FOR some in Brussels, plans to create a vast Europe-America free-trade area which will generate jobs, more transatlantic investment flows and seal an alliance which under President Barack Obama has seemed more fragile than at any time in recent history, is a dream come true.
For many outside the magic circle, however, the proposed Transatlantic Trade and Investment Partnership (TTIP) is more of a nightmare.
But perhaps those who fear that the US and the European Union are ganging up against the rest of the world should think again: the free-trade initiative could act as a much-needed wake-up call to restart serious negotiations on the Doha round of global trade talks.
“These negotiations will set a standard, not only for our future bilateral trade and investment, including regulatory issues, but also for the development of global trade rules,” according to European Commission President José Manuel Barroso.
The deal would be the most ambitious since the founding of the World Trade Organisation (WTO) in 1995, embracing half of world output and a third of all trade. It reflects growing impatience in Brussels and Washington at the long-stagnant WTO talks on global trade expansion which were launched in the capital of Qatar in 2001.
Both the EU and the US have used the last decade to open negotiations on an array of free-trade agreements with Asian, Latin American and some African countries. Critics say the deals are often light on content but heavy in symbolism and political significance.
Many experts have warned that the existing “spaghetti bowl” of trade agreements lead to a fragmentation of the world trading system and penalise smaller nations which are left outside such deals.
“The more problematic side of myriad different preferential trade agreements is that they create a hodgepodge of different regulations, standards and norms that can evolve into serious non-tariff barriers,” according to Keith Rockwell, chief spokesman at the Geneva-based WTO.
Under an agreed outline for the TTIP, the two sides expect it to add 0.5 per cent to the EU economy and 0.4 per cent to the US economy by 2027.
While it may not take a decade to negotiate a transatlantic trade pact, negotiating the TTIP will be no easy task. They may talk of common values and goals but Europe and America will find it difficult to agree on many key trade issues once negotiations start.
EU trade commissioner Karel De Gucht has warned that the talks will be tough, with no “low hanging fruit”. Import tariffs between the two are already not high.
Negotiations will focus on harmonising standards, from car seatbelts to household cleaning products, and regulations governing services. But fleshing out the negotiating plans could cause friction — last year it took EU trade ministers four months to persuade the European car industry to let Brussels officials talk to Japan about creating a similar free-trade pact.
EU negotiations on a free-trade agreement with South Korea faced similar difficulties from the European car manufacturers. Talks on an EU free-trade pact with India are now in their sixth year, having run into trouble with the Indian pharmaceutical, car and other sectors.
One of the key sticking points in the upcoming EU-US talks is likely to be agriculture. Washington has long been frustrated by EU restrictions on US farm produce, such as foodstuffs made with genetically modified organisms (GMOs), poultry treated with chlorine washes and meat from animals fed with the growth stimulant ractopamine.
Barroso has admitted that consumer health issues will remain on top of the EU agenda. “We will not negotiate changes that we do not want of the basic rules on either side, be it on hormones or GMOs,” he warned recently.
Another thorny issue that is unlikely to be resolved directly by the EU-US negotiation is the battle over subsidies for Europe’s Airbus and Boeing of the US, the biggest and longest-running dispute in the WTO’s history.
The TTIP has the full backing of Germany, with Chancellor Angela Merkel describing the initiative as “by far the most important future project” of the EU. Such a move would “not just be an agreement but a real growth project”, Merkel told Germany’s parliament, the Bundestag. Resistance is expected, however, from France and other southern European nations which want to exempt issues like food regulation and gene technology from the talks in order to protect the interests of their farmers.
Negotiations are due to start in June. Analysts say that President Obama regards a trans-Pacific trade agreement as far more important than the transatlantic deal but say the proposal is meant to signal continuing US engagement with Europe.
For some, the EU-US agreement represents the aspirations of a “common West” faced with competition from rising China and other emerging Asian and Latin American powers. But if the agreement with the EU takes too long to negotiate, Washington may decide it’s more important — politically and from the economic point of view — to direct its time and energies towards the conclusion of a pan-Pacific trade agreement.
Whether or not the transatlantic deal sees the light of day, the WTO — which will be under new management as of autumn this year — should use this moment to try and inject life into the Doha round. A global trade agreement which benefits all countries, big and small, would be infinitely better than one that separates the world into the West and the rest.
The writer is Dawn’s correspondent in Brussels.