Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
The Challenges of Negotiating a Transatlantic Trade and Investment Partnership

The Challenges of Negotiating a Transatlantic Trade and Investment Partnership

Ratings: (0)|Views: 3 |Likes:
Published by Cato Institute
In his State of the Union speech, President Obama announced that the United States will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union. This initiative is big news, and potentially a game-changer for trade liberalization. For years now, trade talks at the World Trade Organization (WTO) and other fora have been stalled or grinding along slowly. By limiting the transatlantic talks to two economies that are relatively supportive of free trade, and are at the same development level, perhaps trade negotiators will at last have some success. A completed agreement here could generate momentum for broader trade liberalization around the world. More immediately, the economic benefits of this trade deal would be great, as the United States and the European Union are the two largest economies in the world, and their trade flows with the world account for almost one third of global trade.
In his State of the Union speech, President Obama announced that the United States will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union. This initiative is big news, and potentially a game-changer for trade liberalization. For years now, trade talks at the World Trade Organization (WTO) and other fora have been stalled or grinding along slowly. By limiting the transatlantic talks to two economies that are relatively supportive of free trade, and are at the same development level, perhaps trade negotiators will at last have some success. A completed agreement here could generate momentum for broader trade liberalization around the world. More immediately, the economic benefits of this trade deal would be great, as the United States and the European Union are the two largest economies in the world, and their trade flows with the world account for almost one third of global trade.

More info:

Categories:Types, Research
Published by: Cato Institute on May 07, 2013
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

05/07/2013

pdf

text

original

 
In his State of the Union speech, President Obamaannounced that the United States will launch talks ona comprehensive Transatlantic Trade and InvestmentPartnership with the European Union. This initiative is big news, and potentially a game-changer for trade liber-alization. For years now, trade talks at the World TradeOrganization (WTO) and other fora have been stalled or grinding along slowly. By limiting the transatlantic talksto two economies that are relatively supportive of freetrade, and are at the same development level, perhaps tradenegotiators will at last have some success. A completedagreement here could generate momentum for broader trade liberalization around the world. More immediately,the economic benefits of this trade deal would be great, asthe United States and the European Union are the two larg-est economies in the world, and their trade flows with theworld account for almost one third of global trade.However, there may be some stumbling blocks alongthe way. If the United States and the European Union takeon an agenda that is too broad, it may turn out that thesetrade talks fare no better than other current trade talks. Inorder to succeed, it is important that the negotiations haverealistic goals and a clear path to completion.The precise scope of the talks remains somewhatvague at this point, but a framework is set out in the FinalReport of the U.S.–EU High-Level Working Group onJobs and Growth.
1
The report indicates that various formsof protectionism will be addressed, and also suggests thatthe talks will delve further into domestic regulatory issuesthan most current trade agreements do. While such anexpansion of international trade rules does hold the poten-tial for significant economic benefits, it also tests the limitsof how far trade agreements can go in terms of global tradegovernance. Including issues that the trading system cannothandle may doom the talks from the start, and negotiatorsshould be careful about how they approach this.
The High-Level Working Group Report
In setting out a framework for the talks, the report blurs together some very different issues, and in doing somakes the scope and coverage of the negotiations a bitunclear. The report describes three categories of issues thenegotiators will address: 
  Market Access
: The report groups traditional formsof protectionism, such as tariffs, barriers to servicestrade, and discriminatory government procurement,together with the protection of foreign investments; 
  Regulatory Issues and Non-Tariff Barriers
: Thereport covers issues of regulatory trade barriers(which may or may not be protectionist), regulatorydivergence across countries, and also harmonizationof the domestic regulatory process; 
  Rules Addressing Shared Global Trade Challengesand Opportunities
: The report includes a hodge- podge of issues, such as intellectual property, labor,environment, and “localization” issues, amongothers.Making sense of the content of the proposed talks isdifficult based on this framework. There are examples of  protectionism in all three categories, and the groupingsobscure important distinctions between the different poli-cies pursued (e.g., intellectual property and discriminationthrough “localization” measures fall in the same category).To better understand the issues that will be subject to nego- No. 51 February 26, 2013
The Challenges of Negotiating a Transatlantic Tradeand Investment Partnership
 by Simon Lester 
Simon Lester is a trade policy analyst at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
 
