May 11 (Bloomberg) -- The European Union and the U.S., which have the world’s largest bilateral economic relationship, are making progress on a trade accord that may be spelled out by mid-2014, EU Trade Commissioner Karel De Gucht said.
Tariffs, services, procurement and regulatory issues top the agenda for the proposed agreement, which is taking shape this year. An interim report on the deal’s potential scope is due in June with a final document by the end of 2012, and negotiations could start soon after.
“I propose we negotiate for no longer than 18 months,” De Gucht said today in remarks prepared for a speech in Hamburg. Any accord must be “ambitious enough to include all areas of economic importance, and realistic enough to be successful within a limited period of time.”
Trade negotiators have their work cut out for them. The U.S. and the EU -- which have trade flows between them of $4.4 trillion annually, according to the German Marshall Fund -- have often pressed for closer trade ties, only to run into roadblocks in reaching agreement. Any trade deal would face a lengthy and difficult approval process within the governments.
The U.S. and EU “are examining a number of options for expanding transatlantic trade and investment, including a potential comprehensive trade agreement,” Andrea Mead, a spokeswoman for the U.S. Trade Representative’s office, said in an e-mailed statement. De Gucht and Ron Kirk, the U.S. trade ambassador, lead the group working on the June report and will discuss its progress with trade ministers from EU states in the coming weeks, she said.
“This has always had more support at the highest political levels than it has at the negotiating level,” Bill Reinsch, president of the National Foreign Trade Council, said in a phone interview. Sticking points will include regulations, product standards and health protections, he said, noting that the two sides “have been butting heads on these things for 20 years without a lot of progress.”
Political support for a new trade accord mounted in November, when President Barack Obama and EU leaders created a high-level working group to identify steps to boost economic growth. The EU is particularly eager to find ways to shake loose more economic activity, since the sovereign-debt crisis has forced most members to cut budgets and cope with recessions.
The U.S. should “take the bold step of launching negotiations on a comprehensive package to liberalize transatlantic trade and investment,” leaders of the the U.S. Chamber of Commerce, National Association of Manufacturers and the Business Roundtable, wrote in a letter today to Obama.
“It would put emerging markets on notice that the United States and European Union are serious” about opening their markets and may “trail blaze” a 21st century economic and regulatory alliance, according to the groups’ letter.
De Gucht said the trade talks will include agriculture, food safety and a range of industries. The goal should be to get as close as possible to “full tariff elimination,” with cuts across a range of industries, he said.
Both sides will seek to lower regulatory barriers that hinder transatlantic trade, such as long-running disputes over chemicals, genetically modified foods and chlorinated chicken. The current push focuses less on investment, where a series of bilateral deals have helped foster relatively smooth relations, and more on goods, services and agriculture subsidies.
‘Trigger Something Bigger’
“Anything they come up with is likely to be symbolic,” Peter Holmes, an economics professor at the University of Sussex, said by telephone. “If they really can break a deadlock, that might trigger something bigger for the future.”
Working to set regulatory standards that overcome regional differences has proven difficult, because they’re often set by independent agencies at the national level in the 27-nation EU, said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics in Washington. “Reconciling those has proven to be virtually impossible,” he said by phone, adding that it’s still not clear how broad a potential trade deal could be or how much progress can be made before U.S. elections in November.
The stalled Doha round of multilateral trade negotiations has left an opening for a free-trade agreement, with both the U.S. and EU seeking growth opportunities while struggling to emerge from a financial crisis, said Peter Rashish, vice president for Europe and Eurasia at the U.S. Chamber of Commerce.
“We could achieve a lot” and build a “living agreement” for further work, he told reporters on May 8.
“It would make sense for us to come up with an ambitious transatlantic undertaking,” though hurdles remain in areas including services and agriculture, Susan Schwab, a U.S. Trade Representative during President George W. Bush’s second term, said in an interview. “The question is, do you layer it in?”