Ferrari SpA wants to ship its luxury sports cars to the U.S. without having to pay duties. The owner of KFC and Pizza Hut restaurants is seeking lower tariffs on chicken wings exported to feed hungry Europeans.
Lobbying by companies is accelerating as the U.S. Trade Representative’s office prepares to negotiate with the 27-nation European Union to form the world’s largest free-trade region. Wal-Mart Stores Inc. (WMT), Intel Corp. (INTC), the United Steelworkers union and the Sierra Club are among 367 parties weighing in as the agency opened two days of hearings today.
Because the talks will cover a wide range of merchandise and services, they run the risk of being stalled by special interests. Officials plan to move quickly, beginning the talks in July and reaching an agreement by the end of 2014.
“We must get the substance right,” Dan Mullaney, assistant U.S. trade representative for Europe and the Middle East, said at today’s hearing. “We acknowledge that a negotiation that drags on is in no one’s interest.”
Government leaders and business groups are pursuing the pact, known as the Trans-Atlantic Trade and Investment Partnership or T-TIP, as a way jump-start their sluggish economies. Negotiators want to eliminate most tariffs and streamline the thicket of regulations in the two regions that generate $28 trillion in annual economic output, almost half the world’s total.
Old differences, which have in part prevented the two sides from advancing to an agreement before now, are again surfacing. The U.S. and the EU, which have the world’s largest bilateral economic relationship, have long been at odds over farm policy, health standards, regulations for manufactured goods and country-specific names for products.
“We emphasize geographic indications, and we do not like it very much when on a wine label from the U.S., we see ‘Champagne,’” French Trade Minister Nicole Bricq told reporters through a translator during a visit to Washington last month.
“The agreement itself will set the bar for free-trade agreements worldwide,” Peter Westmacott, the U.K. ambassador to the U.S., said during a speech in Washington in April. “The sheer size of the two economies of the European Union and the United States, and the amount of trade between them, means that T-TIP will be unprecedented in its scale.”
An agreement would reduce costs for companies and industries -- such as automotive, pharmaceuticals, medical equipment and chemicals -- that already have significant direct foreign investment in the regions, according to a May 21 Bloomberg Government study.
The accord will cover issues including agriculture, financial regulations, telecommunications and rules for digital goods that haven’t even been invented yet. With the stakes high, groups representing industries from automakers to soft drinks are seeking to influence the talks.
“Customs duties should be eliminated on automobiles and parts thereof,” according to a filing by the lawyer for Ferrari North America Inc., the Maranello, Italy-based car company’s U.S. distributor.
The American Automotive Policy Council, a Washington-based group that represents Ford Motor Co. (F), General Motors Co. (GM) and Fiat SpA (F)’s Chrysler Group LLC, is among other groups seeking tariff elimination and a convergence between EU and U.S. rules.
Yum! Brands Inc. (YUM) of Louisville, Kentucky, which says it has more than 2,200 restaurants in Europe, is seeking lower tariffs on goods for its KFC, Pizza Hut and Taco Bell chains.
While some levies may not be high, “when a restaurant company is importing millions of dollars of product annually the additional duty cost is quite significant,” the company’s international subsidiary said in its filing. KFC sends U.S. poultry to Europe “to supplement local supply,” which is often too low to meet its demand, the company said.
Yum has to pay 1,024 euros ($1,327) a ton on frozen chicken wings shipped from U.S. processing plants to Europe, according to the company’s filing.
The transatlantic accord “needs to be an agreement that reflects today’s world,” Peter Allgeier, president of the Coalition of Services Industries, said at today’s hearing. The Washington-based group’s members include JP Morgan Chase & Co. (JPM), Microsoft Corp. and FedEx Corp. (FDX) The pact should ensure that state-run businesses including postal carriers, don’t have an unfair advantage over private competitors, Allgeier said.
Company requests for provisions are largely specific to an industry. Atlanta-based Coca-Cola Co. (KO) wants to prevent duplication of regulations for the safety of the flavoring used in soft drinks. Intel Corp. of Santa Clara, California, wants to ensure that rules for communications technology don’t favor local providers. Wal-Mart, the world’s largest retailer, is seeking immediate elimination of import duties, fewer rules for grocery labeling and a framework that encourages electronic commerce.
“The retail industry continues to evolve from a traditionally ‘brick and mortar’ industry to a new multi-channel ‘brick and click’ industry,” the Bentonville, Arkansas-based company said in its filing.
Not everyone is content with streamlining the rules. Too much convergence might eliminate necessary regulations and “pose a serious threat to the environment, working families and communities,” the Sierra Club said in comments. The San Francisco-based environmental group said it is also concerned that the accord would deprive the U.S. Energy Department of oversight for exports of liquefied natural gas to the EU.
The AFL-CIO, the largest U.S. labor federation, wants to make sure the accord avoids rules governing air and maritime transport. The steelworkers’ union said rules of origin for merchandise should be focused on enhancing job creation in the U.S. and the EU. Public Citizen, a Washington-based consumer group, wants the text of the negotiations to be made public and it wants provisions dealing with copyrights and data protection left out of the text.
Before they negotiate, legislatures on both sides of the Atlantic are assessing public sentiment. The U.S. Congress is spending 90 days after being notified by the administration, a period that ends in mid-June. The EU’s Council of Ministers must approve moving ahead with the talks.
The European Parliament on May 23 passed a resolution to keep audiovisual goods out of the talks, a position pushed by France to protect its cinema and television industries.
The two sides also haven’t determined what, if any, agreement they might reach on safety standards for agricultural goods, including whether to increase European market access for genetically modified produce from the U.S.
Momentum for an accord is building and the trading partners should use it to their advantage, said Lucinda Creighton, Ireland’s minister for European affairs.
“It would be a shame to waste this opportunity,” she said yesterday at a meeting with reporters and editors at Bloomberg’s New York office. “If it gets stuck now, there’s no guarantee that it’ll come unstuck in the near future.”
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