An EU-U.S. trade pact?

by on February 13, 2013 at 12:44 pm in Current Affairs, Law, Political Science | Permalink

I do favor the idea, but the bottom line is more likely this:

…[it] would require Europe to open farm, service and other markets that it has been slow to deregulate.

…U.S. officials have been concerned that Europe’s complex politics — of the 27 EU nations, some are avowed free-trade supporters while some veer towards protectionist industrial policy — would make for protracted and perhaps futile negotiations.

The letter from the two senators is a reminder of just how difficult an agreement would be. Goods already flow freely between the United States and the E.U. Much of the value of a free-trade pact would come through reducing regulatory red tape so that — for example — the two sides would adopt common policies on food safety, pharmaceutical testing, patents and other complex regulatory issues.

We cannot deregulate our own country, and yet we think we can deregulate a hydra-headed, 27-nation negotiating sclerotic behemoth?  The big lure here is that the larger EU companies could access government procurement contracts in much of the U.S., but I don’t see that as a political trump by any means, most of all in the smaller countries.  And what is the chance that the U.S. wins concessions only by adopting, in some cases, tougher regulatory policies (in the inappropriate and sclerotic sense)?  Might this in some cases, through perhaps the magic of public choice theory, evolve into a regulatory cartel?

Nonetheless, as mentioned above, I’m all for trying.

Ray Lopez February 13, 2013 at 12:50 pm

Here in Europe they do have better food safety, but not sure if there’s any more upside to a US-EU trade pact, except perhaps cheaper French wine and cheese from the wine and cheese mountains.

Thor February 13, 2013 at 12:58 pm

I had a good Burgundy last week. How does it pair with Romanian horseflesh?

Roy February 13, 2013 at 1:41 pm

Quite well, but really is horseflesh particularily dangerous, or is it just a stupid ick factor. It is delicious for such a lean meat.

Of course I could say the same about GMO…

Ray Lopez February 13, 2013 at 3:02 pm

Yes, I’ve had horse sausage in Russia, it was good. Here in Greece there is a taboo against eating horse but not baby donkey (don’t ask why); I’ve never had baby donkey. But they do eat baby sheep, a.k.a. lambs–pretty cruel as Hannibal Lecter, M.D. would agree?

Thor February 13, 2013 at 3:03 pm

I was just trying to be amusing. Yes, horseflesh is pretty good …

Marian Kechlibar February 14, 2013 at 10:19 am

I do not eat horse either, but the Anglo-Saxon loathing of horse meat is irrational. A lot of nations in the world, even in the first world, eat horse meat with no ill health effect.

You may find horse yucky, but claiming it unsafe – that’s another story.

Someone from the other side February 14, 2013 at 3:08 pm

Quite tasty – not entirely like, but probably closest to beef

axa February 13, 2013 at 3:47 pm

safety means paying 60-65 francs per kilo of sub-average beef in Switzerland

GW February 14, 2013 at 6:06 am

axa, it is not “safety” which leads to high prices in Switzerland. First of all, Switzerland is not in the EU and not party to EU safety regulations except for their products intended to export to the EU (of which agriculture is a tiny component) and second, their high prices for agricultural products are due to restrictions on imports intended to protect local agriculture, much of which is on land which elsewhere would be considered marginal, using traditional techniques that that would not be affordable elsewhere, and paying labor Swiss-level wages.

Someone from the other side February 14, 2013 at 3:09 pm

Pay 15 more and get beef that blows out of the water just about anything you’d find in the US

Oh, and what GW says

Bill February 13, 2013 at 1:17 pm

Actually, both countries want to reduce ag subsidies, so mutual disarmament coupled with free trade might be a win for both sides: an outlet for crafted niche high value EU products, and an outlet for low cost US commodities. And, because of transportation, some ag products will never be traded: fresh milk.

Ashok Rao February 13, 2013 at 1:19 pm

Striving for a trade pact with asia (as in the TPP, possibly) would be far better bang for the buck. I have my eyes on India, because the United States has a lot to gain from a stronger and more robust India with the regional behemoth that China is.

Of course, the politics of India is as ridiculous as that of the E.U. (though we don’t need unanimous support of each state, thank god).

A long-term, visionary deal with China – if achieved – would be a crowning jewel for the Obama administration.

Crocodile Chuck February 13, 2013 at 10:44 pm

You seem sanguine about the Trans Pacific Partnership. Do you have any idea what it portends?

bjssp February 13, 2013 at 1:35 pm

In what ways should we deregulate?

mulp February 13, 2013 at 2:36 pm

WHY should we deregulate??

