What would an EU-US trade pact mean for the WTO?

What would an EU-US trade pact mean for the WTO?

President Obama’s State of the Union endorsement of a free trade pact with Europe has moved the issue to the policy front burner. For both sides, the deal’s expected economic lift  is the principal selling point. But European and U.S. officials have emphasized another advantage: the benefits of a trade pact for the troubled multilateral trading system, led by the World Trade Organization (WTO).

Washington and Brussels insist that a bilateral pact would in fact advance global trade liberalization. The EU envoy to the United States made the point in a Wednesday op-ed:

Working toward a trade pact also recognizes that a more intense EU-US partnership can enhance the capacity of Europe and the US to deal more effectively with other regions of the world.

Reaching an ambitious economic agreement between us would send a powerful message to the rest of the world about our leadership in shaping global economic governance in line with our values.

The battle to promote free and open democratic principles and practices, as Europe and the US interpret them, is far from over and the attraction of undemocratic formulas of governance is a reality in many parts of the world. A free trade agreement not only serves European and US interests, it serves the interests of the world – and promotes democratic values.

The White House point person on international economic affairs, Michael Froman, also emphasized that a pact would "help set global rules that could help strengthen the multilateral trading system."

Unsurprisingly, Washington and Brussels are taking the most sanguine view of the longstanding debate about the compatability of regional and global trade liberalization. They’re not alone in their optimism. Indonesia’s candidate to lead the WTO told Reuters that a bilateral deal would push other players to get more serious about stalled global talks.  "The U.S.-EU deal will be a catalyst…Others will see the momentum and they won’t want to be overtaken by events."

But advocates of global free trade have long worried that the trend toward regional and bilateral trade blocs will suck the energy out of global trade talks and, worse, create a confusing and inefficient trading system. WTO officials reacted cautiously to the news of a US-EU trade push. Via Agence France Presse:

Creating preferential trade agreements (PTAs) between states, such as an EU-U.S. deal, may achieve some of the same ends, but many experts are concerned that breaking the world into blocs could end up creating new obstacles to global trade.

"The more problematic side of myriad different PTAs is that they create a hodgepodge of different regulations, standards and norms that can evolve into serious non-tariff barriers," said Keith Rockwell, chief spokesman at the Geneva-based WTO.