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Obama to Open Trade Talks With E.U. Obama to Open Trade Talks With E.U.
(about 4 hours later)
BRUSSELS — Answering pleas from European leaders desperate for a way to speed up economic growth, President Obama said on Tuesday that the United States would begin talks on a comprehensive trade agreement with the European Union. BRUSSELS — Embarking on what could be the biggest trade agreement ever in its economic sweep, officials from the United States and the European Union indicated Wednesday that they had already resolved some of the stickiest issues behind closed doors.
Mr. Obama devoted a single sentence to the topic in his State of the Union address, but that was what proponents of a trade deal had been hoping for. His statement set the stage for talks to remove tariff barriers and regulatory hurdles between the United States and the European Union, which are already each other’s largest trading partners. But the sheer ambition of the trade negotiations, which aim not only to eliminate import duties but also synchronize regulations governing products like cars, drugs and medical devices, leaves plenty of room for the talks to bog down in the type of parochial concerns that have derailed past efforts at a trans-Atlantic trade pact.
“And tonight, I’m announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union,” Mr. Obama said, in the process also giving the potential pact a name. He added, “because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.” Ron Kirk, the U.S. Trade Representative, said by telephone Wednesday that this time things would be different. Already, he said, preliminary discussions between him and top E.U. officials have made “very good progress” on issues that have stymied trade relations for years, like health and safety standards applied to food. A final agreement is possible before the end of 2014, he said.
Karel De Gucht, the E.U. trade commissioner, said completing such a trade deal could take about two years, according to an advance copy of remarks he was expected to make in Brussels on Wednesday. But, Mr. Kirk acknowledged, “we’ve still got a lot of work ahead of us.”
Mr. De Gucht said that he wanted formal negotiations to begin before the summer and that his goal was “then to push ahead with them as quickly as possible.” President Barack Obama endorsed a trade pact during his State of the Union address Tuesday, answering pleas from European leaders desperate for a way to speed up economic growth. Though Mr. Obama devoted only a single sentence to the topic, it was the green light that proponents of a trade deal had been hoping for.
Some of the toughest negotiations are expected to focus on food and pharmaceutical regulations in Europe — but Mr. De Gucht made several pointed references to concessions that the Europeans would seek from the United States. “And tonight, I’m announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union,” Mr. Obama said, giving the potential pact a name. He added, “Because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.”
“First of all, we still need to dismantle any remaining traditional tariffs and then we need to make headway on market access issues in other areas, such as public procurement, services and investment,” said Mr. De Gucht, according to the advance copy of his remarks. European officials on Wednesday agreed with Mr. Kirk that the timing is favorable for an agreement. And officials in both Brussels and Washington noted that the rising economic might of China gave them further incentive. A broad trade agreement could help ensure that Americans and Europeans, and not the Chinese government, would set standards on product safety or protection of intellectual property in years to come.
He said an example was “the barriers faced by European car manufacturers over their exports to the U.S.” “You will now be setting what the rules of the road are for trade that are going to shape the global trading system,” said Karan Bhatia, a former deputy U.S. trade representative who is now vice president for global government affairs at General Electric in Washington.
He added that automobile safety rules in Europe and the United States were similarly strict, so “perhaps it makes sense to look together at putting in place a system of mutual recognition.” Unless the United States and Europe are in agreement, in too many future trade cases, “we would be forced to accept Chinese standards,” Karel De Gucht, the trade commissioner who is expected to lead the talks on behalf of Europe, said during an interview. “That’s what it is about.”
There are many sensitive and complex issues to overcome. On Tuesday, two powerful U.S. senators warned that any deal must open Europe to American farm products. José Manuel Barroso, the president of the European Commission — the Union’s administrative arm — said at a news conference here that a trade pact would bolster the economies of the United States and Europe.
“Both of us need growth, and both us also have budgetary difficulties,” Mr. Barroso said. “Trade is the most economic way of promoting growth.”
But Mr. De Gucht, interviewed later, added a note of caution. “The low-hanging fruit doesn’t exist here any more,” he said. “All the easy topics are off the table.”
European leaders, including Prime Minister David Cameron of Britain and Chancellor Angela Merkel of Germany, have been pushing for a trade deal as a low-cost way of stimulating their struggling economies. Mr. Obama’s statement Tuesday will help put to rest complaints by some Europeans that the U.S. president has not paid enough attention to his country’s largest trading partner.
“A deal will create jobs on both sides of the Atlantic and make our countries more prosperous,” Mr. Cameron said in statement. “Breaking down the remaining trade barriers and securing a comprehensive deal will require hard work and bold decisions on both sides.”