What did several decades of de facto and de jure deregulation in the US accomplish since the late 70s accomplish that is positive?

Reducing the number of major airlines to 3 after repeated bankruptcies of virtually every air carrier which resulted in net investment losses over that period for air carrier stocks, and along with that, a reduction in air craft makers to effectively one in the US and a government created one in the EU, and several other government sponsored competitors. (A second air craft maker sector exists in the US that is supported by government.)

We have had two huge bank crisis in three decades, the second a repeat of the first, except that it took place after deregulation reduced the number of banks to about 1% of those existing in the first crisis, with virtually every bank insolvent in the second crisis while only a large minority were insolvent in the earlier crisis. And the push to deregulate spread to Europe where the banks became insolvent in the second crisis as well.

And a claim that air travel and banking has improved for consumers over the past three decades is hardly a clear cut case. I remember the complaints that banks were only paying 4% interest on savings deposits, and regulation prevented banks from competing on interest on checking, forcing them to compete with free checking and gifts of toasters if you open an account.

And does anyone think that without the EPA, Clean Air and Water Acts, the air and water in the US would be cleaner than in the 60s today instead of following the path of China which is suffering from choking pollution, even after major efforts to reduce pollution. Note the BP oil spill occurred using equipment that was no longer allowed to operate in the North Seas because it did not meet regulations.

Dan February 13, 2013 at 2:51 pm

http://www.businessweek.com/stories/2011-01-20/airline-deregulation-revisitedbusinessweek-business-news-stock-market-and-financial-advice

“Airline revenue per passenger mile has declined from an inflation-adjusted 33.3 cents in 1974, to 13 cents in the first half of 2010. In 1974 the cheapest round-trip New York-Los Angeles flight (in inflation-adjusted dollars) that regulators would allow: $1,442. Today one can fly that same route for $268.”

Yea, airline deregulation was terrible.

Norman Pfyster February 13, 2013 at 2:56 pm

It’s always good to see liberals defending corporate interests against consumer welfare. Got to protect those cushy management jobs!

Ray Lopez February 13, 2013 at 3:08 pm

A study once concluded that even in a 100% deregulated environment, corporations would have “cushy management jobs” a.k.a. corporate deadwood and fat. A reason advanced why: a corporation cannot easily attract outside talent, but rather ‘keeps two people employed for every one corporate position’ so they can promote from within (and fire the non-performer). Food for thought.

bjssp February 13, 2013 at 3:37 pm

I was kind of hinting at the same thing. I’m not necessarily pro or against more regulation. I just wish people could be more specific.

Colin February 14, 2013 at 11:47 am

If you’re really concerned about insufficient airline competition in the US there’s any easy cure for that: allow foreign-owned airlines to fly domestic routes — i.e. more deregulation.

prior_approval February 13, 2013 at 1:42 pm

So, the U.S. is declaring its willingness to have a ‘trade war’ if the EU passes stricter privacy protections, which means what in terms of dealing with the EU? ( http://www.marketplace.org/topics/world/eu-data-protection-law-could-trigger-trade-war – ‘Any company that breaks the new law would risk a fine of up to 2 percent of their total annual revenues. U.S. government sources have warned that if American corporations are forced to implement the new law globally, it could trigger an US/EU trade war.’)

That the EU will roll over like so many of America’s ‘free trade’ partners? Or that it won’t?

Or that EU ideas might just start to reach American shores, threatening its purity of essence?

Juan Antolin-Diaz February 13, 2013 at 2:07 pm

“[…] hydra-headed, 27-nation negotiating sclerotic behemoth”

I have no sympathy for the nation-level bureaucracies or the perverse system of incentives that the European institutions impose to national governments, but from first hand experience, and despite the myth, the eurocrats themselves are a highly skilled group of technocrats of the highest qualification, and generally pro-market – they will do everything in their hand to make this succeed.

As for the usual suspects, the heads of state and governments, there is a surprising (miraculous) level of support for this idea among European politicians. I guess in times of austerity, anything that sounds like “growth” and is inexpensive in terms of budgets sounds very exciting.

This might yet work, believe me.

violent buddhist February 13, 2013 at 2:25 pm

Highly skilled in what exactly? Do you really think that the Eurocrats have the ability to dismantle agricultural subsidies which make up the bulk of the EU budget to begin with? But anything that makes their status rise (“look, americans think we’re important again!”) and keeps them occupied with futile negotiations, they’ll favor. Also, I wouldn’t bet on the European left and hard right just bowing down to “failed neoliberalism”.

