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11/28/15

EU-USA: Transatlantic trading deal

The guns of the long transatlantic beef war are silenced. Last year the European Union more than doubled its quota of American beef imports (so long as it is not treated with hormones) and America removed punitive duties on imports of Roquefort cheese. The Americans should soon ease a ban on beef imports imposed in 1997 to prevent the spread of mad cow disease. In November the EU accepted the American practice of decontaminating meat with lactic acid. A final skirmish, over American beef fat, could soon be settled through plans to allow imports of tallow for biodiesel (but not for cosmetics).

After decades of trade rows and lawsuits, the truce is meant to clear the air for an ambitious transatlantic free-trade deal. EU officials speak of creating “something approaching a transatlantic single market in goods”. Even a less grand pact could help to re-energise struggling economies on both sides of the Atlantic. It could also help America and Europe to set international trade rules in the face of a fast-rising China.

Big business wants a deal. Trade unions and greens are no longer so worried about a race to the bottom. The ever-protectionist French and Italians are on board. And yet there is genuine wariness, particularly on the American side.

The report of a high-level group that is expected to recommend the start of talks has been delayed. Perhaps, think some, President Barack Obama is trying to squeeze concessions out of the Europeans; or, Europeans worry, he cares more about a transpacific deal; or he is busy setting up his second-term administration; or is he waiting for the right moment for an announcement, for instance in his state-of-the-union message on February 12th?

American officials say they want to ensure that any negotiation is both unusually ambitious and unusually fast. The deal, they say, has to be done “on one tank of gas”, by which they mean in the next two years. Neither side wants a repeat of the moribund Doha round, now in its 12th year.

America and the EU make up the world’s biggest and richest trading partnership, accounting for about half of global GDP and one-third of trade. They are the biggest investors in each others’ economies. But this very closeness makes progress harder. Easy deals have mostly been done; what is left is complicated. Tariffs are low (below 3% on average, though higher on farm products) but non-tariff barriers abound. Many have to do with consumers, public health, the environment or national security. Governments are not usually elected to compromise on such matters.

One European aim is to open up America’s public-procurement market, which is more protected than Europe’s; one reason is that the federal government cannot force states to open tenders to foreign bidders.

Another is to dismantle restrictions on services, which represent the lion’s share of output but a relatively small part of exports. European airlines cannot take over American carriers or carry passengers between American cities. Similar restrictions apply to coastal shipping under the 1920 Jones Act. Yet the EU market in services also remains fragmented. A transatlantic deal could spur further integration.

Other difficulties include France’s insistence on the “cultural exception” to protect French-language audio-visual products, and the EU’s wish for America to respect hundreds of “geographical indications” on everything from Parmesan cheese to French wines.

Read more: Transatlantic trading | The Economist

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