Between them, the United States and Europe account for about half of global economic output and one-third of world trade. Trade in goods between the Union and America totaled $646 billion last year, according to U.S. government figures.
According to Mr. Kirk, the trade representative, the Union is the best customer for U.S. exports, buying $459 billion in goods and services and supporting 2.4 million American jobs.
“I don’t know if I would call it the biggest trade agreement in the history of the planet,” Mr. Kirk said, “but it is really a very big deal.”
Tariffs on goods traveling between the United States and Europe are already low, averaging about 3 percent. But the saving from eliminating duties would still be significant because the volume is so enormous.
“One of the big winners is the aircraft sector, where the tariff rate is very low but value is so high,” Peter Chase, vice president for Europe of the U.S. Chamber of Commerce, said during a conference call with reporters Wednesday. Duties on aircraft come to about $450 million a year, he said. “That’s a lot of money by anyone’s count.”
With his use of the word “comprehensive” in his speech Tuesday, Mr. Obama indicated that negotiators planned to go beyond tariffs and attempt to eliminate regulatory inconsistencies that, for example, force the German carmaker Audi to build different versions of its vehicles for the U.S. and European markets, or require drug makers to seek approvals for new medicines on both continents.
Mr. Obama, presumably, would not have put his imprimatur on such an ambitious trade agenda unless he were confident of success. A so-called high-level working group including Mr. Kirk and Mr. De Gucht spent most of a year discussing the framework for talks; it issued its report Wednesday after a delay of several months. One reason for the delay was that officials wanted to make sure ahead of time that they could overcome historic points of contention.
“We don’t want to spend 10 years negotiating what are well-known issues and not reach a result,” Michael Froman, the U.S. deputy national security adviser for international economic affairs, said on a conference call with reporters Wednesday.
The increasing economic importance of emerging-market countries in Asia and Latin America, which threatens the economic supremacy of the United States and Europe, adds another measure of urgency.
A deal “will have a worldwide impact,” said Mr. De Gucht, the Union’s trade commissioner. He said the talks were “about our place — and by our place I mean the United States and Europe — within a decade on the world economic scene.”
The similarities between Europe and America in culture and legal systems mean that harmonizing regulations should be possible. Both, for example, impose strict safety and emissions requirements on automobiles, even if their regulations differ in important ways. While there is no talk of creating joint U.S. and European regulatory agencies, Mr. De Gucht said that “perhaps it makes sense to look together at putting in place a system of mutual recognition.”
But with many sensitive and complex issues to overcome, two powerful U.S. senators warned Tuesday, anticipating Mr. Obama’s speech, that any deal must open Europe to American farm products.
Max Baucus, Democrat of Montana, who is chairman of the Senate Finance Committee, and Orrin G. Hatch of Utah, the highest-ranking Republican on the committee, said that a trade deal presented an “enticing opportunity.”Max Baucus, Democrat of Montana, who is chairman of the Senate Finance Committee, and Orrin G. Hatch of Utah, the highest-ranking Republican on the committee, said that a trade deal presented an “enticing opportunity.”
But in a letter to Ron Kirk, the U.S. Trade Representative, they also wrote, “Broad bipartisan Congressional support for expanding trade with the EU depends, in large part, on lowering trade barriers for American agricultural products.” But in a letter to Mr. Kirk, they also wrote: “Broad bipartisan Congressional support for expanding trade with the E.U. depends, in large part, on lowering trade barriers for American agricultural products.”
E.U. leaders, including Prime Minister David Cameron of Britain and Chancellor Angela Merkel of Germany, have been pushing for a trade deal as a low-cost way of stimulating their struggling economies. Both have called for a deal numerous times since Mr. Obama’s re-election. The U.S. Chamber of Commerce and large companies like General Electric have also lobbied for an agreement. Food issues have long been an obstacle to more open trade between America and Europe. Many Europeans object to genetically modified crops and products derived from cloned animals that are commonplace in the United States.
There had been some frustration among supporters of a deal that more progress was not being made. A group of U.S. and E.U. officials has been preparing the ground for formal talks, but its report is several months late. A senior official in the Obama administration, who declined to be identified, said the Europeans, being eager “for anything that looks like a growth strategy,” seemed “to be ready to take on some of the more difficult issues” like agriculture.
Mr. Kirk, the U.S. trade representative, said during a visit to Davos, Switzerland, last month that Mr. Obama was in favor of an agreement but wanted to make sure a treaty would overcome objections by some farm groups and be able to pass Congress. Mr. Barroso told reporters Wednesday that restrictions in Europe on genetically modified crops would not be up for discussion, a statement that seemed to conflict with U.S. demands that restrictions be based solely on scientific evidence.
