Will US-EU Trade Talks Spur Growth - or Show Globalization's Limits?

Article excerpt

When American and European negotiators sit down this week to launch talks on a free trade deal between the US and the European Union, they are moving into uncharted waters - whether the deal succeeds or fails.

The Transatlantic Trade and Investment Partnership (TTIP) would be the world's largest free trade deal, far surpassing the North American Free Trade Agreement (NAFTA) between the US, Mexico, and Canada.

It's also ambitious in content. With tariffs already low, this deal will focus more on business barriers such as safety standards or inspection procedures. The issues might seem pedestrian, but are some of the trickiest to negotiate, going to the very heart of the way people live their lives: the way chicken is cleaned, or the assumptions people make when they walk into a pharmacy or get into a car.

A trade deal would deeply integrate US-European relations at a time of drift, and during a rocky patch, amid friction over American spying allegations. If it succeeds, some say it would create a more level playing field with the rise of China and other emerging markets, as well as reinvigorate other global trade initiatives.

Yet even if it fails - and there are plenty who think that the obstacles such as agriculture and, most recently, data privacy are insurmountable - a failure would be pivotal, showing that tariffs can be dropped but non-tariff barriers, which are often more cultural in nature, remain stubborn. A failure, says Fredrik Erixon, the director of the European Center for International Political Economy (ECIPE) in Brussels, "could lead to a larger standstill in efforts to address 21st century trade barriers."

Long-standing obstacles

Tariffs between the US and EU are already relatively low, but because of the sheer size of trade between the two - representing half of global economic output - advocates say it would be a major booster of growth and jobs, especially in debt-stricken Europe that has seen record high unemployment at 12.2 percent.

The two already invest nearly $4 trillion in each other's economies, according to US statistics, which translates into 7 million jobs.

It's the non-tariff barriers, however, that most are watching in TTIP talks. Today, if a product is made in France, for example, it goes through the various regulatory hurdles to bring it to the marketplace; it then has to go through another set of strenuous - and often redundant - hurdles to reach the US market. Under the TTIP, both sides could agree to mutually recognize the others' systems.

When it comes to car safety, reducing red tape may be an easy compromise. But other issues on the table have long vexed negotiators. That includes French subsidies for its film industry, European resistance to genetically modified foods (GMOs), or data privacy laws - especially in the wake of the information released by former National Security Agency (NSA) contractor Edward Snowden revealing the US systematically spies on its own citizens, as well as European institutions.

"One of the sleeper issues in the deal is how to deal with privacy," says Bruce Stokes, the director of the Global Economic Attitudes program at the Pew Research Center. Europeans, particularly Germans, are far more sensitive than Americans when it comes to data privacy.

"There is a disconnect between Europeans and Americans about this new digital economy," Mr. Stokes says. And even if the Snowden case is about government, not industry, it bolsters European assumptions that Americans don't care about privacy, he says. …