The Challenges of Negotiating a U.S.-EU Trade and Investment Agreement

A couple months ago on this blog, I set out some views on the possible U.S.-EU free trade agreement that was being discussed.  Things have now progressed a bit, and President Obama has announced talks on a “Trade and Investment Partnership” with the EU.  Reports suggest that the negotiations will begin this summer.

Should we be excited about these developments?  Perhaps a little bit, but overall I maintain the ambivalence I had in my earlier blog post.  I have elaborated on this ambivalence in a Free Trade Bulletin. To summarize, I like all the trade liberalization parts of these talks (lower tariffs, removing barriers to services trade, opening up government procurement), but there are also aspects that take us down a difficult and unclear negotiating path.  One of these aspects is the issue of “regulatory barriers to trade.”  Some people have the idea that there will be great economic benefits if we can harmonize regulation across the U.S. and EU, so that, for example, manufacturers do not have to produce different products for different markets.  I agree that there would be benefits if we could address this problem.  But it won’t be easy to reach agreement here, and there could be some downsides (e.g., if this is a compromise, both the U.S. and EU may have to agree to some regulatory changes that they don’t like).

I’d like to get excited about these talks. But I have some doubts about their scope, and I’m not sure anything will come out of them.

We’ll be talking more about all this at a policy forum here at Cato tomorrow.