It is safe to say that a watershed has been reached with the launch of the Transatlantic Trade and Investment Partnership - an ambitious agreement to advance trade and investment liberalisation between the EU and US. For 20 years Europe and the US have mulled the idea of freeing transatlantic commerce, however, every previous attempt to launch formal talks has stalled. Whilst both EU and US firms are happy to invest around their own region's regulatory structures, there has never been much appetite from business for bearing the costs of switching to a rival set of rules. Companies are further concerned about the political will on both sides of the Atlantic, which is only reinforced by the Doha round failure. Overcoming these concerns has taken time, and it is pretty remarkable that no one has gotten cold feet at this stage.
The bestselling point of the planned Partnership is that it is tailored the dilemmas that are facing 21st Century business in terms of opening up traditional market. But as the Final Report of the EU and US High Level Group on Growth and Jobs makes clear, the opening of investment and service markets will only set in stone what has already been agreed to in previous trade negotiations. Lock in is valuable, but it is not path breaking. Not surprisingly, the estimated gains from limited liberalisation are small.
Where the initiative truly breaks new ground is in designing the next generation of business regulation. Top-down tariff cutting is to be augmented by bottom-up regulatory reform. The details will vary across sectors, but the underlying principle of enhancing compatibility of rules and cooperation in enforcement is a great step forward.
Selling the Partnership to voters wary of globalisation however won't be easy. It is hard to predict the future course of regulation - let alone estimate the benefits of greater transatlantic cooperation. The estimates that are available at this stage are no more than sophisticated guesswork and not very large to boot. For instance, the European Commission reckons the agreement "could" bring an overall increase in EU GDP of 0.5%, but not for fifteen years' time. The benefits from trade reform are a bit like fitness training - not felt immediately, and often accompanied by pain. This Partnership will be no different.
Should the negotiations go well, the contrast between the Partnership and the stalled WTO negotiating machinery will become all the more apparent. Optimists argue that new transatlantic rules would provide a blueprint for a reinvigorated WTO. This could, however, easily go the other way. If the major emerging markets don't sign up for these rules, then the WTO's centrality in the trading system could be fatally undermined. Even if the optimists are right and the basis of a deal between the EU, US, and developing countries could be found incorporating any transatlantic rules into the WTO is at least a decade away.
The list of concerns facing the next WTO head has certainly just got longer.
More:Transatlantic Relations EU US Trade Deal World Trade Organization Wto Transatlantic Free Trade Agreement
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