- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009.
This story was updated.
The European Union and the United States are struggling to put their differences aside and ink the world’s largest trade deal, leaving proponents and opponents alike worried.
Groups such as the U.S. Chamber of Commerce are trying to goose talks with events, letters, and other cheerleading while almost daily U.S. lawmakers are listing the dangers of free trade agreements.
"Nobody thought these negotiations would be easy," said Miriam Sapiro, who worked on the negotiations as U.S. deputy trade representative until she stepped down in February. "There’s a reason that the U.S. and Europe don’t have a trade agreement even though it’s the most important trade relationship in the world."
The Transatlantic Trade and Investment Partnership (TTIP) aims to increase the amount of goods flowing back and forth across the Atlantic beyond last year’s $650 billion. Although on the whole the United States has more in common with countries across the Atlantic than with some of its other trading partners, narrowing the gap between the two economies that combined represent 60 percent of global GDP is proving difficult.
European officials, for instance, continue insisting that financial services regulation be part of the talks, even though U.S. regulators and deal negotiators resoundingly reject the idea.
"I believe that the interoperability of our financial markets is actually key to the success of the rest of the trade talks," Michel Barnier, the EU commissioner responsible for financial markets, said in Washington on Thursday. He was in town to meet with U.S. regulators and trade negotiators, including Treasury Secretary Jacob Lew and Trade Representative Michael Froman. On his ninth trip to Washington in four years, he hoped to sway Lew and Froman but failed.
By Friday, a leaked internal EU draft revealing that the Europeans instead will threaten to exclude financial services from TTIP completely began circulating.
"The EU considers that the ambition of the EU offer is closely linked to the progress of discussions on regulatory cooperation," the document reportedly stated. "Therefore, commitments on financial services will be included at a later stage."*
U.S. officials argue that financial regulation matters are best hashed out bilaterally between regulators and in existing international forums, such as the G-20, rather than by trade negotiators who aren’t as steeped in the details.
European negotiators are willing to put trade in financial services back into play if the U.S. agrees to discuss regulations.
"The situation may change in the future if the US shows willingness to engage solidly on regulatory cooperation," the draft reportedly stated.
The U.S. says it won’t budge.
"Unlike the other sectors in TTIP, there are multiple existing forums focused on the co-ordination of financial services regulation, including a bilateral forum," the Financial Times on Monday quoted Froman as saying.
Meanwhile, TTIP faces numerous other obstacles.
Until the deal is sealed, talks are vulnerable to whatever row breaks out between Washington and European capitals. Last week, French President François Hollande pressed President Barack Obama to go easier in a case against his country’s largest bank. U.S. authorities are contemplating a $10 billion fine against BNP Paribas for its dealings with sanctioned countries such as Iran and Sudan. Obama dismissed the idea that he could intervene in a case brought by U.S. prosecutors. French Foreign Minister Laurent Fabius said the fine could hold up the trade talks.
"They have their national champions and they want special rules for them and they want BNP to be able to get away with money laundering," said former IMF chief economist Simon Johnson, who has been a strong advocate of tough, post-crisis financial regulations.
Barnier declined to discuss the fine because it’s still under negotiation between the bank and the U.S. Justice Department. "We simply want this case to be investigated in a manner which is proportionate, fair, and objective," Barnier said.
The trade agreement aims to bring the two sides of the Atlantic closer on the oversight of everything from cars to chemicals. Cheese has proved to be particularly contentious. Europe has much stronger protections for food products from certain geographic areas. Whereas Europeans think Parmesan should come from the vicinity of Parma, Italy, Americans think it’s perfectly OK to shake it out of a green plastic jar made by Kraft Foods.
"It will be one of the issues that is closed out toward the end because there is such a difference between the U.S. and the EU systems," said Peter Chase, the U.S. Chamber of Commerce’s vice president for Europe, speaking from Paris.
Chase was in Madrid and Paris recently as part of the chamber’s campaign to drum up support for the agreement. Some trade proponents are concerned that the talks, beset by so many obstacles, could stall. The chamber is also holding pro-trade forums in London and Rome in the next few weeks to nudge companies to more vocally and publicly support the talks.
"The opposition is gaining traction, and it’s up to the business community on both sides of the Atlantic to counter this by speaking frequently and forcefully about the opportunities that TTIP brings," the Chamber of Commerce said in its announcement of the tour.
Underscoring how big the food fight is, Agriculture Secretary Tom Vilsack heads to Europe this week to discuss points of contention, such as the cheese-name wrinkle.
"The EU is the world’s largest importer of food and agricultural products," Vilsack said in a statement. "But despite the continued growth of this market, U.S. market share is shrinking because U.S. producers and exporters continue to face numerous trade barriers. The negotiation of the TTIP offers a major opportunity to address these barriers and expand market access for U.S. farmers and ranchers."
Seasoned trade negotiators say the agreement is still in the early rounds, making it hard to know how many of the big issues will shake out.
"It’s a lot of technical back-and-forth right now, but the difficult issues will be put off," said Gary Hufbauer, a trade expert at the Peterson Institute for International Economics.
That is, if the talks make it that far.
"You don’t really know until the end whether you’re going to get the deal or not," said Sapiro, who recently worked on the deal.
Opponents, such as labor groups and their allies in Congress, are focusing their efforts on the Pacific trade deal with Asian and Latin American countries, which is further along than the European agreement. But the anti-trade sentiment could make it hard to pass either one.
"For as many years I’ve been in congress I’ve never
seen a trade deal that advantages the American manufacturer or the American worker," said Democratic Rep. Louise M. Slaughter of New York.
*Correction, June 16, 2014: European officials are threatening to completely exclude financial services from TTIP talks. A previous version implied that only financial services regulation would be excluded from the next round of discussions. (Return to reading.)