EU-U.S. trade deal seems distant dream after early optimism

BRUSSELS (Reuters) - When U.S. trade chief Michael Froman opened talks in 2013 on an EU-U.S. free trade deal he said he was confident it could be reached on “one tank of gas.” Two years later, negotiations have all but stalled.

U.S. Trade Representative Michael Froman speaks to reporters after a meeting with Japan's Economics Minister Akira Amari in Tokyo April 19, 2015. REUTERS/Yuya Shino

This was to have been a unique trade deal between open, developed economies whose high wages meant trade unions did not need to fear job-sapping floods of cheap imports.

But as negotiators prepare for their 10th meeting, in Brussels next month, EU officials are complaining that U.S. counterparts are inflexible and the European Parliament is so split on the subject of the deal that it cannot even agree to debate it.

Senior trade officials initially forecast talks could conclude by the end of 2014, but now they appear to be heading for the in-tray of whoever succeeds Froman’s boss Barack Obama in 2017.

“The two sides haven’t really started negotiating yet. Even if they hit full speed we are looking at something like 2019 or 2020 based on a normal schedule,” said Hosuk Lee-Makiyama, director of the European Center for International Political Economy.

Timing is important. The partners envisage an agreement encompassing a third of global trade that would set a standard for others to follow, but their economic influence is gradually waning.

“The window of opportunity for the transatlantic west to set common standards is shrinking because of initiatives by the global south,” said Peter van Ham of Dutch think tank the Clingendael Institute, referring to the China-led Asian Infrastructure Investment Bank as an example.

The subject has whipped up ecology, consumer and civil society groups who argue that this is a secretive deal for big corporations that will lower food, environmental and health standards and cut rather than increase jobs.

But even aside from problems posed by external pressures, officials representing each region face considerable stress inside the negotiating room.

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The United States and the European Union have successfully concluded trade deals with other regions by imposing their methods on a promise of a massive market of consumers in return.

Now they are finding that approach doesn’t work with each other, and a fight has broken out over who will be top dog.

A clash of styles was clear from the start. The European Commission, armed with a mandate from EU members, presented an offer to cut tariffs on 95 percent of products or “tariff lines” from the outset, while the offer from the United States, more used to leaving issues open until the end, only covered 67 percent of lines.

The partners also have different approaches to regulation, from which most of the gains of the Transatlantic Trade and Investment Partnership, known as TTIP, are expected to derive given tariffs are already low.

In some areas, such as automobile safety, there is a meeting of minds. In many other fields the United States wants Europe to reform its regulatory process, while the EU has urged regulatory bodies to find ways of reconciling differences.

Other matters look extremely tough to reconcile, such as the EU’s system of “geographic indications” (GIs), a designation of origin protection which means that only Greeks can use the term “feta” for their cheese and that parma ham must come from Italy. Many in the United States view this as protectionism.


Public concerns have also led to delay. The issue of protecting investors against new regulation that could affect businesses - previously a matter only for trade technocrats - blew up as an issue at the end of 2013, forcing the Commission to suspend talks on investment and to launch a public consultation which drew 150,000 mostly negative responses.

“It has been slowed down, but slowed down for a very good reason. It’s brought into question the level of ambition of TTIP. Will it be a one-off trade deal or a ‘living’ agreement that evolves?” said van Ham.

A further hurdle is that the United States has prioritized a trans-Pacific trade deal, meaning TTIP is only second in line. The presidential election could also slow progress in 2016.

Simon Lester, of the Cato Institute, believes a very broad deal may simply be asking too much. He suggests that negotiators drop investor protection and GIs from any deal.

“Trying to include them would push a deal to 2018 and beyond. Without them and with focus, it’s something that could be achievable within a year,” he said.

Still, out of the limelight, some progress is being made.

U.S. and EU pharmaceutical regulators have agreed that biosimilars, near copies of original biological medical products whose patents have expired, may be approved with a single test rather than two expensive studies on each side of the Atlantic.

EGA, the European Generic and Biosimilar Medicines Association, says they are also considering common single tests for complex generics and for pharmaceutical manufacturing sites.

“A lot of groups are angry, but here is something with benefits for everyone - lower costs for businesses and cheaper medicines,” said EGA director general Adrian van den Hoven.

Reporting By Philip Blenkinsop; Editing by Sophie Walker