Mr. Obama’s reference to talks about a possible free-trade pact with the European Union was a late addition to his State of the Union address, according to a senior administration official, because a U.S.-E.U. working group had sent recommendations to Washington only Tuesday that the two sides were close enough on various issues to pursue negotiations toward a comprehensive free-trade agreement, rather than a more limited one. “These negotiations are not about compromising the health of our consumers for commercial gains,” Mr. Barroso said.
That high-level working group has spent most of a year discussing whether the talks would cover just tariff issues, for example, or regulatory ones like questions on environmental, pharmaceutical and automobile industry issues. The administration official, who declined to be identified, said the Europeans, being eager “for anything that looks like a growth strategy,” seemed “to be ready to take on some of the more difficult issues” like agriculture. But Mr. De Gucht said some European laws on growing biotech products were already under revision and the outcome could help to diffuse trans-Atlantic tensions.
Tariffs on goods traveling between the United States and Europe are low, averaging about 3 percent, but proponents say that the savings from eliminating duties would still be significant because the volume of trade is so enormous. Commerce between the Union and the United States totaled $646 billion last year, according to U.S. government figures. Another complicating factor will be the nature of the European Union, with its 27 members who do not agree among themselves on all trade issues. There is some concern in France over the prospect of looser restrictions on agricultural products, or the dismantling of regulations designed to promote French films and other cultural products.
Mr. Kirk has estimated that eliminating trade barriers could add $50 billion to the U.S. economy. Mr. De Gucht said he did not intend to negotiate with his hands tied by the demands of any single European country. Even so, he conceded, “I’m also living in the real world, and I know this is difficult for, by the way not only for France, but for a number of member states.”
Potentially more important than abolishing tariffs, but also much more complicated, would be a deal that harmonized regulations on products like food, cars, toys and pharmaceuticals. Automobile manufacturers like Daimler, for example, would like to see agreement on safety and emissions standards for cars, reducing or eliminating the need to build different versions for the U.S. and European markets. Jack Ewing reported from Frankfurt. Brian Knowlton and Jackie Calmes contributed reporting from Washington.
But harmonizing regulations is fiendishly difficult, in part because the 27 countries in the European Union have not completely synchronized their own rules.
European restrictions on imports of chickens washed with chlorine and beef treated with hormones have long irritated U.S. meat exporters, and one of the knottiest areas of any future trade negotiations is likely to be in the area of biotechnology foods.
In their letter, Senator Baucus and Senator Hatch expressed concern about rules for sanitizing food “that act as significant barriers to U.S.-EU trade.”
The European Commission, the group based in Brussels that would lead any trade negotiations with the United States, has sought for years to break a legal deadlock on growing genetically modified crops in Europe.
In so doing, the commission, the policy making and administrative arm for the Union, has hoped to remove an irritant in trade relations with the United States and with other countries that use biotechnology, and to lower costs for European farmers and industry.
Yet the commission has repeatedly bumped up against stiff opposition in countries like France and Austria, where hostility to what people there call Frankenfoods is deep-seated and seemingly unshakable.
The withdrawal from the market last year of a potato produced by BASF, a German chemical group, left a type of corn produced by Monsanto as the only biotechnology crop grown in Europe.
In biotechnological corn and soy for animal feed, the Union takes a more permissive approach. But European farmers still face long delays before being able to source new products because of an approvals process that allows member states to deadlock for years before the commission can issue its own approval.
Skepticism among Europeans about new food technologies has since spread to the cloning of livestock.
Like biotechnological crops, the descendants of animal clones are an accepted part of the food chain in the United States. But the practice remains rare or nonexistent in the Union, although Denmark is the only member state that has banned cloning for food outright.
Three years ago the commission proposed a way to regulate imports of milk and meat products — and large amounts of eggs, semen and embryos — from cloned animals raised in countries where the technique is used, like the United States, Argentina and Brazil.
Rather than banning those products outright and setting off a fight with the United States at the World Trade Organization, the commission proposed other ways of regulating products derived from clones. But those efforts failed in 2011 when E.U. governments and the European Parliament failed to agree on how sweeping the rules should be.
Thomas J. Donohue, president of the U.S. Chamber of Commerce, said last month that a deal could be concluded within 18 months if both sides set their minds to it.
But others, noting the disagreements over food issues, say it could take much longer and still not succeed.
China was the second-largest trading partner of the United States last year, with goods totaling $536 billion, but most of that trade consisted of wares exported from China to the United States. American trade with Europe is more balanced. The United States sold goods worth $265 billion to the Union, more than twice as much as it exported to China, according to the U.S. Commerce Department.
James Kanter reported from Brussels. Jackie Calmes contributed reporting from Washington.