The Case for Transatlantic Geo-Economics at the G8

A Global Affairs Magazine

Diplomatic Courier volume 6 | issue 3 | may/june 2012

The Case for Transatlantic

Geo-Economics at the G8

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| By Tyson Barker |

hen the G8 leaders meet on May 18th–19th in Camp David, they will face a transatlantic economic outlook that is increasingly diverging and fraught with long-term peril. Even as the U.S. experiences the first glimmers of recovery, the Euro-zone crisis continues to rumble beneath the surface. Spanish and Italian bond yields are climbing again, a reflection of lost competitiveness, debt and anemic growth prospects.

And even as the U.S. pivots to Asia and continental Europe continues to look inward, G8 leaders from the U.S. and Europe should seize the summit to re-ignite an overarching transatlantic economic agreement.

When looking at the state of transatlantic economic policy since the end of the Cold War, the Greek myth about Corinthian king Sisyphus is instructive. Cursed for his hubris, he was forced to roll a boulder up a large hill only to watch haplessly as the stone would tumble back down. He repeatedly had to begin his task again.

Integrating the transatlantic economy— after EU and NATO enlargement, the great post-Cold War strategic project between the U.S. and Europe—has been a Sisyphean endeavor.

For decades, U.S. and European policy-makers have attempted to unlock the latent potential of the world’s two largest markets. Numerous initiatives have been launched with varied outcomes, but none proved to be the game-changer that ignited the push from the New Transatlantic Agenda (NTA) in 1995 to the Transatlantic Economic Council (TEC) in 2007. These initiatives, often with deep political undertones, have never sustained the internal logic long enough to yield the tangible strategic results. Today, for example, the TEC–the last major initiative aimed at regulatory harmonization across portfolios–is delivering some solid, if highly technical breakthroughs. But at its low point in 2008, the TEC had devolved into a cabinet-level talk shop about disinfecting processed chicken.

The G8 summit could offer the dogged Sisypheans in the transatlantic community another, perhaps fleeting, chance. In Washington, there is the sense that critical mass for joint action has been achieved. The business community on both sides of the Atlantic, from the U.S. Chamber of Commerce to BusinessEurope, united early to push the U.S. and Europe to move

their timetable forward. On the Hill, a bipartisan coalition of advocates, from Congressman Gregory Meeks (D-NY) to Senator Rob Portman (ROH), has been rallying support for a major push for a more imaginative economic agreement between the U.S. and Europe. And the transatlantic brain trust spent much of the spring churning out reports, holding workshops in Washington and Brussels, and testifying before Congress.

Why might this time be different? First of all, this spring has already seen a great deal of positive momentum in the U.S.-EU economic relationship in what U.S. Ambassador to the EU William Kennard calls “putting points on the board.” Three high-profile cases stand out in particular. In February, the U.S. and EU signed an agreement on organic food certification that will ease market access for U.S. and EU producers in the entire transatlantic organic market (90% of the world market, or approximately $50 billion). Negotiators have also made significant progress on relaxing a complex series of 20-yearold bans on beef imports. Moreover, the U.S. and EU (and Japan) have followed their WTO dispute settlement victory on raw materials with a joint dispute settlement case against China on its restrictive rare-earths export policy. Rare earths, a cluster of materials used in the most advanced technology from green tech to smart phones, are what Senator Kay Hagan (D-NC) has called “the building blocks of next generation manufacturing.”

Second, in November 2011, the Obama administration and its counterparts in the European Commission established the High Level

Copyright © 2012 by Diplomatic Courier. Adapted with permission.

For subscriptions to Diplomatic Courier, visit us online at www.diplomaticourier.com summitry | g8 Working Group on Jobs and Growth. The Working Group differed cleverly in two key ways from earlier iterations. First, it has a limited one-year mandate to assess the areas in which the conditions are right for progress—from public procurement policy to the foreign-direct-investment (FDI) climate to regulatory barriers to trade to aligned digital and privacy standards in the commercial realm—and chart a course toward a more deeply enmeshed transatlantic marketplace that touches on issues beyond tariffs. The Working Group also avoided creating false expectations of what can be accomplished at the outset, focusing rather on a sober analysis of 17 fields. Results are to be presented in June 2012.