tiations, this paper separates out protectionism from lesstraditional trade issues, and discusses some of the implica-tions of going beyond protectionism in particular areas.
Protectionism
The report addresses issues of protectionism in four main ways. First, with regard to tariffs on trade in goods,the report recommends thatthe goal of the agreement should be to eliminate allduties on bilateral trade, with a substantial eliminationof tariffs upon entry into force, and a phasing out of all but the most sensitive tariffs in a short time frame.Eliminating tariffs, even if it may go slowly for some products, is a core goal of trade liberalization and a clear  benefit for consumers and the global economy. While tar-iffs between the United States and the European Union arerelatively low, the amount of trade at stake suggests thatthe economic benefits of tariff elimination would be large.As to trade in services, liberalization is more compli-cated, as most of the protectionism comes through domes-tic regulation. Here, the report recommends thatthe goal should be to bind the highest level of liberalization that each side has achieved in tradeagreements to date, while seeking to achieve newmarket access by addressing remaining long-stand-ing market access barriers, recognizing the sensi-tive nature of certain sectors.There are some sensitive issues that arise from how inter-national trade rules on services might interfere with domes-tic policy autonomy. Nonetheless, as with goods, removing protectionist barriers to trade in services for trade betweenthe United States and the European Union would be a verywelcome development.The report also addresses protectionism in the area of government procurement. It recommends thatthe goal of negotiations should be to enhance businessopportunities through substantially improved accessto government procurement opportunities at all levelsof government on the basis of national treatment.In essence, this means that, in their procurement practices,governments should not discriminate against foreign firms(think of Buy America provisions).Finally, the report mentions the problem of “localiza-tion barriers to trade,” which it describes asmeasures designed to protect, favor, or stimulatedomestic industries, services providers, or intel-lectual property at the expense of imported goods,services, or foreign-owned or foreign-developedintellectual property.This language seems to reflect the general principle of non-discrimination, but it may be an attempt to expand some of the more specific nondiscrimination rules that already existin trade agreements.While these efforts at promoting free trade are good,there are, unfortunately, also some gaps in the effort to takeon protectionism. First, with regard to tariffs, there is nomention at all of the so-called trade remedies (antidumping,countervailing duties, and safeguards). And second, thereis no discussion of the problem of subsidies, which has been a particular irritant in U.S.–EU trade relations. TheUnited States and the European Union have been battlingfor years at the WTO over subsidies to their respective air-craft industries. And both have been criticized heavily for their massive subsidies to domestic agricultural producers.These issues seem to be off the table.
Foreign Investment
Over the last several decades, governments havesigned on to a variety of international agreements relatedto foreign investment. Originally, these agreements took the form of bilateral investment treaties. In recent years,though, obligations in this area have been included as sepa-rate chapters in trade agreements. These rules have provedcontroversial, both for their substantive obligations, andalso because they allow foreign investors to sue govern-ments in an international tribunal.On the issue of foreign investment, the report recom-mends that a U.S.–EU trade agreementshould include investment liberalization and pro-tection provisions based on the highest levels of liberalization and highest standards of protectionthat both sides have negotiated to date.This language indicates that the existing internationalinvestment rules in current U.S. and EU trade and invest-ment agreements will be duplicated in any U.S.–EU agree-ment.It is important to note a distinction between two typesof investment policies. First, there are policies related toinvestment
liberalization
. At its core, liberalization of for-eign investment suggests that countries will not discrimi-nate against foreign investors as compared to domesticinvestors. That means any barriers to an initial foreigninvestment would be limited to legitimate concerns such asnational security; and it means that once a foreign invest-ment has been made, governments will treat domestic andforeign companies the same.By contrast, investment
 protection
is a broader con-cept. Protection of domestic companies who invest abroadcan go beyond simple nondiscrimination. For example,typical international investment rules set out a “minimumstandard of treatment,” under which foreign investors areentitled to a certain level of good treatment, and can sueeven where the host government’s actions are nondiscrimi-natory. When combined with the ability of foreign inves-tors to sue governments directly (referred to as investor– state arbitration), these rules have been controversial.Cross-border flows of investment between the UnitedStates and the European Union are quite large. As the report
2
 
