European leaders seeking a path to economic growth while curbing their debt focused on the benefits of a trade agreement with the U.S. after the European Union authorized the start of talks.
As Group of Eight leaders gathered for a two-day summit in Northern Ireland today, trade rose to the top of the agenda after the EU’s 27 members bowed to France’s demands on protecting its film industry to start negotiations.
“These trade deals matter, because they mean more jobs, more choice for consumers and lower prices,” U.K. Prime Minister David Cameron, who will host the gathering, said today in a statement released by his office.
European nations are grappling with the three-year-old debt crisis, which has sent euro-area unemployment to a record and set back Cameron’s plan to eliminate the U.K. structural budget deficit. The European Commission estimates an agreement, which might take two years to close, would generate annual economic benefits of 119 billion euros ($159 billion) for Europe and 95 billion euros to the U.S. Cameron said benefits to the U.K. could reach 10 billion pounds ($15.7 billion).
The euro has climbed 2.6 percent against the U.S. dollar in the last three months, trading at $1.3347 as of June 14. Euro-area inflation accelerated in May, led by the Netherlands, adding to signs the currency bloc’s economy is beginning to emerge from recession that began in the fourth quarter of 2011.
“This can be a game-changer not only for the transatlantic area, the United States and Europe, but for the world,” European Commission President Jose Barroso told reporters at Enniskillen, Northern Ireland today. He said talks should start next month and may take “about a couple of years” depending on the two sides keeping up their momentum.
EU governments last week gave the commission, the bloc’s regulatory arm, a mandate for negotiations with the Office of the U.S. Trade Representative. The objective will be to remove tariffs, ease regulatory barriers and expand access in investment, services and public procurement.
“Wherever we have free-trade agreements it gives a boost to growth, to trade in general,” German Chancellor Angela Merkel said in a Bloomberg interview on June 14. “This is why I will throw my full political weight behind such a mandate.”
An accord between the EU and the U.S. would outstrip all others because both sides already have goods and services trade valued at $2 billion a day. European and American policy makers are seeking commercial deals with individual countries or groups of nations to spur growth.
“There’s enough good will on both sides to realize this is the moment to push ahead,” Cameron said in a June 13 interview with Bloomberg. The trade pact will be called the Trans-Atlantic Trade and Investment Partnership.
“It’s important that this be a comprehensive agreement,” Andrea Mead, a spokeswoman for the USTR in Washington, said by e-mail after the EU ministerial go-ahead in Luxembourg after daylong talks on June 14. “We recognize there will be sensitivities. That’s what negotiations are intended to deal with.”
The economic benefits of a trans-Atlantic agreement aren’t certain, according to Olivier Garnier, chief economist at Societe Generale in Paris. The U.S. and European economies are already integrated and any potential impact would be “almost impossible to measure,” he said in an interview.
“If you begin talks with a lot of barriers in place, then a trade pact can result in a big jump in growth,” Garnier said in Paris. “But the U.S. and the EU are already in a pretty open situation, so I wouldn’t expect a massive effect.”
EU negotiations over the last few weeks have also exposed internal differences that may end up threatening a deal. The French government vowed to wield its veto power unless audiovisual policies were fully excluded from the commission’s mandate, saying culture can’t be treated as a commercial item.
The commission and most EU nations including the U.K. and Germany opposed that stance and pressed France to show flexibility. They proposed to fix so-called “red lines” for the talks to ensure European policies to promote cultural works wouldn’t be jeopardized, while allowing some possible concessions to the U.S. so the EU would have greater leverage over other matters, such as American public procurement.
EU ministers carved the audiovisual industry out of the mandate to win French support, while leaving the commission the right to request permission to negotiate on this issue later.
Other potential areas of discord are public procurement, where so-called Buy America rules represent barriers for Europe, and agriculture, including genetically modified foods that the EU regards more skeptically than the U.S.
The EU says data protection, highlighted by recent revelations of American government surveillance programs, isn’t covered by the planned negotiations with the U.S.