Just three years after embarking on a Trans-Pacific Trading Partnership between the United States and several Asian countries, President Obama in his State of the Union address Tuesday pushed for a new U.S.-E.U. trade agreement that some trade specialists are calling, “the new NATO.”
“Tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs,” Obama said in his State of the Union.
American and European leaders have been looking for ways to deepen their trade ties for the past two years, and this proposed Transatlantic partnership looks like it’s the product of those negotiations.
The partnership may be good news for American jobs, but it would also be a big win for the still-struggling E.U. economy. The United States and European Union are already major trading partners: The United States exports three times as much to Europe as it does to China, and trade between the two already accounts for more than 50 percent of the global GDP. Some analysts estimate that a U.S.-EU free trade deal would be worth five times as much as the U.S.-Korean free trade deal ratified in 2011.
The big obstacle to increasing U.S.-E.U. trade hasn’t been tariffs, which are already quite low between the United States and the European Union. Instead, most analysts say the issue is the E.U.’s incredibly strong food and product safety regulations. As Reuters reported:
U.S. policymakers have long been frustrated by what they consider the EU’s “non-scientific approach” to food safety that has blocked imports of U.S. genetically modified crops, poultry treated with chlorine washes to kill pathogens and meat from animals fed the growth stimulant ractopamine.
In fact, the only reason the two regions haven’t already knocked down trade barriers is because negotiating trade regulations strikes at some key concerns over safety.
“Whether it has to do with the length of car bumpers, the permissibility of genetically modified corn or the correct method to be used when slaughtering beef, trade talks are often just as complicated as nuclear non-proliferation negotiations,” writes Gregor Peter Schmitz for Spiegel.
Unlike the United States, the European Union blocks the import of products that are widely regarded as safe elsewhere, such as genetically modified crops, on a “precautionary principle,” which is basically the public health equivalent of “better safe than sorry.” European regulators can invoke the principle if a scientific “evaluation does not allow the risk to be determined with sufficient certainty,” and it’s on the manufacturer of the product — rather than the regulators — to prove the absence of danger.
The European Union still blocks imports of American hormone-treated beef, and the United States has filed complaints with the World Trade Organization over the European Union’s blockage of poultry imports that have been treated with “any substance other than water.”
It’s no wonder that in their press release pushing for the trade agreement, Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) listed “access for U.S. agricultural exports like beef and pork” as among their top priorities.
The E.U.’s rigorous standards are incongruous with U.S. food and product safety policy, and it makes it harder for America and Europe to sell goods to each other.
“Redundant standards, testing and certification procedures are seen by (U.S. and E.U.) companies as far more costly and harmful than any trade barriers imposed at the border, such as tariffs or quotas,” wrote Raymond J. Ahearn for the Congressional Research Service last year.
A 2009 study found that smoothing out these regulatory issues would bring in $158 billion in annual GDP for the European Union and $53 billion for the United States.
Over the past few years, delegations from the United States and European Union have met to try to work out their regulatory differences, but they haven’t made much progress, in part because of the complicated legal structures on both sides of the Atlantic. (The two sides couldn’t even come up with a cohesive model for crash-test dummies in talks a few years ago.)
“Responsibility for regulation is split in the E.U. between European and national levels, and in the U.S. between the federal and state governments, so simply getting the right people into the room can be a real challenge,” writes Dan Hamilton, directer of the Center for Transatlantic Relations.
Europeans not only want Obama to endorse the talks, Gary Hufbauer, a senior fellow at the Institute for International Economics, told Reuters, but also to sell Congress on the idea that a U.S.-EU trade agreement would boost exports and grow jobs.
We’ll see if chlorine-washed American chickens stand in the way.