Negotiations for one of the biggest free trade agreements have inched closer with the European Union (EU) and the US signalling their decision to move forward on a bilateral pact that is expected to give a substantial push to trade and investment flows across the Atlantic.
EU Trade Commissioner Karel De Gucht will travel to Washington early February to finalise a joint EU-US report. At a recent press interaction, the commissioner gave a clear indication that the Transatlantic partners are readying to deepen the already existing strong business engagement.
An interim report seeking a bilateral pact, which was released around the middle of last year, was heralded as a strong move for a possible agreement covering goods, services and investment. However, with the US moving into the election mode after the release of the report, there was little movement forward. However, now Brussels and Washington have evinced interest in taking the next step towards a possibly “ambitious” agreement that will benefit over 800 million people.
The European Commission, according to news reports, is of the view that the trade agreement could boost Europe’s economic output by euro 65 billion annually, equivalent to a 0.52 per cent increase in the EU’s gross domestic product.
The US, as of now, has free trade agreements with about 20 countries. But most of them are with countries for political and strategic reasons. The North American Free Trade Agreement and bilateral agreements with Korea and Australia are, however, also geared for genuine market access.
The EU, on the other hand, has completed negotiations with four partners — Chile, Korea, Mexico and South Africa. It is negotiating agreements with the Association of Southeast Asian Nations, Canada, the Gulf Cooperation Council, Singapore and Malaysia, besides India. The EU agreements are comprehensive and are directed to gain market access for both parties.
The US-EU agreement, as the EU trade commissioner has pointed out, is not going to be easy. Both sides will have to accommodate to a lot if a worthwhile agreement has to be reached. Indications are that the negotiations will be for a comprehensive agreement covering goods, services and investment.
The High-Level Working Group, which has submitted the interim report recommending the commencement of negotiations, has gone into various aspects of bilateral trade and investment issues. The report has reportedly looked into issues, such as elimination or reduction of conventional barriers to trade in goods like tariffs and tariff-rate quotas; elimination, reduction or prevention of barriers to trade in goods, services, and investment; opportunities for enhancing the compatibility of regulations and standards; elimination, reduction, or prevention of unnecessary “behind the border” non-tariff barriers to trade in all categories; enhanced cooperation for the development of rules and principles on global issues of common concern, and also for the achievement of shared economic goals relating to third countries.
The group’s interim report indicated that the goal would be to eliminate all duties on bilateral trade with the shared objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of all, but the most sensitive tariffs in a short-time frame. In the course of negotiations, both sides would consider options for the treatment of the most sensitive products. Agricultural products certainly would fall under the sensitive products list and it will be interesting to see how the two partners resolve that issue.
An important aspect for the two sides would be to tackle non-tariff issues. The two sides have decided to have a detailed discussion on the regime followed on sanitary and phytosanitary measures that govern regulations on agricultural products, as also on technical barriers to trade that regulates manufactured goods.
The US has been holding back from making any concrete proposal at the World Trade Organisation’s negotiations in the last year or so, since there has been a strong anti-trade lobby holding back the negotiators. Hopefully, the same lobby will not try to scupper the bilateral negotiations when they begin.
It is also essential to note that given the economic outlook in Europe and the US, the negotiations, whenever they begin, have the potential to build a win-win agreement. Importantly, the two sides need to finalise an agreement soon if they want to collaborate and challenge the rise of Asia, especially China, in global markets.
The writer is Principal Adviser at APJ-SLG Law Offices
