U.S.-EU Super Trade Pact: How the Two Can Drive the Global Economy Once More
While much of the world’s attention understandably is focused on the growing importance of Asia in the global economic system, November’s U.S.-EU summit presented an opportunity for renewing the transatlantic partnership. As the summit showed, a new U.S.-EU trade pact could not only have hemispheric implications, but could build into something much larger – a far-reaching plurilateral services agreement.
Though representatives of the members of the WTO at the December Ministerial paid lip service to concluding the Doha Round (also known as the Doha Development Agenda, or DDA), there was a quiet acceptance that alternative pathways to trade liberalization must be found. Somewhat untethered from the DDA, governments are developing new ideas and breathing new life into old ideas to address 21st century trade barriers. A U.S.-EU trade pact is one such old idea which has received new attention and energy in the post-Doha trade regime. At the November U.S.-EU summit, leaders called for the creation of a bilateral High-Level Working Group on Jobs and Growth under the umbrella of the Transatlantic Economic Council.
The Working Group’s mandate is to provide a report on avenues for transatlantic trade liberalization by next summer. While many promising ideas have died in the form of “working groups” and “committees,” I am cautiously optimistic that the renewed focus on finding alternative pathways to trade liberalization has created an environment in which this Working Group, humble as its origins may be, can be the start of an ambitious, high-standard trade agreement.
The key to success in U.S.-EU trade negotiations is to abandon the “single undertaking” model, and allow negotiations in services, manufacturing, and agriculture to proceed independently. A similar plan for “parallel but separate negotiations” was recently proposed by the U.S. Chamber of Commerce.
The benefits of such negotiations certainly are not limited to services, but a services-only negotiation between the EU and the U.S. would build upon the highly-beneficial transatlantic services trade that already exists. While financial and other business-related services are those services that are most commonly associated with U.S.-EU trade (think of the financial transactions between New York and London), telecom, legal, media, delivery, and other services sectors have a great deal to gain from closer links between Europe and the U.S. as well. If successful, the result would be a high-standard services agreement that should include an investment agreement, regulatory cooperation, the free flow of data, a level playing field between private and state-supported businesses, and address other 21st century services trade issues.
That agreement could lead to significant economic growth in and of itself. However, it is possible that it could grow larger as other nations ask to join the hypothetical high-standard U.S.-EU services agreement out of fear of being left as disadvantaged trading partners of the world’s two largest services providers. Such an agreement would be consistent with Article V of the WTO’s General Agreement on Trade in Services, and would set a new standard for services trade liberalization. The anticipated growth of the Trans-Pacific Partnership (TPP) negotiations, which Japan, Canada, and Mexico seek to join, presents an example of how smaller trade negotiations can “snowball” into much larger agreements. The U.S.-EU services agreement could evolve into a significant plurilateral services agreement – those countries that can and will join will enjoy its benefits, creating an incentive for others to join.
The challenges facing a successful conclusion of a U.S.-EU trade pact are numerous. But, the renewed focus on the transatlantic economic partnership creates the possibility, however fraught with obstacles, to make a significant impact on the global trade regime.
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