US enthusiastic about trade deal despite culture opt-out
By Benjamin Fox
After months of enthusiastic talk about the most lucrative trade agreement in history, EU-US trade negotiations got off to an inauspicious start.
With their American counterparts waiting in Washington, EU trade ministers spent more than 12 hours holed up in a meeting in Luxembourg after the French government insisted that it would veto a negotiating mandate that did not exclude audio-visual services.
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In the end, a face-saving compromise was agreed. The film industry will not be part of the mandate of the clumsily named Trans-atlantic Trade and Investment Partnership (TTIP), but it will be on the negotiating table and the European Commission will report back on what the Americans say before deciding on next steps with ministers.
As a result, UK Prime Minister David Cameron was able to launch the talks at last week's G8 summit in Northern Ireland, and the Irish government added another thing to its list of EU presidency achievements.
If French intransigence exasperated many of her European counterparts, the American reaction was one of bemusement.
"Our view is pretty clear, in order to get a comprehensive and ambitious agreement we don't think that you should come to the table with carve outs," William Kennard, the US ambassador to the EU, told a small group of reporters last Thursday (20 June). "It's not a carve out but a caveat…….. but EU negotiators are not free of constraints on this," he added.
More than anything else, the controversy over the status of the audiovisual sector demonstrates the difficult and unwieldy process of satisfying all 27 EU member states. It will also put added pressure on trade commissioner, Karel de Gucht, who will lead the EU's team. After the embarrassing collapse of the anti-counterfeit treaty Acta last summer, rejected by the European Parliament following two years of negotiations, the Commission will be feeling the heat to make sure that it delivers on its promises.
"We were promised things (on Acta) that Europe did not deliver," says Tyson Barker, director of transatlantic relations at the Bertelsmann Foundation, a Washington DC-based think-tank.
But if the so-called 'cultural exception' is the EU's first 'opt out', there is also much on what the US will want to remove from the negotiating table. Kennard disputed suggestions that financial services would be removed, but was less equivocal about the agriculture and transport sectors.
"You've only got to look at the last 25 years of US-EU relationship to know where the tensions are," he said.
The first round of talks between EU and US officials will start on 8 July in Washington. The Obama administration is "hyper ambitious" on the timeline for negotiation, says Barker, adding that 2015 - following next autumn's Congressional mid-term elections - is "a perfect year to ratify.".
"Everyone has an incentive to move really quickly on this," said Kennard. "The biggest threat to the negotiations is drift."
As far as the broad political mood in the US is concerned, the TTIP is not expected to be controversial. The majority of Congressional Democrats and Republicans are supportive of a deal with Europe and made no attempt to pressure the White House for their own opt-outs. "Frankly, I'm quite proud and satisfied that we've got to this stage without demands for carve outs on our side," says Kennard.
Meanwhile, the Obama administration is also well aware of the 'legacy' factor. It is "a historic opportunity to create the largest bilateral trade agreement, but also to inject new vitality into the global trading system," Kennard adds.
A successful TTIP, together with a similar deal with Japan, would see Obama leave office in 2016 having secured the two biggest trade and investment agreements in history.
The US and the EU's 27 member states already have the largest single trade relationship, accounting for around a third of world trade and €2.1 billion ($2.7 billion) per day in goods and services. Since November 2011 they have been exploring ways to further deepen ties amid rising global competition, particularly from China.
For the US, a trade agreement with Europe could set the rules of international trade and form the basis for agreements with other countries, such as South Korea.
Enlightened self-interest is also at play. If the US economy is not quite as desperate for growth as recession-weary Europe, it is not far behind. While the European Commission estimates economic benefits worth €100 billion per year extra to the EU economy, the US is forecast to make an extra €80 billion, together with up to two million new jobs.
In Kennard's words, "we are at a moment with the EU where there is more incentive to cooperate than to compete."
At the June summit in Brussels later this week, EU leaders will once again trumpet their desire to combat the chronic levels of unemployment, particularly among under 25s, across the bloc. A year after committing to a Growth and Jobs pact worth €120 billion, only €6 billion has been forthcoming for the so-called Youth Guarantee initiative.
Securing a trade deal with the US would do more for employment prospects in Europe than any policy emanating from Brussels or national capitals in recent years. Although there are numerous reasons for politicians on both sides of the Atlantic to stay 'hyper ambitious' on the TTIP, this is the single most important reason why trade officials should keep their eyes on prize.