Few disagree that a proposed free trade agreement between the European Union and the United States would be an economic boon on both sides of the Atlantic. But pesky details stand in the way.
Plans for the overarching trade agreement were sketched in broad terms by President Obama, who announced it in his State of the Union address, and by EU officials. They announced an ambitious goal to complete the deal within two years.
“We are committed to making this relationship an even stronger driver of our prosperity,” Obama, EU President Herman Van Rompuy and European Commission President Jose Barroso said in a joint statement. The EU plans to present draft negotiating plans this month to kick off the talks.
Obama, Van Rompuy and Barroso said they hope “not only to expand trade and investment across the Atlantic, but also to contribute to the development of global rules that can strengthen the multilateral trading system.”
The trans-Atlantic agreement would be far-reaching. By some estimates, it could boost annual economic output by 0.7 percent in the U.S. and 0.5 percent in the EU. An estimated $2.7 billion in goods and services already move between Europe and the U.S. each day.
Containerized imports from northern Europe and the Mediterranean totaled about 2.6 million 20-foot-equivalent units last year. Exports to those regions, which include non-EU countries such as Russia, were estimated at 2 million TEUs. Those figures represented about 16 percent of the U.S. global total in each category. Top containerized imports include beer, wine, auto parts and furniture. Exports were led by wastepaper and automobiles.
The automotive industry on both sides of the Atlantic would stand to benefit from a trade agreement. Automakers and parts manufacturers move substantial volumes between the U.S. and Europe. Shipments of vans and trucks would be helped by removal of a 25 percent tariff on U.S. imports on those vehicles.
Missing from top U.S. exports to the EU is poultry, an important commodity on other trade routes but one that has been a political football in trans-Atlantic trade for the last half century. In the 1960s, European nations slapped high tariffs on imported chickens, promoting U.S. retaliation with a tariff on trucks and vans. The poultry tariffs have been rendered academic by more recent EU rules prohibiting imports of poultry that had been chlorine-washed to kill pathogens, a common practice by U.S. processors.
“The result of this non-science-based action is that the United States has not been able to export poultry to the EU since 1997,” the National Chicken Council, National Turkey Federation, USA Poultry & Egg Export Council, and U.S. Poultry & Egg Association said in a joint statement. The organizations endorsed the trans-Atlantic initiative, which they said could generate more than $500 million a year in U.S. poultry exports to Europe.
The chlorine-washing ban is just one of several trade barriers that could stand in the way of a trade agreement. Other obstacles include farm subsidies, regulatory standards, and the EU’s objections to genetically modified products.
The decision to proceed with the U.S.-EU talks follows a recommendation by a high-level working group that urged “negotiations on a comprehensive, ambitious agreement that addresses a broad range of bilateral trade and investment issues, including regulatory issues, and contributes to the development of global rules.”
“Nobody should be under any impression that we’re not going to be resolving agricultural issues,” Michael Froman, the U.S. Trade Representative’s deputy national security adviser for international economic affairs, said on a conference call with reporters. “Everything’s on the table across all sectors,” U.S. Trade Representative Ron Kirk added.
It’s unclear how much headway trade negotiators can make in easing non-tariff barriers that impede trade, or how quickly it can be done. Recent U.S. trade deals have required years of negotiations, followed by delays in securing congressional ratification.
The chairman and ranking minority member of the Senate Finance Committee said in a letter to Kirk that a U.S.-EU trade agreement offered “an enticing possibility.” But the letter from Sens. Max Baucus, D-Mont., and Orrin Hatch, R-Utah, added that any deal must address access to U.S. agricultural exports such as beef and pork, strong intellectual property protection, access for U.S. services exports, regulatory compliance, and a mechanism for dispute settlement.