European Affairs


Representatives from both sides of the Atlantic were equally vague and cautious in their remarks following five days of closed-door negotiations. "I believe that we have moved one step ahead, identifying those areas where we have common ground and therefore we can further engage on textual-base discussions in the rounds ahead," said Ignacio Garcia Bercero, the EU's chief negotiator.

"We've had a very successful and productive set of meetings this week in a good atmosphere of positive and constructive engagement,” said the United States’ chief negotiator Dan Mullaney. “This second round … has given us an opportunity to probe more deeply into our respective approaches to trade and investment agreement provisions."

Combined, the United States and the EU account for roughly half of the global economy, trading $2.7 (Euro 2 billion) in goods and services daily, or around $30 trillion in annual output.[1] Seventy percent of global financial transactions are between Europe and the United States, with cross-border portfolio flows totaling nearly $32 trillion annually. In terms of direct investment, the U.S. total in the EU is $2.2 trillion while the EU’s in the U.S. is $1.6 trillion, according to the Securities Industry and Financial Markets Association (SIFMA).

Since tariffs between both are already low, the TIPP talks are focusing on the “elimination, reduction, or prevention of unnecessary ‘behind the border’ ” policies, which include “regulatory coherence.” Dealing with bureaucratic red tape is said to add unnecessary costs or prevent some products and services from being traded.

The eleventh hour scramble in July to reach agreement in principle on how the multi-trillion dollar derivatives market would be jointly policed by U.S. and EU regulators showed how hard the fights will be as each side protects its authority. Details for that arrangement have yet to be signed off on, leaving the U.S. Commodities and Futures Trading Commission to start enforcing its own rules rather than waiting to coordinate. Michel Barnier, European Commissioner for Internal Market and Services, is pushing for an end-of-the-year settlement before CFTC’s chairman leaves. That experience has drained confidence in each other.

Source:   European Commission. Available at: .



Source: Economist.

“Every man lives by exchanging,” as Adam Smith wrote, but this perspective often gets trampled over in trade talks as fired-up interest groups inevitably push their narrow agendas. For TTIP, this seems particularly to be the case. Some, including members of the EU Parliament, want far more transparent negotiations, but EU Trade Commissioner Karel de Gucht has steadfastly rejected that demand, arguing for secrecy to cut deals in balancing conflicting interests. Both sides, though, will publish a state-of-play document after the mid-December round.

Environmentalists in Europe worry that protections will be weakened while consumer groups fear watered-down EU safety standards for food, including genetically modified products, to achieve “regulatory coherence” with the United States.

Still others are skeptical that a trade deal will provide any economic stimulus, seeing a zero-sum outcome that will do little to offset demographic disadvantages for Europe after decades of low birthrates and an aging population.

Then, there are the European and American political situations. In Europe, a deal is highly unlikely before the eighth EU Parliament elections in May 2014, meaning a new political calculus will likely guide EU trade negotiators. A lethargic economy, record high unemployment, and governments struggling under enormous debt burdens are all kindling for protectionists to derail TIPP. The White House is bitterly engaged in stalemates with Republicans in Congress over issues that forced a government shutdown and threaten the President’s legacy, his healthcare reforms. Leaked documents revealing U.S. eavesdropping on European leaders’ phone conversations have fueled distrust in Brussels towards Americans, too, with a “no-spying” pact needed to be in place by the end of the year. Against that backdrop, TTIP is low political priority.

Those issues aside, there are plenty of trade obstacles for the “economic NATO,” too. One of the thorniest issues is whether financial services should be part of a TTIP deal. While the EU and the U.S. securities industry are adamant for the sector’s inclusion in the negotiations, the White House has seemed less enthusiastic in putting the sector on the table. In pursuit of regulatory coherence, Administration officials fear the talks could lead to weakening of Dodd-Frank reforms enacted to address causes of the 2008 financial crisis. Since the U.S. Congress is likely to have only have an up-or-down vote on a final agreement, financial regulations may have to be compromised in exchange for trade deals in other sectors.

The U.S. position seems to be shifting with the lead negotiator’s most recent public comments hinting at flexibility. “We haven’t taken anything off the table,” Mullaney said. “The EU side has made clear that they want to have conversations in this area, and we are engaging in those conversations.” Whether Kay Swinburne, a Conservative on the EU Parliament's Economic Affairs Committee, was exaggerating the situation in recent remarks ("We've been told to stop talking about it [financial regulation] because it's not going to happen."), her sense of the outlook may prove prescient if signs from the Obama Administration that it is changing its stance prove to be noise instead of signals. Without the President’s backing, as Swedish Foreign Secretary Carl Bildt observed, not much can be achieved. “If it sinks down to the trade negotiators, we are dead.”

Regulatory coherence for financial services trade, supporters say, should involve two components: first, each side recognizing the equivalency of the other’s regulatory regime; and, second, minimizing differences by reducing and/or eliminating unnecessary, inconsistent, or duplicative requirements.

Then there are the issues surrounding how European banks are treated in the United States. The “Federal Reserve’s proposed capital and holding-company requirements for foreign firms operating in the US – while better than national treatment and, in my judgment, prudent – deeply angered the European Commission,” notes University of Michigan Law Professor Michael S. Barr.

Much work ahead, then, from inventorying the differences between the two regulatory regimes to resolving tensions over financial regulatory conflicts to agreeing on a roadmap for financial services trade talks.

And, always with negotiations the challenges of understanding each other, as former U.S. Secretary of State Madeleine Albright observed. “The capability of negotiating... is something that means you not only have to understand fully what you believe and what your national interests are but in order to be a really good negotiator, you have to try to figure out what the other person on the other side of the table has in mind.”

[1] Economist,


Perspectives is an occasional forum of The European Institute reflecting views on topical issues.