EU, US leaders hail trade talks

Talks on transatlantic free-trade agreement to start in July.

The leaders of the European Union and the United States today celebrated the launch of talks on what could become the “biggest bilateral trade deal in history”, saying that a transatlantic trade deal would reinforce the two blocs’ status as the “backbone of the world economy”.

The comments – made by US President Barack Obama, the leaders of the EU’s institutions and national leaders on the first day of a summit of leaders of the G8 group of leading economies – underlined the enormity and the ambition of the pending talks, which should begin in July in Washington.

EU trade ministers agreed a mandate for EU negotiators on Friday. The US mandate is due to be settled within days.

In a sign of the difficulties that await, the EU’s mandate was hammered out only after nearly 13 hours of talks devoted principally to the issue of including or excluding the audiovisual sector, a sector that includes the film and television industries. France feared that an exception granted to cultural industries, enabling states to apply quotas to culturall imports and enjoy subsidies for domestic production, could be undermined by the talks, though the European Commission says that the exception is protected by EU law. The dispute was resolved only when the EU’s 27 member states agreed to exclude audiovisual services from initial phases of talks, but to consider adding the sector to the agenda at a later stage.

Karel De Gucht, the European commissioner for trade, said on Friday that he was “delighted” to have a mandate. De Gucht had been anxious to prevent audiovisual services from being excluded from the mandate, in part to deter the US from ringfencing sectors itself.

However, the sour legacy of the protracted talks was evident in an interview given to the International Herald Tribune by José Manuel Barroso, the president of the European Commission. Attacking he depicted as an opposition based on antipathy to globalisation, he said that opponents of a freer trade in films and music had “no understanding of the benefits that globalisation brings also from a cultural point of view”. He continued: “Some say they belong to the left, but in fact they are culturally extremely reactionary.”

While Europe’s ‘cultural exception’ has dominated the preparatory phases of the negotiations, the fundamental challenges are expected to relate to the harmonisation of regulations. In a public statement today, Barroso described the “core challenge” as being to move “regulatory regimes closer and [to address] the harmful effect of behind-the-border trade barriers” and highlighted the “huge economic benefits…expected from reducing red tape and avoiding divergent regulations”.

Obama said politicians should “look beyond narrow concerns and focus on the big picture” – the big picture being that this single deal will cover half the world’s economy.

In a study released in recent days, the Ifo institute, a German economic think-tank, calculated that a deal could increase US income per head by 13.4% in real terms over the long term but only by an average of 5% among the EU’s 27 member states.

But the direct economic boost is just one potential benefit attributed to the deal.

Herman Van Rompuy, the president of the European Council, said that “Europe and the United States are the backbone of the world economy” and that the transatlantic free-trade area could “enshrine Europe and America’s role as the world’s standard setters”, describing this as of being “of key strategic significance”. EU officials have indicated that even in the contentious area of competition rules, a model could emerge that would help set standards globally.

Barroso said that the two sides were determined “to shape an open and rules-based world”.

In geopolitical terms, the deal could, some argue, amount to the equivalent of an ‘economic NATO’. It would also reinforce the transatlantic alliance at a time when there is concern in Europe that the US is preoccupied by the rise of Asia.

The stated goal of the European Commission, which will negotiate on the EU’s behalf, is to complete talks by the end of 2014, when the term of the current European commissioners ends. However, some believe that a natural – and more realistic – timetable would see a deal settled by the end of Obama’s second term, in early 2017.

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The adoption of broad negotiating mandates by both sides is itself a major advance. Diplomats on the EU side have said that initially the US’s interest in a deal did not extend beyond lowering tariffs and addressing long-standing points of difference on food issues.

“A year and a half ago, we were not even sure the place had a door, and now we are entering the negotiating room together,” Van Rompuy said today.

The comments on the free-trade talks vied at the beginning of a two-day summit that is likely to be dominated by talks on tax evasion – a theme driven by the host country, the United Kingdom – and the crisis in Syria.