Negotiations on the future free trade treaty between France and the United States begin Monday and will last at least a year and a half. The debates promise to be complex, and the resulting agreement promises to reshuffle the cards of international trade on both sides of the Atlantic.
Atlantico: Negotiations on the free trade agreement between the United States and the European Union begin this Monday despite the hiccups caused by the case of espionage by the Americans. While France wanted discussions to stop following this affair, Angela Merkel spoke out in favor of continuing them. How is Europe approaching these discussions? And with what potential consequences? How could the United States take advantage of this?
Michael Fouquin: Negotiations on the transatlantic free trade agreement begin on Monday despite revelations of large-scale espionage operations carried out by the NSA against European institutions and certain European embassies in the United States in particular. As compensation, the Commission obtained the parallel holding of a transatlantic group of experts to discuss American practices (in particular with regard to the protection and sharing of private data). This is a concession made by the Americans. Mrs Merkel, the Commission and most of the Member States absolutely wanted to maintain the date for the opening of negotiations, the French did not want it, but they were isolated on this subject and therefore chose to accept this compromise. On the content of the work of this group of experts, nothing is known for the moment, but it is clear that this could be a means of pressure from Europe on the United States. The Europeans have tried in vain for two years to obtain access to private data collected by American agencies and reciprocity on, for example, information on passengers using air transport.
Jacques Sapir: In the negotiation that begins, the interests of each side are very different. Given the market collapse in the Eurozone, Germany needs to open up to the US market. Moreover, it anticipates the probability of a revaluation of the euro against the US dollar. Large German companies, some of which already produce in the United States, will develop their local production. For all these reasons the transatlantic free trade agreement is a necessity for German companies. Even if it destroys jobs in Germany, the drop in the labor force that we know and which will increase in the next ten years will compensate for this. From this point of view Mrs Merkel is following a policy that is perfectly consistent with the interests of German companies but not at all with those of European workers.. It is more than regrettable, it is in fact reprehensible, that France did not block the negotiation.
Jean-Pierre Corniou: The division of Europe is a structural wound that weighs on our global position in all areas that involve negotiations. Faced with the large politically homogeneous continental groups such as the United States, China, Brazil or Russia, we are certainly a giant, which constitutes the world's largest economy, but composed of 28 distinct entities and concerned not to lose their sovereignty. In fact, there is a double negotiation. Between the 28 member states first, with games of influence and alliances, then with the outside world. The United States is better prepared, better organized and much clearer than the Europeans about their objectives. The asymmetry is due to the fact that the European Union is not a state, its leaders are not accountable to universal suffrage, whereas the United States and European countries each have leaders concerned about their electorate. While such a negotiation involves meticulous preparation by the experts who will sift through customs tariffs and what are called non-tariff barriers, sector by sector, the final agreement will be made at the political level, which implies a solid capacity for 'commitment. Obviously the United States will exploit the slightest flaws in European positions resulting from more or less robust internal compromises.
What does this agreement contain? What are the most sensitive points on one side as on the other?
Michael Fouquin: By definition – unless you are the recipient of mandates from the negotiators – you don't know anything specific. Commissioner Barroso wanted to have the widest possible negotiating mandate from the member countries, France opposed this, obtaining the exclusion of the cultural industry from the negotiations. This is the only known exception which had infuriated José Manuel Barroso. The mandate is therefore very broad. For Europe, one of the important points of the negotiation will certainly be the question of access to public contracts: on the European side, it is considered that 80% of public contracts are open to international competition, compared to only a third on the American side. The American States are particularly braced on the defense of these markets which undoubtedly have a great electoral and industrial value to defend American SMEs. On customs duties, the expected gains are quite low – on average they are less than 3% – but there are sensitive sectors on the European side: meat in particular. But in this area the most important questions concern GMOs and certification of the contents of canned food. Another subject is that of designations of origin, which the Americans do not want. In general, the question of standards will be central, whether in terms of product safety, health quality, etc. The question is not always a source of conflict and on the contrary would allow the West to impose their standards on the rest of the world, it is one of the strategic interests of these negotiations.
Finally, there is the question of multinationals. The United States has obtained from Canadians and Mexicans, within the framework of the North American free trade agreement NAFTA, that multinationals can directly attack the regulations of partner states if they believe that they are disadvantageous to them. The Europeans absolutely do not want it. Tax issues could be addressed and an agreement on the fight against tax optimization which deprives all national public treasuries of important revenues in these times of abyssal deficits.
Jacques Sapir: This agreement will focus mainly on so-called "non-tariff" barriers, ie safety standards and environmental standards. We know that the United States applies much lower standards than the European Union in a large number of cases. The agreement is therefore very likely to lead to an alignment of European standards with US standards. Another dimension of this agreement relates to services. Here too, we are in the presence of very different standards between the United States and the EU, in particular on working conditions. There too we must fear an alignment on the "lowest bid/least cost" which is very unfavorable to European workers. From this point of view, it is worth looking at what the share of the richest 1% represents in the American national income: 23%! We actually reach 8% to 9% for France. It is clear that behind the technical discussions it is in reality the complete dismantling of the “social model” of continental Europe that we are going to witness.