Emil February 14, 2013 at 8:46 am

As someone who has met eurocrats for work (several employees of the EC) I can vouch for the fact that they are typically highly pompous, incompetent and generally full of it.

doctorpat February 14, 2013 at 11:43 pm

In my experience senior government officers are usually very intelligent and highly educated. However they usually believe in big government (otherwise why devote their lives to it?) and the structure they work in usually forces them to make decisions they know are not optimal.

Mark Thorson February 13, 2013 at 2:27 pm

I can’t see this working. After years of bullying Asian countries to accept ractopamine-laced meat, are we just going to roll over on that issue with Europe? We will never back down on that issue, and neither will the EU, therefore no trade agreement is possible.

anon February 13, 2013 at 4:37 pm

We cannot deregulate our own country, and yet we think we can deregulate a hydra-headed, 27-nation negotiating sclerotic behemoth?

@Mark Thorson: “no trade agreement is possible.”

Oh, I don’t know. Magical thinking has made a lot of headway in the US in the last 12 years, and we might catch up with Brussels soon.

errorr February 13, 2013 at 2:32 pm

Many federal contracts are already performed by foreign companies that have wholly owned american subsidiaries. The only pain is that you need a proxy board of American citizens if you want a security clearance. EADS, SAP, BAE, TATA, and just about any other foreign based multinational has numerous government contracts. Although if you need a specialized part from a unique foreign supplier the necessary hoops I had to go through to get a $100 part from Australia ate beyond ridiculous, but that’s what resellers are for. I doubt it will be more efficient when so much of the wast comes from the congressional mandates to buy from small businesses.

GW February 13, 2013 at 3:39 pm

Let’s not forget that there are some areas in which deregulation in Europe has led to far more open and competitive markets than in the US. Here in Germany, I am happy to have a choice among hundreds of electricity and natural gas providers for my home and business, with a huge variety of payment and green energy options, as well as dozens of internet and telecommunications providers. The fact that I can get unlimited national telephoning, unlimited DSL with a decent speed and reliable service and a couple of cell phones with unlimited calling within their own network and to all domestic landlines for around 30 Euros a month together attests to a lively competition basically unknown in the US and certainly different from the near-monopolies on these services in many regions of the US.

V Buddhist February 13, 2013 at 3:59 pm

You got LTE? You got shale gas? I don’t doubt there are a lot of ways to pay for your green energy options.

anon February 13, 2013 at 4:38 pm

h8tr

Nathan Goldblum February 14, 2013 at 6:46 am

LTE is perfectly common in the EU. Shale gas resources exist, but we’re not investing too heavily, which I think is rather a good idea.

Urso February 14, 2013 at 9:58 am

Europe gets to wait for Americans to both perfect the tech and, not incidentally, to find out whether the anti-fracking environmental doom & gloomers are correct. Seems like a pretty good deal for them.

doctorpat February 14, 2013 at 11:48 pm

The early bird gets the worm, but the second mouse gets the cheese.

Nyongesa February 13, 2013 at 11:00 pm

“The fact that I can get unlimited national telephoning, unlimited DSL with a decent speed and reliable service and a couple of cell phones with unlimited calling within their own network and to all domestic landlines for around 30 Euros a month together attests to a lively competition basically unknown in the US and certainly different from the near-monopolies on these services in many regions of the US”

Is this a serious comment or some sort of parody, I can’t tell?. what could have been an interesting discussion has already flowered into us/them jousting, with all the usual exaggerations. Good topic, lame thread.

prior_approval February 14, 2013 at 12:21 am

It is a dead serious comment, and quite accurate.

From the perspective of Germany, the U.S. looks quite quaint when dealing with telecommunications (notice that in the U.S., only T-Mobile offers anything resembling normal European cell phone service, and as for Internet access speeds – well, Germany is not exactly at the head of the European pack), mail (there are several competing postal services in Germany) or power grids (25% renewable supplied electricity in Germany, which exported electricity last year, after turning off 8 nuclear reactors).

affenkopf February 14, 2013 at 4:22 am

Also: Trains. While the government-owned Deutsche Bahn dominates the market there are several regional private train companies, absolutely impossible in the US.

