Trade Negotiations Can Be Painful to Watch

In an ideal world, governments would recognize the benefits of trade liberalization, and eliminate domestic tariffs on their own.  In the real world, though, much of the tariff reduction process comes through international agreements between countries, which go something like this: We will agree to lower our tariffs if you agree to lower yours.  Most people recognize that this is a silly way to do things, but in the end it leads to lower tariffs and it’s the only way to do so within existing political constraints, so we go along with it.

But it can be really painful to watch in action.  Here’s an article in the FT about the U.S.-EU trade talks:

The US has accused the EU of abandoning a pledge to remove all tariffs applied to goods traded across the Atlantic, in the first substantive row to hit landmark trade negotiations between the two economies.

The EU and US last year launched a push to reach a Trans-Atlantic Trade and Investment Partnership billed as the world’s largest regional trade negotiation covering economies comprising almost half of the global economy.

Much of the focus of the discussions has been on bringing regulations in line to encourage more trade and on reducing other non-tariff barriers. But both sides had also pledged to seek to remove all tariffs on transatlantic trade, and in a sign of the difficult discussions to come the US has accused the EU of backing away from that goal.

In discussions this week in Brussels, EU officials have told their US counterparts that they plan to allow US beef, chicken and pork into the EU only under a quota system. The move amounts to a stick in the eye of US negotiators who face powerful agricultural lobbies at home and a Congress that is appearing ever more sceptical about the value of trade agreements.

It also follows a concerted effort by Karel De Gucht, the EU trade commissioner, to label the US’s original tariff offers tabled last month as less ambitious than the EU’s. The EU’s original offer would eliminate tariffs on 96 per cent of goods traded across the Atlantic while the US offer promised to wipe out tariffs on 88 per cent of goods.

US officials insist they plan to negotiate their offer upward and remain committed to the goal of eliminating all tariffs. However, EU officials, they say, have told their US counterparts that they will not eliminate tariffs on beef, chicken or pork and instead subject them to a sliding system of tariff-rate quotas.

At the end of all this, my hope is that most U.S. and EU tariffs will be eliminated.  But watching everyone haggle about it, and demonstrate so much reluctance to do what is clearly in their interest, is not much fun.