notes, “the United States and the European Union havedirectly invested more than $3.7 trillion/€ 2.8 trillion on bothsides of the Atlantic.” All of this investment is beneficialin economic terms. However, it also provides numerousopportunities for investor–state litigation, which may causeconcern among groups who worry that these rules interferewith domestic policy autonomy. Under the similar provisionsof the North American Free Trade Agreement (NAFTA),Canadian companies have brought 15 cases against theUnited States in the almost 20 years since the NAFTA wassigned.
2
With EU investment in the United States over seventimes the amount of Canadian investment,
3
there is the poten-tial for a large number of complaints.
Regulatory Issues
One of the most difficult issues in these negotiations ishow to address various concerns about domestic regulation.There are a number of issues within this general category:
 Regulation as a trade barrier, international regulatorycooperation
, and
regulatory practices
.At the outset, it is worth noting that issues of regula-tory
 protectionism
are already dealt with under the rulesof the WTO. There is a long history of WTO cases—and prior to the WTO, at the General Agreement on Tariffsand Trade (GATT)—dealing with protectionism appliedthrough regulatory measures. Although the report is notcompletely clear on this point, presumably the UnitedStates and the European Union will continue to rely onthe WTO to deal with such issues and are not seeking torewrite the WTO’s jurisprudence.However, regulations can act as trade barriers even if they are not protectionist. The WTO’s rules deal with thisissue as well, but it appears that the United States and theEuropean Union are seeking to push the rules further. Inthis regard, two of the specific proposals are 
 An ambitious “SPS-plus” chapter, including es-tablishing an ongoing mechanism for improveddialogue and cooperation on addressing bilateralsanitary and phytosanitary (SPS) issues. The chapter will seek to build upon the key principles of theWorld Trade Organization (WTO) SPS Agreement,including the requirements that each side’s SPSmeasures be based on science and on internationalstandards or scientific risk assessments, applied onlyto the extent necessary to protect human, animal, or  plant life or health, and developed in a transparentmanner, without undue delay. 
 An ambitious “TBT-plus” chapter, building on hori-zontal disciplines in the WTO Agreement on Tech-nical Barriers to Trade (TBT), including establish-ing an ongoing mechanism for improved dialogueand cooperation for addressing bilateral TBT issues.The objectives of the chapter would be to yieldgreater openness, transparency, and convergence inregulatory approaches and requirements and relatedstandards-development processes, as well as, inter alia, to reduce redundant and burdensome testingand certification requirements, promote confidencein our respective conformity assessment bodies, andenhance cooperation on conformity assessment andstandardization issues globally.In seeking to expand on both the SPS and TBT agreements,the United States and the European Union seem to be suggest-ing that the existing rules are inadequate. It is not clear whythey think so. There have been a number of WTO disputesunder these agreements already. These cases have delved intosome very sensitive domestic regulatory issues, and have doneso in a way that tries to balance trade issues and domestic policy concerns. WTO disputes between the United States andthe European Union have addressed issues such as EU mea-sures related to hormone treated beef and genetically modifiedorganisms. But these disputes have shown how difficult theseissues are to resolve. While the United States succeeded on itslegal claims, domestic political constraints have prevented theEuropean Union from complying. Perhaps there is room for improvement in the rules here, but without further details, itis difficult to say whether this particular proposal is a sensibleone and what its impact might be.With regard to
regulatory
 
cooperation
, the report refersto “more compatible regulations for goods and services,”and further talks aboutProvisions or annexes containing additional com-mitments or steps aimed at promoting regulatorycompatibility in specific, mutually agreed goodsand services sectors, with the objective of reducingcosts stemming from regulatory differences in spe-cific sectors, including consideration of approachesrelating to regulatory harmonization, equivalence,or mutual recognition, where appropriate.If the goal here is to reduce the costs of arbitrary diver-gences in regulation across countries, such an effort has the potential to be of great benefit. At the same time, includingsuch rules in trade agreements has not been done before,and carries the risk of taking on new issues that tradeagreements cannot handle.Currently, issues related to incompatible regulationsare being pursued in a number of different fora. Outside of trade agreements, the United States and Canada are pursu-ing these issues through a regulatory cooperation council.And in the trade arena, there are broader talks about regu-latory coherence in the Trans Pacific Partnership (TPP). Itis not yet clear which forum is the most effective place toaddress these issues.Finally, the U.S.–EU trade and investment talks willtake on issues of 
regulatory practices
, which the TPP isdealing with as well. The report says that the parties shouldseek to negotiateCross-cutting disciplines on regulatory coherenceand transparency for the development and imple-mentation of efficient, cost-effective, and morecompatible regulations for goods and services,including early consultations on significant regula-tions, use of impact assessments, periodic review
3

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->