Nathan Goldblum February 14, 2013 at 6:47 am

And comparing Deutsche Bahn with Amtrak would be ridicoulous…

Someone from the other side February 14, 2013 at 3:15 pm

Not just that (although the mobile phone market makes me chuckle every time I am in the US) – as a Swiss, I was stranded during Sandy last year (Long Island if you need to know). What went down there is reminiscent of bad shit happening in a developing country during a major earth quake, not what is generally considered a 1st world country (similar hurricanes would barely disrupt Western Europe and most certainly would not give you failing power and phone systems)

prior_approval February 15, 2013 at 12:21 am

‘similar hurricanes would barely disrupt Western Europe’

Perhaps you did not experience the full fury of Lothar? Various things collapsed for a while – though in fairness, Dec. 26 is a holiday, and in 1999, cell phone networks were not as important. But for several days, movement in this entire region was not possible – no deliveries of anything, no ambulance service, no trains. And Lothar was mainly wind – no flooding, luckily.

Randy February 13, 2013 at 3:50 pm

Seems to me like there is a lot of industrial policy on the US side of the fence. We want to protect IP in other countries or enhance exports of our subsidized crops. I don’t see why European countries should accept more of our stagnation policies at the expense of their citizens.

Thomas Molitor February 13, 2013 at 3:57 pm

At the time Peter Schiff was writing his book, Crash Proof, the U.S. current account balance was minus $200 billion. He showed a chart of the balance going from zero deficit to $200 billion between 1990-2005. He was railing that America is a nation of consumers, not producers. Since 2006 the current account balance has gone from minus $200 billion to minus $107 billion (the last reporting period, Q3 2012). What are some of the contributing factors to the balance deficit being cut nearly in half since Schiff was ringing the warning bell in 2006?

anon February 13, 2013 at 4:03 pm

The assumption that we need less regulation rather than more is not self-evident.

Dan Weber February 13, 2013 at 4:55 pm

Our host thinks we need more regulation in some areas (finance, climate), while less in most others.

Steven Kopits February 13, 2013 at 5:06 pm

Post on the economics of Olympic wrestling, please.

Tomasz Wegrzanowski February 13, 2013 at 5:21 pm

Tariffs are already very low.

In all likelihood the only things such agreement would bring would be more draconian IP enforcement and more opportunities for evading taxes.

Scot Johnson February 13, 2013 at 7:43 pm

Hey, this could be a real win for the US. Perhaps we could buy into European healthcare systems. I hear they get the same outcomes at far lower cost. Sounds like a good opportunity for trade to me.

Dismalist February 13, 2013 at 7:43 pm

For all the impediments, just to get past those FDA regulations on imported cheese and meat products is worth the effort.

Free Trade is Best!

No Mas February 13, 2013 at 8:10 pm

Please, check your facts. The FDA regulations on imported cheese and meat products are, well, thin American beer compared to what the EU does to restrict and block imported cheese and meat products, with little connection to any science, never mind the well-hidden secret of 27 individually autonomous customs administrations subject to no central authority in Brussels or anywhere else.

dan February 13, 2013 at 10:03 pm

As a group, the US collected $4.5 billion in tariffs from EU countries in 2012, which was about 15% of total tariffs collected. The US only collected more from China ($13.2 billion/44%). One Bloomberg study estimated that the EU collected $6.4 billion on imports from the US, but I’m not sure if that was in 2010 or 2011.

While the real gains would likely come from eliminating non-tariff barriers and increasing mutual recognition of standards (if not outright deregulation), the potential to eliminate $10 billion annually in two-way tariffs shouldn’t be ignored.

Nyongesa February 13, 2013 at 11:04 pm

finally some economics enters the thread.

Emil February 14, 2013 at 8:57 am

Some people would argue that the objective of government is not only to maximise the revenues raised to government but the well being and freedom of its citizens. Every $ collected in tariffs means that the prices that US consumers have to pay increase and the fact that tariffs exit means that some products that would be beneficial to US consumers are not even available to them

Ken Monahan February 14, 2013 at 10:38 am

I led the Bloomberg Government study that estimated that the EU collected $6.4 billion on imports from the U.S., and the data was from 2011. EU imports of chemicals, machinery, fruit/vegetables, and autos would see the biggest tariff savings.

Paul Rene Nichols February 13, 2013 at 11:28 pm

“We cannot deregulate our own country, and yet we think we can deregulate a hydra-headed, 27-nation negotiating sclerotic behemoth?”

Paul Rene Nichols February 13, 2013 at 11:32 pm

“We cannot deregulate our own country, and yet we think we can deregulate a hydra-headed, 27-nation negotiating sclerotic behemoth?”

Tyler Cowen is hilarious, and prescient at the same time. I am continually surprised by negative reactions to his posts. Excuse the accidental post before this one.

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