of an awful financial crisis and recession (for some, lasting years). I would imagine that EU member states still form the bulk of the UK's trade, and ignoring that should only be done at your own peril. Leaving the common market could have other issues - could London remain the big hub for euro-denominated financial transactions/forex? Would the UK be able to use streamlined visa procedures, patents, etc. that are a big boon to business? The costs of leaving are not trivial.

Regardless, this is a moot point. To my knowledge the TPP has not been open to countries not, you know, on the Pacific Ocean. It's certainly true that the UK will be free to negotiate both bilateral and regional trade agreements outside of an EU framework, but it already exists in the deepest free trade bloc in the world, the EU.

[Hazir]

Everyone's trade with the eurozone is falling - it's in the middle of an awful financial crisis and recession (for some, lasting years). I would imagine that EU member states still form the bulk of the UK's trade, and ignoring that should only be done at your own peril. Leaving the common market could have other issues - could London remain the big hub for euro-denominated financial transactions/forex? Would the UK be able to use streamlined visa procedures, patents, etc. that are a big boon to business? The costs of leaving are not trivial.

Regardless, this is a moot point. To my knowledge the TPP has not been open to countries not, you know, on the Pacific Ocean. It's certainly true that the UK will be free to negotiate both bilateral and regional trade agreements outside of an EU framework, but it already exists in the deepest free trade bloc in the world, the EU.

Wiggin, you seem to ignore that the EU is by far the biggest actual market for thr US outside NAFTA. Even tiny growth in trade between the US and EU is bound to benefit both parties involved. That makes any agreement with the EU a quick earner. My question is though if both sides can manage to get to the point where they can make big steps which would have huge advantages for both side (at which time the deal outruns TPP by a mile in mutual advantages).

As for the UK making trade deals separate from the EU; not going to happen. Even if they would leave the EU.

[RandBlade]

As for the UK making trade deals separate from the EU; not going to happen. Even if they would leave the EU.

There's absolutely zero evidence for that.

Wiggin is entirely right that leaving the Single Market would not be worth it for those that we would get, but the notion we'd lose the Single Market and never be able to get anything else instead is equally ridiculous.

[Dreadnaught]

@Hazir: it's a good idea if the terms make sense. If either side is somehow forced to kowtow to some major interest group on either side of the Atlantic, the thing will either never get passed or it won't have much positive impact.

The more I think about this, the more I'm curious how they could try to resolve labor, environmental and digital privacy issues.

[GGT]

"Free Trade" is an oxymoron. It's akin to calling "markets" free enterprise zones, regardless of the people involved.

[Steely Glint]

We should combine the dysfunctional political system of America with the dysfunctional finacial system of the EU and create the ultimate economic crisis, which will rise from the ocean and do battle with the current economic crisis, kaiju-movie style.

[Dreadnaught]

Yeah, but at least you'll be able to buy a Ford Fiesta for like 10% less or something.

[LittleFuzzy]

The more I think about this, the more I'm curious how they could try to resolve labor, environmental and digital privacy issues.

I don't think they can, not at present.

[Hazir]

I don't think they can, not at present.

I think it' s going to be near impossible as well. All I see is a bit of tinkering with tariffs. After that they will find out that they simply can't make deals that are acceptable back home and leave it at that.

[RandBlade]

Labour issues have sod all to do with free trade. Neither a transatlantic free trade zone nor the Single Market should have anything to do with them. The US has the right idea in leaving most issues to individual states to decide. Even better is leaving it to local employee-employer relationship to decide.

[Dreadnaught]

And yet labor unions delayed free trade agreements here with Korea and Columbia for five years. I can't imagine they wouldn't try to exert some amount of input into this, or that French negotiators would balk at a free trade agreement with those 50-hour workweek Americans.

[RandBlade]

And yet labor unions delayed free trade agreements here with Korea and Columbia for five years. I can't imagine they wouldn't try to exert some amount of input into this, or that French negotiators would balk at a free trade agreement with those 50-hour workweek Americans.

Just because labour issues have nothing to do with trade doesn't mean that they have nothing to do with politics.

Why does the EU involve itself with labour issues? Not because of trade (its irrelevant to trade) but purely due to politics. Why do unions have issues with NAFTA etc? Its politics.

If I buy some flatpack furniture from IKEA does it matter what Sweden's labour regulations are to me as a consumer? No. Does it matter to unions (and politicians influenced by them)? Yes.

[Dreadnaught]

I know. And yet we live in the world we live in.

[Flixy]

Consumers actually do care (a little) though, see fairtrade products etc.

[RandBlade]

Fairtrade etc is a consumer choice made by some. And I know some who passionately hate Fairtrade and will boycott anything wearing that label. Consumer choices in action > government mandating it.

[Aimless]

Ah yes, the apathy of the majority.

[Hazir]

Well, the EU would like to finalize the deal within the next two years. And I would imagine that Obama has a horizon in his mind has well.

[Loki]

Obama doesn't give a damn about free trade. The first second this becomes politically difficult, he'll stall.

[Hazir]

I would think that he is interested in growth and the jobs that come with growth.

[Loki]

A) He doesn't think free trade is good.
B) The growth in question wouldn't come during his term in office.

He's only doing this to not overly antagonize the Europeans.

[GGT]

Just because labour issues have nothing to do with trade doesn't mean that they have nothing to do with politics.

Why does the EU involve itself with labour issues? Not because of trade (its irrelevant to trade) but purely due to politics. Why do unions have issues with NAFTA etc? Its politics.

If I buy some flatpack furniture from IKEA does it matter what Sweden's labour regulations are to me as a consumer? No. Does it matter to unions (and politicians influenced by them)? Yes.

In reality, buying flatpack furniture from Sweden gives consumers a sense of value combined with social justice. That includes assumptions that Swedish corporations use sustainable models for its materials, and wouldn't exploit human labor, even in third world nations that are part of their production chain. IKEA uses all those issues as main marketing tools in the US.

Labor, trade, and politics are pretty much inextricably linked in the 21st century. Anyone buying a $2 tee-shirt from Walmart, or a $200 chair from IKEA knows that some worker, somewhere, is being screwed.....

[Dreadnaught]

If he were ballsy he would use this kind of agreement to impose European-style labor laws and other stepping-stones of socialism, though it would be a political monster to get through.

But Loki is right that Obama legitimately doesn't believe in free trade. The President who complains that ATM machines are destroying jobs doesn't have a firm understanding of healthy competition.

[Hazir]

A) He doesn't think free trade is good.
B) The growth in question wouldn't come during his term in office.

He's only doing this to not overly antagonize the Europeans.

After 4 years YOU are telling me the American President cares about European sensitivities? That's rich.

In reality, buying flatpack furniture from Sweden gives consumers a sense of value combined with social justice. That includes assumptions that Swedish corporations use sustainable models for its materials, and wouldn't exploit human labor, even in third world nations that are part of their production chain. IKEA uses all those issues as main marketing tools in the US.

Labor, trade, and politics are pretty much inextricably linked in the 21st century. Anyone buying a $2 tee-shirt from Walmart, or a $200 chair from IKEA knows that some worker, somewhere, is being screwed.....

I am pretty certain no flatpack furniture is produced in Sweden at all. Ikea isn't even a Swedish company any longer. So all this tells us that their PR is working on some level.