U.S. trade talks with Europe seem, on the surface, like a slam-dunk. The world’s richest nations will sit across a bargaining table stacked with potential compromises on regulatory and other issues that may represent tens of billions of dollars in extra sales and jobs.
But there’s a big potential hitch: The European Union is far from a unified negotiator, and the competing economic and political interests of its 27 member nations may outweigh the difficulties of reaching a deal with the United States.
As the United States and European Union begin to negotiate a landmark free trade agreement, some critics worry that the new deal could undermine the current global trade system embodied in the WTO. (Bloomberg)
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Europe’s struggle in recent years to contain a financial and sovereign debt crisis laid bare the region’s unfinished debate about local power vs. central authority. The issue has enraged Greeks who feel beset by German-enforced austerity and led the United Kingdom to threaten to leave the union altogether.
Now those same countries will be asked to compromise on sensitive trade and regulatory matters in a way that may be good for the region as a whole, and good for the transatlantic economy, but politically tough at a local level. With Irish Prime Minister Enda Kenny, who holds the E.U.'s rotating presidency, due in Washington on Tuesday for meetings with President Obama, the prospect of a major trade deal poses tough questions.
Aligning drug, food, or auto safety laws with the United States may be great for German industrial giants, or the multinationals that are driving Ireland’s economic recovery. But will French farmers agree to give up their market protections so BMW can ship cars more easily? Will national governments drop their local procurement rules? Will the region’s more isolated countries hold the process hostage — as Finland did on another issue at the peak of Europe’s financial troubles?
“We will have differences of opinion and there are political difficulties” that the European countries will have to navigate among themselves even as they try to present a single face to the United States, Kenny said in an interview from Dublin last week. In contrast to some E.U. nations, Ireland has “a disproportionate connection worldwide.”
“As an island nation and a trading nation we have to make these connections. This [agreement] is full of potential,” he said.
Kenny visits Washington this week to press the case for an agreement that has generated a rare positive energy in a region that is slumping economically. His own country is recovering from a crisis that left it under an international bailout program. In that context, Obama’s announcement of the European negotiations in his State of the Union address was a political victory in itself for business groups and officials who had been trying to convince the United States that a broad deal was within reach.
Preliminary talks over the past year and a half were handled through the centralized European Commission under trade minister Karel De Gucht. He is expected to receive a formal negotiating mandate from the 27 E.U. member states, and will barter on behalf of all of them in hopes of finishing negotiations in two years.