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FEBRUARY 13, 2013

A NEW US-EU TRADE DEAL: ARE WE SYNCHING? by Tyson Barker President Obama’s State of the Union announcement to “launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union” committed the US to engage in its most ambitious economic re-wiring in a generation. The force of the announcement exceeded expectations; some observers hailed it as the speech’s most significant statement. The US had been coquettish about its intention to pursue an agreement that would graft together the world’s two largest economies, but Washington’s hard negotiating position paid off. In the run-up to the announcement, the US received concessions on some difficult agricultural issues that seemed intractable. In addition, a subsequent battery of announcements dispelled any doubt about the scope of this initiative. The final report of the High Level Working Group for Jobs and Growth called for a “comprehensive ambitious agreement”, the most far-reaching of all options considered. The dimensions of the US-EU economic relationship are unparalleled. More than 13 million American and European jobs are fostered by trans-Atlantic trade and investment. This is roughly equal to total employment in Poland. The flow of trans-Atlantic goods and services is currently $2.7 billion per day, equal to that among NAFTA countries in 2011. US-EU direct investment was $3.7 trillion in 2011, compared to $594.7 billion among NAFTA countries in 2009. Time to Huddle The Atlantic partners now enter into a honeymoon phase during which both sides must confer with legislators and stakeholders about the contours of an agreement. Trade officials have spoken


of a “high-standard” partnership in which tariff and quota reduction are merely the baseline issue. The wish list will be long, touching on everything from agriculture, procurement, IPR protection, regulatory alignment, joint approaches to SOEs, currency targeting, commodities and energy. Consultation with Congress will be crucial in the coming months. Currently, knowledge on Capitol Hill of the Transatlantic Trade and Investment Partnership is much lower than knowledge of the Trans-Pacific Partnership (TPP). But initial reactions from Congress match the White House’s robust enthusiasm. Key figures on the Senate Finance Committee have endorsed an agreement with Europe, stating that “[a] comprehensive US-EU FTA, negotiated and implemented with the highest standards, would have a multiplier effect and would be certain to generate much needed economic growth on both sides of the Atlantic.” Last year, while still in the Senate, Secretary of State John Kerry, along with Rob Portman (R-OH), spearheaded an effort rallying Congress to support such an endeavor. In the House, Ways and Means Chair Dave Camp (R-MI) has said “a strong, comprehensive trade and investment agreement with the EU has the potential to create significant good-paying jobs for American workers.” The chair of the House Subcommittee on Trade, Portuguese-American Devin Nunes (R-CA), sponsored legislation in the last Congress to give the administration the leeway to start negotiations. In Europe, discussions will now also be prone to greater scrutiny. Thus far, deal proponents, including the German and British governments, the European Commission and the Trade Committee of the European Parliament have dominated the narrative in Europe. In coming months, the French and Italian governments, Green parties and European agribusiness will play a greater role in shaping European positions. This must happen quickly and with sustained political engagement to set the stage for a formal launch of negotiations in June, probably timed around President Obama’s visit to Europe for the G8 summit. A “Go Big” Strategy With the trans-Atlantic economic partnership and the concurrent TPP, President Obama has outlined a vision for trade policy that could be part of his legacy. The Bush administration pursued a two-track approach to trade, focusing simultaneously on bilateral agreements with smaller economies (e.g., Peru, Colombia, Central America) and the completion of multilateral talks in the Doha Round. The Obama administration in contrast has now articulated a “going big” bilateral strategy, focusing on game-changer agreements with the world’s most significant economic blocs—the EU and the Asia-Pacific— that are tinged with geopolitical undertones and meant to re-ignite global trade liberalization and reset the multilateral economic order. The Transatlantic Trade and Investment Partnership—while economically driven—has always been guided by geopolitics. It was an elegant means for the administration to create a positive agenda that would allow it to engage in everything from the eurozone crisis to the potentially distortive effects of China’s rise. It also provides an organizing logic for the US’s relationship with Europe that has been defined in recent years by withdrawal (Afghanistan, Iraq), retrenchment (declining defense budgets and political will for security operations) and economic crises.


A Case Study in Economic Statecraft Post-crisis US foreign policy has attempted to integrate economic policy more tightly. “Economic statecraft” is the diplomatic buzzword for such an intertwined policy approach, and Secretary of State John Kerry reaffirmed the commitment to this approach. “Foreign policy is economic policy,” he said. It’s been clear for decades that the traditional silos of foreign policy have broken open, eroding the boundaries between traditional agencies and departments. Areas like cyber security, climate change, regulation and trade are now front-burner issues that require economic statecraft. With its announcement today, the US has begun to implement this strategy in earnest. The shared values make US-European relations a laboratory for what is possible in interstate relations and to test the mettle of economic statecraft in practice. The Bertelsmann Foundation recently released its Field Manual to Europe, which sets out a strategy for realizing a new trans-Atlantic economic compact. The Field Manual can be found at: http://www.bfna.org/publication/field-manual-to-europe. Tyson Barker is director of transatlantic relations at the Bertelsmann Foundation. tyson.barker@bfna.org ABOUT THE BERTELSMANN FOUNDATION The Bertelsmann Foundation is a private, non-partisan operating foundation, working to promote and strengthen transAtlantic cooperation. Serving as a platform for open dialogue among key stakeholders, the foundation develops practical policy recommendations on issues central to successful development on both sides of the ocean. ©Copyright 2013, Bertelsmann Foundation. All rights reserved. 1101 New York Avenue, NW, Suite 901 • Washington, DC 20005 USA • Tel: +1.202.384.1980 www.bfna.org


B|Brief: A New US-EU Trade Deal: Are We Synching?