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USTR Hopes TTIP+TPP = Faster Growth

12:00 AM, Jul 13, 2013 • By IRWIN M. STELZER
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Through Mike Froman, the U.S. Trade Representative (USTR), the administration is insisting that the regulation of financial services be kept as far off the table as the French would have film subsidies. The president is concerned that harmonization would weaken the Dodd-Frank financial services reform act, and dilute American efforts to apply stricter U.S. regulations to foreign banks. The left of his party, most notably Maxine Waters, the California congresswoman and senior Democrat on the House financial services committee, is pressing the president to stand firm, and not allow “unelected trade representatives” to sell tight financial regulation for a mess of beef exports. Suspicions that regulatory harmonization might relax restrictions on bankers’ ability to cause another financial crisis are heightened by the fact that Wall Street bankers are insisting that more uniform regulation of the financial sector be one of the goals of the negotiations. Operating as they do across national boundaries, bankers would like to play by one set of international rules, especially if those rules are not as onerous as the U.S. ones.

These problems notwithstanding, the negotiators plunge on, hoping to meet the November 2014 date set for the inking of a final agreement, all the while “resisting the temptation to downsize our ambitions”, as Obama puts it. One must assume that the President and his negotiators have noticed that the final stages will play out during the run-up to the November 4 congressional elections, including the preceding months in which incumbent congressmen will be battling challengers in primary elections. That’s when pledges to preserve American jobs are required of all Democratic candidates by consumer groups (ever-suspicious of any relaxation of health and safety regulations) and unions skeptical of the promised benefits of freer trade. Whether the unions will be mollified by the fact that, unlike the circumstances underlying  the NAFTA agreement with Mexico, America has a labor and energy cost advantage over Europe remains to be seen. Or soften their opposition to freer trade because economists at Germany’s Ifo institute say that in the long run a TTIP deal would benefit the U.S. more than the EU, real income per head rising by 13.4 percent in America and only 5 percent on average in EU member states.

This will end up as a crucial test for President Obama, whose standing has fallen as critics left, right and center are borrowing from Eliza Doolittle and accusing him of Words! Words! Words!–but no action to accelerate the economic recovery. Freeing trade, he says, would do just that. Which is one reason Obama also is driving to conclude the similar Trans-Pacific Partnership (TPP) being negotiated with eight countries in Asia and Latin America. Another reason just might be that both China and Russia would end up on the outside looking in.

Fans of the more inclusive Doha Round view these regional deals as inadequate alternatives. For them, none is better than half-a-loaf. Not for Obama.

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