FEBRUARY 13, 2013

A NEW US-EU TRADE DEAL: ARE WE

SYNCHING?

by Tyson Barker

President Obama’s State of the Union announcement to “launch talks on a comprehensive

Transatlantic Trade and Investment Partnership with the European Union” committed the US to

engage in its most ambitious economic re-wiring in a generation. The force of the announcement

exceeded expectations; some observers hailed it as the speech’s most significant statement.

The US had been coquettish about its intention to pursue an agreement that would graft together

the world’s two largest economies, but Washington’s hard negotiating position paid off. In the

run-up to the announcement, the US received concessions on some difficult agricultural issues

that seemed intractable. In addition, a subsequent battery of announcements dispelled any doubt

about the scope of this initiative. The final report of the High Level Working Group for Jobs and

Growth called for a “comprehensive ambitious agreement”, the most far-reaching of all options

considered.

The dimensions of the US-EU economic relationship are unparalleled. More than 13 million

American and European jobs are fostered by trans-Atlantic trade and investment. This is roughly

equal to total employment in Poland. The flow of trans-Atlantic goods and services is currently

$2.7 billion per day, equal to that among NAFTA countries in 2011. US-EU direct investment

was $3.7 trillion in 2011, compared to $594.7 billion among NAFTA countries in 2009.

Time to Huddle

The Atlantic partners now enter into a honeymoon phase during which both sides must confer

with legislators and stakeholders about the contours of an agreement. Trade officials have spoken

of a “high-standard” partnership in which tariff and quota reduction are merely the baseline

issue. The wish list will be long, touching on everything from agriculture, procurement, IPR

protection, regulatory alignment, joint approaches to SOEs, currency targeting, commodities and

energy.

Consultation with Congress will be crucial in the coming months. Currently, knowledge on

Capitol Hill of the Transatlantic Trade and Investment Partnership is much lower than

knowledge of the Trans-Pacific Partnership (TPP). But initial reactions from Congress match the

White House’s robust enthusiasm. Key figures on the Senate Finance Committee have endorsed

an agreement with Europe, stating that “[a] comprehensive US-EU FTA, negotiated and

implemented with the highest standards, would have a multiplier effect and would be certain to

generate much needed economic growth on both sides of the Atlantic.” Last year, while still in

the Senate, Secretary of State John Kerry, along with Rob Portman (R-OH), spearheaded an

effort rallying Congress to support such an endeavor. In the House, Ways and Means Chair Dave

Camp (R-MI) has said “a strong, comprehensive trade and investment agreement with the EU

has the potential to create significant good-paying jobs for American workers.” The chair of the

House Subcommittee on Trade, Portuguese-American Devin Nunes (R-CA), sponsored

legislation in the last Congress to give the administration the leeway to start negotiations.

In Europe, discussions will now also be prone to greater scrutiny. Thus far, deal proponents,

including the German and British governments, the European Commission and the Trade

Committee of the European Parliament have dominated the narrative in Europe. In coming

months, the French and Italian governments, Green parties and European agribusiness will play a

greater role in shaping European positions. This must happen quickly and with sustained political

engagement to set the stage for a formal launch of negotiations in June, probably timed around

President Obama’s visit to Europe for the G8 summit.

A “Go Big” Strategy

With the trans-Atlantic economic partnership and the concurrent TPP, President Obama has

outlined a vision for trade policy that could be part of his legacy. The Bush administration

pursued a two-track approach to trade, focusing simultaneously on bilateral agreements with

smaller economies (e.g., Peru, Colombia, Central America) and the completion of multilateral

talks in the Doha Round. The Obama administration in contrast has now articulated a “going

big” bilateral strategy, focusing on game-changer agreements with the world’s most significant

economic blocs—the EU and the Asia-Pacific— that are tinged with geopolitical undertones and

meant to re-ignite global trade liberalization and reset the multilateral economic order.

The Transatlantic Trade and Investment Partnership—while economically driven—has always

been guided by geopolitics. It was an elegant means for the administration to create a positive

agenda that would allow it to engage in everything from the eurozone crisis to the potentially

distortive effects of China’s rise. It also provides an organizing logic for the US’s relationship

with Europe that has been defined in recent years by withdrawal (Afghanistan, Iraq),

retrenchment (declining defense budgets and political will for security operations) and economic

crises.

A Case Study in Economic Statecraft

Post-crisis US foreign policy has attempted to integrate economic policy more tightly.

“Economic statecraft” is the diplomatic buzzword for such an intertwined policy approach, and

Secretary of State John Kerry reaffirmed the commitment to this approach. “Foreign policy is

economic policy,” he said. It’s been clear for decades that the traditional silos of foreign policy

have broken open, eroding the boundaries between traditional agencies and departments. Areas

like cyber security, climate change, regulation and trade are now front-burner issues that require

economic statecraft.

With its announcement today, the US has begun to implement this strategy in earnest. The shared

values make US-European relations a laboratory for what is possible in interstate relations and to

test the mettle of economic statecraft in practice.

The Bertelsmann Foundation recently released its Field Manual to Europe, which sets out a

strategy for realizing a new trans-Atlantic economic compact. The Field Manual can be found at:

http://www.bfna.org/publication/field-manual-to-europe.

Tyson Barker is director of transatlantic relations at the Bertelsmann Foundation.

tyson.barker@bfna.org

ABOUT THE BERTELSMANN FOUNDATION The Bertelsmann Foundation is a private, non-partisan operating foundation, working to promote and strengthen trans-

Atlantic cooperation. Serving as a platform for open dialogue among key stakeholders, the foundation develops practical policy recommendations

on issues central to successful development on both sides of the ocean.

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