A transatlantic trade pact in trouble

Brussels and Washington need to earn more public support

Early in 2013, the US and the EU launched talks on a bilateral trade deal that they intended to complete, as the US trade representative Michael Froman put it, “on one tank of gas”. Three years later, the Transatlantic Trade and Investment Partnership (TTIP) has required repeated refuelling but has still made disappointing progress.

The talks, which have encountered determined political resistance, are deep in trouble. That is a pity, since the concept of the deal is a thoughtful attempt to make trade pacts reflect the reality of increasingly service-based international commerce. Yet while much of the substance is sensible, there has been a serious mishandling of the politics and a failure to grasp the depth of the opposition.

Businesses have long complained that trade deals have not kept up with changing economies. The multilateral “Doha round” focused on agricultural issues of interest to the low and middle-income countries whom it was intended to help. That helped drive away manufacturing and services exporters, depriving the round of lobbying support.

TTIP, by focusing on rules rather than tariffs, aimed to address this problem. But it failed to take into account the difficulty of compelling domestic regulators to bring their standards into line with each other. It was thus in difficulty from the outset.

The deal has also suffered because of the toxic politics surrounding trade pacts on both sides of the Atlantic. Having finally passed in 2011 a handful of smaller bilateral deals — Colombia, Panama and South Korea — the US Congress has turned against trade agreements in general.

Even the Trans-Pacific Partnership (TPP), with a strong geopolitical component intended to reassert America’s role in Asia, has struggled to make headway on Capitol Hill. Republican candidate Donald Trump has opposed the deal. His Democratic rival Hillary Clinton, who as secretary of state was intimately involved in negotiating the TPP, has said she cannot support it in its current form.

President Barack Obama’s administration could try to jam it through Congress, if necessary in the “lame duck” session between November’s election and the inauguration of the new president in January. But this is regarded by most observers as a long shot.

Economic ties between Europe and the US took a knock this week when the EU slapped huge back taxes on Apple and several European politicians declared transatlantic trade talks to be effectively dead. Gideon Rachman asks Tony Barber, the FT’s Europe editor, and Shawn Donnan, the FT’s world trade editor, what hopes remain for a successful conclusion to the TTIP talks.

In Europe, a general suspicion of the political establishment and growing support for the radical left has found expression in opposition to both TTIP and a less comprehensive EU deal with Canada. The European Commission recently felt itself compelled to backtrack on its previous position, that the Canada deal could be ratified at an intergovernmental and European Parliament level, and conceded that parts of it needed to be agreed by dozens of national and regional parliaments throughout Europe.

The problem lies in launching trade deals without first doing the groundwork, particularly political preparation of the public and of regulators affected by the pact. The poisonous atmosphere surrounding trade deals, partly reflecting worries about inequality and globalisation in advanced economies, means the US and EU need to be more confident of gaining support before they put their credibility on the line. Unless there is an improbable acceleration of TTIP talks before the end of the year, Washington and Brussels will need to take a pause for breath and consider if and how the pact can be pushed forward.

Spending time addressing the concerns of their regulators and their public before driving ahead with negotiations would be a good start.

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