Jean-Pierre Corniou: A few reminders... Since the 1995th century, the idea of free trade has developed against its antithesis, protectionism, which is more easily practiced, because leaders have always sought to protect their industry and trade by taxes against penetration of foreign products. Through free trade, everyone is potentially a winner by opening their borders to the goods and services of the other. This is the basic doctrine adopted today by the world community within the framework of the World Trade Organization, the WTO, created in 1986 following the Uruguay Round negotiations between 1994 and XNUMX. WTO ensures compliance with treaties between States on the conditions of free trade and on the transparency and stability of the rules. It is also a dispute management body.
But what constitutes once again the heart of the debates between Europe and the United States, in a context of crisis, is the degree of adherence to the idea that free trade between territories is a factor of mutual enrichment, economic development and job creation. However, opening up international trade more widely means first of all more competition, and therefore the weakening of the least well-prepared companies.
However, if the European and American economies, which are equally mature, are interdependent, we are both rivals and partners, as the aeronautics industry demonstrates. Gold Europe and the United States represent 31% of world trade and 49% of world GNP. Daily flows amount to 2 billion euros of goods and services. Mutual investments represent a stock of 2,8 trillion euros. More than 800 million citizens are affected by this negotiation.
Economic relations are currently defined by the 2007 framework agreement on the "new transatlantic economic partnership" which already aims to tackle non-tariff barriers. The challenge of this new negotiation with the United States, defined in June 2012 by the Joint Task Force on Jobs and Growth, is to make progress in reducing residual obstacles to mutual trade, 80% of which are non- tariffs and concern standards and procedures that are expensive for businesses and, making trade more complex, slow them down. A negotiating mandate was given on June 14, 2013 by the Member States to the Commission.
The EU could gain an additional 0,5 point of growth per year against 0,4 for the United States if we trust the estimates of the European Commission. What is it really? Where do each other's interests lie?
Michael Fouquin: The negotiation has not started, so we do not know what the impact will be. The estimates quoted are of the order of sophisticated mystification, the only significant result concerns the sectoral effects of such and such a measure and in this case it is generally shown that the gains for the consumer are greater than the potential losses for the producers and therefore that everyone is a win-win as the liberal vulgate wants.
More seriously, let's not forget that Europe has large trade surpluses, and that the American market has basically been favorable to them since 1945. Past conflicts have shown that the dispute settlement body of the WTO has given fairly balanced results. That said, some sectors, and therefore some countries, will be negatively affected (meat) while others will gain (automotive, for example).
The difficulty of Europe is that it is made up of 28 countries which do not have identical interests and that the United States may be tempted to take advantage of this to obtain more than they will yield.. It is up to the Commission – remember that it is the one negotiating – and that by definition it must find a way to satisfy its constituents. There will necessarily be psychodramas (we may remember Balladur and the Blair House agreement which made it possible to conclude the Uruguay cycle). However, let us also remember that the United States and the European Union had found common ground during the Doha round of negotiations and that it was the Indians, supported by China and Brazil, who caused this round to fail. .
Finally, it should be noted that the European Parliament will have its say and that in this area it is sensitive to the defense of European interests (see its position on solar panels or on American espionage).
Jacques Sapir: The growth estimates made here and there are perfectly fanciful and based on models that were built precisely to validate free trade. If we look to the past, we will see that the extension of free trade has not been accompanied by growth gains. If we look at France's long-term growth rate, we see that it went from 2,6% per year from 1980 to 1989, in a period of regulated market liberalization, to 1,8% per year. from 1990 to 2007, in a period of deregulated liberalisation. From this point of view, both France and the European Union will not be so much the "useful idiots" of free trade as the hostages and victims of large German and American companies.. From this point of view, we must never forget that in the United States national security regulations can always be invoked to suspend the effects of a free trade agreement. However, there is no provision of this type in Europe. We negotiate naked while the Americans keep their clothes and their colt. Jean-Pierre Corniou: The Commission estimates that the additional opening to trade with the United States represents a stake of 187 billion euros per year of new outlets for European companies. The figure of two million new jobs created is mentioned. No one can dispute these figures, nor reasonably advance them, because we have no vision of the outcome which the negotiations will lead to, tenuous or ambitious. It is also necessary to measure the impact of an increase in transatlantic trade flows on other economic currents with these two zones. China, like most emerging countries, could suffer from this, which would lead to reactions on their part. Because if in France we measure, as usual, the risks for our country alone, we underestimate the offensive character that such an agreement, by imposing "Atlantic standards", could represent towards all the other nations of the world. We are also beginning to speak of a “NATO agreement”.