Finally, interest in a deepened transatlantic economic agreement is gaining traction in Europe. German Chancellor Angela Merkel called for an overarching transatlantic trade agreement at this year’s World Economic Forum annual meeting in Davos, as did British Prime Minister David Cameron, most recently during his March 2012 state visit to Washington DC. Perhaps most surprising has been Paris’ tacit acquiescence to a more comprehensive agreement, even in the midst of a tough campaign season that has highlighted French ambivalence about globalization. With the political elements in the most powerful European member-states coalescing, the European Commission—the EU’s executive arm—seems to be moving aggressively toward negotiations on a big initiative with the US.

For the U.S., the G8 summit is the last high-profile opportunity for the Obama administration to outline its vision for the transatlantic economic relationship before the presidential election. The Working Group should fast track the results of its internal assessment and use the spring G8 summit in Camp David as the platform to launch such a big-think initiative. The Camp David summit is long enough before the election to avoid being clouded by the political morass that will certainly engulf any initiatives launched in the summer. It will also send a powerful signal that the Obama administration is committed to bolstering the U.S.’s economic profile internationally in a manner that is constructive and market oriented. At the same time, such a move would signal to Europe the U.S.’s continued dedication to the transatlantic strategic relationship, which has been doubted in recent years. It will also provide a glimpse into the international economic priorities of a second-term Obama administration.

The challenge will be for the U.S. and EU to find a Goldilocks initiative that manages expectations and provides a durable vision for the transatlantic market place in 10 years’ time.

Overreaching at its outset risks inviting interests groups to pick apart the agreement. Thinking small will not ignite the imagination of political leaders, especially in Congress and in European parliaments. This has been the case in plurilateral U.S.-EU cooperation in the Obama administration. While tangible headway has been made

on regulatory standards from e-vehicles to commercial refrigeration to secure cargo safety standards, these victories have not led to an overarching internal logic that provides the transatlantic economic relationship the geopolitical weight it deserves.

In finding that middle path, the Obama administration and its EU partners should think about the long game rather than the big bang. Leaders should announce a comprehensive roadmap dotted with a litany of short- and long-term benchmarks—some publicly declared, some behind the scenes—that will knit together an overarching narrative for a deep transatlantic economic compact.

At the G8 meeting itself, leaders from the U.S. and Europe can begin the process with a package of short-term deliverables that will set the tone for a long-term strategy. First, the leaders and their Japanese counterparts should announce that the Doha Round of WTO negotiations has reached an inconclusive stalemate and increasingly obstructs greater global trade and investment liberalization. By moving to a plurilateral nucleus, the U.S. and Europe can regenerate global economic integration while leaving the door open to re-centering negotiations in a multilateral format when the time is right. Second, the partners could immediately agree to a U.S.-EU investment agreement that would subsume the bilateral investment agreements that the U.S. has with many EU member-states in a manner that is consistent with the Lisbon Treaty. Third, the U.S. and the EU could establish principles for market access for jointly engaging rising economic powerhouses like China and India. Fourth, they can announce that legislators should be incorporated into and take ownership of the legislative implementation early in the process. This is equally true for Congress as for the European Parliament. The U.S. administration should work with Congress to set up a task force within the Ways and Means Committee to mirror the transatlantic working group of the European Parliament’s Trade Committee under Chairman Vital Moreira. This group could serve as the core of the Congressional delegation that will meet with its European counterparts in Copenhagen this summer and could become a bipartisan hub for legislation in Washington.

There is an increasing sense that the U.S.-European economic predominance is on borrowed time. Today the U.S. and Europe comprise 50% of global GDP (41% in purchasing power). That number is projected to diminish to 31.6% by 2030. There are centrifugal forces pulling at the transatlantic relationship. The G8 summit should take advantage of this window of opportunity to lay out how the transatlantic economic relationship can continue to shape the global economic order.

Tyson Barker is director of transatlantic relations at the Bertelsmann Foundation.