USTR Hopes TTIP+TPP = Faster Growth
12:00 AM, Jul 13, 2013 • By IRWIN M. STELZER
Here’s a TTIP for you. No, that’s not a typo missed by our ever-vigilant editors. It stands for Transatlantic Trade and Investment Partnership, what British prime minister David Cameron calls a “once-in-a-generation prize” that can create two million jobs on both sides of the Atlantic, and Sir Peter Westmacott, Britain’s ambassador here in Washington, reportedly describes as the “Holy Grail” for resuscitating transatlantic economies. If the deal can be fashioned, TTIP will have created what analysts at the Brunswick Group describe as “the largest internal market in the world, with 830 million consumers, and would liberalize one-third of global trade.”
Some 150 negotiators from the EU and the U.S. sat down in Washington last Monday to begin negotiating a trade-liberalizing agreement between two parties that between them account for almost half of the world’s economic output. It wasn’t easy getting to the table. The French, whose antipathy to free markets extends to free trade, first refused to attend unless their subsidies to domestic filmmakers and quotas against American cultural products were declared off the table. Even their European negotiating partners laughed off France’s effort to refuse to allow discussion of a measure designed to protect producers of films no one wants to see, a move that would have antagonized Hollywood moguls, among them Barack Obama’s more important fundraisers.
Ever resourceful, the French then professed shock, shock to find that allies spy on allies, and that American spies were listening in on the deliberations of EU policymakers, a chore probably assigned to the insomniac spooks unlikely to nod off listening in on the several EU presidents as they try to figure out how to get Germany to put up still more money in order to prevent national flights from the euro. No use: negotiations have begun as scheduled.
The prize of which Cameron speaks is variously estimated at adding somewhere between 0.6 percent and perhaps 1 percent to annual world economic output. Or about $700 to the real income of every EU household and $841 to the income of every U.S. household (the precision of the latter estimate is a testimonial either to the arrogance or the sense of humor of the forecasters). Grasping that prize will involve three important steps.
The first is to recognize that the low fruits have already more or less been picked: tariffs between the two trading areas are already quite low. It is the non-tariff barriers to trade, NTBTs, to use the latest addition to the bureaucrats’ alphabet soup, that matter. For example, The Economist estimates that chemical exports to America face a modest 1.2 percent tariff rate, but NTBTs equivalent to a tariff of 19.1 percent.
Second, there will have to be significant concessions by both sides to eliminate or soften the impact of these non-tariff barriers. Europeans bar beef fed on ractopamine, which American ranchers use to produce leaner beef, while we bar EU beef lest we are felled by the mad cow disease that afflicted the UK and Europe some years ago. EU rules limit imports of the billions of dollars of genetically modified foods that our farmers produce annually; U.S. law (the Jones Act) requires that only vessels built here and manned by Americans can carry cargoes between U.S. ports, which the Dutch point out prevents a Rotterdam-bound vessel leaving Baltimore from dropping off goods in New York.
Third, politicians on both sides of the Atlantic will have to be willing to antagonize important constituencies. French president François Hollande might have to tell his filmmakers to consider making movies that attract audiences rather than subsidies, and his farmers that they will have to compete with more efficient American tillers of the soil. President Obama, in no position to force individual states to exclude protectionist “buy American” provisions from their procurement policies, will have to find some other concession to offer, especially since the recession has produced a fourfold increase in such state-level measures in recent years. Perhaps forgive us our buy-American sins and we will forgive you France’s exception culturelle, or allow foreigners to own U.S. airlines, which might just introduce a standard of service that American carriers have long since abandoned.
The thorniest issue relates to regulatory harmonization. It should be possible to agree to live-and-let-regulate in some areas. The EU insists on flashing brake lights on cars, American safety regulators prefer a steady red glow. Surely, agreements can be reached to allow auto makers additional economies of scale, and therefore better deals for consumers. But the question of the regulation of financial services is not so easily solved.
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