8/3/2019 Time for a Transatlantic Reset: Talking Trade at the U.S.-EU Summit

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Summary: The times are long 

past when U.S.-EU summits were

major political events. Not only do

 they take place only sporadically

 today, but they generate little

interest from both heads of state

and the public. While the United

States and the EU are still each

other’s most important trade andinvestment partners, the trans-

atlantic economic partnership

has seen better times. Regard-

less of this bleak picture, there

is a small window of opportunity

 to breathe some new life into

 the transatlantic trade partner-

ship before the U.S. presidential

campaign takes off in early 2012.

While the U.S. public is increas-

ingly skeptical about trade, most

Americans still say that increased

 trade with advanced countriessuch as Canada, Japan, and the

European Union would be good

for the United States. It will take

bold and unfaltering U.S.-EU lead-

ership to revitalize transatlantic

 trade cooperation. The upcoming 

summits present an opportunity

 that should not be wasted.

Economic Policy Program

 Time for a Transatlantic Reset:

 Talking Trade at the U.S.-EU Summit 

by Stormy-Annika Mildner and Claudia Schmucker 

November 2011

1744 R Street NW

Washington, DC 20009T 1 202 745 3950F 1 202 265 1662

E info@gmfus.org

Te times are long past when U.S.-EUsummits were major political events.

Not only do they take place only sporadically today, but they generatelittle interest rom both heads o stateand the public. Te November 28-29summit and meeting o the ransat-lantic Economic Council (EC) ollowthis pattern and has been shoe-hornedin between President Obama’s trip toAsia, Congressional budget negotia-tions, Tanksgiving, and the Christmasholidays.

While the United States and the EUare still each other’s most importanttrade and investment partners, thetransatlantic economic partnershiphas seen better times. Te transatlanticpartners bicker over the best way torevitalize economic growth, how totackle their mutual debt problems, andhow to reduce macroeconomic imbal-ances. Both the Obama administrationand Congress see Europe primarily as an economic problem rather than

an opportunity or the U.S. economy.Tere is no cooperation on concludingthe Doha Round o World rade Orga-nization (WO) negotiations. Andthere are many new trade conictslooming on the not-so-distant horizon,including the EU’s plan to require allairlines to obtain carbon emissionpermits or aircra traveling routes

either originating or terminating atEU airports. Both partners race each

other or new markets in Asia. Coop-eration in the EC to reduce regula-tory nontari trade barriers is slowand tedious. Just recently, the UnitedStates and eight other negotiatingpartners agreed on the ramework oran ambitious ree trade agreement —the rans-Pacic Partnership is to becompleted in 2012, despite the actthat EU-U.S. cooperation in the WOand in advancing bilateral economicintegration promise more benets.

Regardless o this bleak picture, thereis a small window o opportunity tobreathe some new lie into the transat-lantic trade partnership beore the U.S.presidential campaign takes o in early2012. Aer an initial neglect o tradepolicy, the Obama administration isslowly dening a clear trade policy agenda. In October 2011, the U.S.Congress nally passed three pendingree trade agreements (FAs) with

South Korea, Panama, and Columbia.Now the White House is searchingor lighthouse projects. While the U.S.public is increasingly skeptical abouttrade, most Americans still say thatincreased trade with advanced coun-tries such as Canada, Japan, and theEuropean Union would be good orthe United States. Te transatlantic

8/3/2019 Time for a Transatlantic Reset: Talking Trade at the U.S.-EU Summit

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Economic Policy Program

partners should use the 2011 U.S.-EU summit to launch a

bigger vision or the transatlantic relationship and positionthemselves to put pressure on the WO Ministerial Coner-ence, which will take place 15-17 December 2011.

A New Transatlantic Trade Agenda

Concluding the Doha Round

Te United States and the EU alone certainly cannot carry the Doha Round over the nishing line. But they are still theonly actors that can provide leadership in world trade — atleast as long as China is not willing to do so.

 l Early Harvest with built in Follow-up: As an ambitious

Doha Round deal is currently ar out o reach, thetransatlantic partners should push or a “Doha lite”agreement, ocused on trade acilitation, reductionin agricultural support, and market access or poorercountries, building in mechanisms or continued nego-tiations down the road in 2012 and beyond. It is truethat such an “Early Harvest” would bring ew benetsand would unevenly distribute welare gains worldwide.But, it would restore some o the WO’s credibility andree the way to long overdue governance reorm in thatinstitution. While the EU has spoken out in avor o such an agreement, the U.S. is still in strong opposition,

arguing that such a deal would not generate enoughmarket access to be worth investing the political capitalto get Congress to approve it. It’s high time to changethis attitude and consider the wider implications o a Doha ailure. Te lack o even a small compromisecould endanger the credibility o the WO and theauthority o the dispute settlement system. So ar, evencountries like China have accepted most o the WO’srulings; this could change in the uture, in particulari issues were pushed into the dispute settlement system.

 l  Allowing or plurilateral and sectoral agreements under 

the WTO or new trade issues: Going orward, not allcountries will be ready to proceed at the same speed inmultilateral trade liberalization. Te United States andthe EU should push or a soening o the current SingleUndertaking approach to WO trade negotiations,in which nothing is concluded beore everything isagreed upon. Tey should propose allowing plurilateralagreements among like-minded countries on invest-

ment, government procurement, and competition, and

sectoral agreements to remove barriers to trade in envi-ronmental goods and services. At the same time, they should expand the product coverage in existing sectoralagreements such as the Inormation echnology Agree-ment. In order to encourage the emerging economiesto consent to this approach, the transatlantic partnersneed to oer something in return. Current budgetary constraints in both the EU and the United Statesprovide an opportunity to do so by cutting domesticsupport or agriculture.

Deepening the Transatlantic Economy  l

 A Zero-Tarif Agreement: While transatlantic taris arealready quite low, their elimination would generateconsiderable welare gains due to the sheer volume o current EU-U.S. trade, as well as existing tari peaksor some key products such as transport equipment andchemicals. Te Brussels think tank ECIPE calculatedthat the removal o all remaining tari barriers couldboost both the EU and the U.S. economies. I improvedproductivity and reduced trade acilitation costs aretaken into account, the EU could realize an increaseo GDP by 0.32-0.47 percent (or $46 to $69 billion)annually, while the United States could gain 0.99-1.33

percent (or $135-$181.9 billion). In addition to tradegains, this agreement would send a strong new signalabout the importance o the transatlantic relationship. Aresh impetus is urgently needed — particularly as theU.S. ocus increasingly shis to the Pacic region. Tisimpetus could come through a transatlantic zero tari agreement. As a ollow up, Brussels and Washingtoncould negotiate a ree trade agreement on services andan investment treaty. Regarding liberalization o tradein services, the Dutch think tank ECORYS nds thata 75 percent reduction o barriers could increase EU(EU-27 minus the Netherlands) GDP by $10.2 billion

and U.S. GDP by $9.6 billion annually in the long-run.

l Removing Nontarif Barriers: Nontari trade barriers— such as incompatible regulations — are costly obstacles to transatlantic trade and the basis o many heated transatlantic trade disputes. Removing thesebarriers promises tremendous welare gains. Accordingto a 2009 ECORYS study, under an ambitious long-run scenario, removing NBs could translate into an

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