Subjects of mutual interest as well as frictions, even conflicts, are legion on both sides. The negotiations will therefore constitute a test of the capacity of these two groups to bring about a common interest despite the difficulties which engage the political responsibility of the States. Each party will seek to improve its relative competitive situation, and this in a complex game where the cards are reshuffled with the BRICS in general, but also with the energy producing countries among which the United States is making a surprising comeback. .
Agriculture, agri-food, electronics, textiles, chemicals, energy, manufactured products, pharmaceutical products, access to public markets, are all complex subjects for which European interests are not always convergent within Europe, and diverge with those the United States. When we approach the thorny agricultural issue, between the Common Agricultural Policy on the one hand and the Farm Act on the other, which encounter multiple difficulties, we know that the technical discussions on the environment, production and prices farmers are placed under the threatening sword of Damocles of the influential rural populations. When American chemical products benefit from the drop in the price of gas of around 30% brought about by the exploitation of shale gas, European industrialists believe that they are not in conditions of fair competition as long as hydraulic fracturing is prohibited. European and American conceptions of the environment, which leave their mark on a large number of standards, are sufficiently divergent for substantive reasons that it is hard to see how these discussions will be able to change them rapidly.. GMOs, intellectual property, food safety and health are all complex subjects which will slow down a serene progress in the negotiations. As for the protection of culture, it is an infinite subject of internal debates which it is difficult to see how the negotiators will overcome. We must also integrate the problem of the euro/dollar parity, the volatility of which can undermine any carefully balanced agreement.
We therefore engage in a long and laborious discussion, under the watchful eye of parliaments and public opinion, punctuated by partial successes, crises and twists and turns. It is unlikely that an agreement will be reached before the officially scheduled date of the end of 2014.
Beyond customs duties, what is the risk in terms of homogenization of standards whether in agricultural, financial or even... cultural matters?
Michael Fouquin: In times of crisis it is tempting to make foreigners the scapegoats of our troubles, the question of the moment is not only a bilateral question it also engages the rest of the world. At a time when the United States has made Asia the pivot of its global strategy, and the "containment" of China its priority, the strengthening of transatlantic economic ties may be a good way to maintain our privileged relationship since the Marshall plan. Commonly defining the rules of the world game is the heart of the negotiation and, basically, we must recognize that the European economic systems are not so different from each other that we cannot find common ground of agreement.
The American arrogance revealed by their wide-ranging eavesdropping – and which is probably much less sensitive than one might think (some pointing out that with 28 members drafting the European negotiating mandate there is not much to be hidden on this side of the Atlantic) in the same way the Chinese arrogance which appeared during the conflict on the solar panels show that firm positions are profitable provided that they are well founded.
Jacques Sapir: The problems will essentially focus on agriculture, where environmental standards and the principle of precaution in theory so dear to Europeans will be the first victims of this future agreement, and in the financial field; where we are going to align ourselves more and more with financial standards, but above all with United States accounting standards. We can see the benefit of this for European financial companies, but it will always make it more difficult to establish state controls over finance. In fact, one can wonder if there is not a fundamental opposition between the interests of certain big companies which are already perfectly globalized and which want to emancipate themselves from any possibility of public control and the interests of the populations, that the 'we consider producers (and employees) or consumers. These are therefore very gloomy prospects for the European peoples who are announced with this agreement which will, in fact, be negotiated behind their backs.
Jean-Pierre Corniou: The two European and American economies were also hit by the 2008 crisis which accelerated their deindustrialisation, increased their indebtedness, and degraded employment with serious consequences at the territorial level. If their traditional economy is also weakened, the United States has a head start in everything that produces and embeds digital content.
All the arguments will continue to be exchanged between sovereignists, supporters of intelligent protectionism, and liberals during the long months that this negotiation will last. But if it is certain that lasting confinement behind its borders is rarely a source of progress, it will certainly be necessary to prepare public opinion in an educational way for this new transformation, which today is more synonymous with threats than opportunities.. To create confidence, the negotiators will also have to show neither naïveté nor angelism so as not to easily give up on the deep values of the European model by exchanging them for potential jobs. The world economy has entered into a lasting resonance and we must move there with circumspection.
However, if globalization is doing its work to standardize many practices, especially everything related to this new industry that is digital technology with 6 billion mobile phone users and 2,5 billion web users, it does not change not social practices so easily. The particularisms of the markets are tenacious, and beneficial because they are linked to national cultures, and it is not negotiations that will instantly change the tastes of consumers in terms of food, household appliances, automobiles, etc.
The development of exchanges within this transatlantic zone, the historic heart of its political, economic and military supremacy today contested by Asia is therefore a major event for the world economy and will mark the coming years.
source: Atlantico.fr via Master Confucius
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