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Fresh Perspectives on Transatlantic and Transpacific Trade

he progress, or lack of progress, made on negotiations for free trade agreements between the United States and Europe (TTIP) and the Trans-Pacific Partnership (TPP) could have enormous impact on the global economy throughout the balance of 2014. The prospect for reaching an agreement on TTIP and TPP was the focus of our International Advisory Council meeting in January 2014.
Laurens Jan Brinkhorst, former minister of economic affairs in the Netherlands and director general with the European Commission, opened the discussion by noting that there have already been three rounds of negotiation on TTIP so far, and there will be a review session taking place in February before the fourth round of negotiations take place. Obviously the thinking in Europe has been that America is moving east to Asia. But, we all realize that in multilateral trade terms, the combined efforts of Europe and America still count for nearly half the worlds trade, so it is a joint interest to have a positive result with TTIP. It is one area where both the Republicans and the Democrats in the United States should unite, and the current administration is quite interested. It is the view from Europe that President Barack Obama wants to make TTIP one of his foreign policy success stories. The mandate on both sides will be quite complicated because of the issues of agriculture, financial services and also the Jones Act in America. Although there are a number of areas where there are difficulties, the climate is positive and both sides realize that a lot is at stake. Of course the National Security Administration (NSA) affair has destroyed some of the confidence between the two sides, but reason is prevailing and the feeling is that progress should not be sidestepped by the security dimension to let the much more
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important economic dimension fail. Although this is far from a conclusion, and it may be too optimistic to believe that anything will be concluded by the end of this year, there is hope for an agreement in 2015. Cliff Stearns, former U.S. congressman and head of the Transatlantic Legislators Dialogue in Congress, noted that during the third round of TTIP negotiations, the two sides discussed market access to industrial and agricultural products and the rules of origin for these products, which is a big step forward. They also talked about regulations in the area of food perhaps one of the more controversial areas in Congress. During this third round of negotiations they invited 350 different stakeholders to submit comments, and they sat down in a three-hour session with about 50 of them, so they listened to a full range of issues; a good step forward that they are reaching out. Christian Murck, former chairman of the American Chamber of Commerce in China, noted that the TPP is something that the American business community in Asia has been actively supporting for the last five or six years. Southeast Asia a very large market in the aggregate, but one which is extremely fragmented. For a number of years people have been focused on the question of regulatory coherence dealing with behind-the-border barriers to trade, not simply reducing tariffs, but harmonizing standards and regulation. The TPP would address much of these issues if a high-standard agreement is reached. It is also strategically important in setting a new standard for trade agreements and a new way in which trade could be managed going forward. What is absent from TPP negotiations is trade promotion authority, without which a final deal cannot be struck. It would be difficult to think that any of the negotiating parties will make the final politically difficult decision to sign an agreement if they know it will then be subjected to further negotiations in the U.S. Senate. So trade promotion authority is required at this point in order to close on TPP. If the president is not given trade promotion authority, then nothing is going to happen in the next three years with respect to global trade agreements. On the subject of trade promotion authority, Governor Bill Richardson, chairman of APCOs Global Political Strategies (GPS) and former U.S. secretary of energy, remarked that although Congress is currently viewed as dysfunctional and there is a lot of cynicism, eventually Republicans will rally for free trade. In the end, when a president makes a request of this magnitude for two major treaties in Europe and Asia, he will get trade promotion authority. Governor Richardson remarked that his only worry about the TPP is speculation that the objective of the agreement is to isolate China, and the potential that China will respond

negatively. So far China has not reacted in this way, but this will need to be considered as the discussions on TPP move forward. A major player in the TPP is going to be Mexico. Mexico has had successful energy reform. There was much skepticism that Mexico could not accomplish this, but it now has a comprehensive plan that will allow for a lot of partnerships between not just the United States and Mexico but energy companies around the world in renewable energy, oil and gas, and offshore drilling. Lalit Mansingh, former Indian foreign minister and ambassador to the United States, noted that while obviously India does not qualify for the TTIP, it has an interest in the TPP, and there are good reasons to believe that at some later stage India will get the support of the United States and the major economies to have a go at the TPP. Last year was one of the worst years over the past decade for the Indian economy; India was growing at 9 percent in 2008, and it dropped to 5 percent growth in 2013. There were three major problems high inflation, high fiscal deficit and a high current account deficit. But, there is good news: On all three fronts India has managed to control the situation. Inflation has come down from 7.5 percent in 2012 to about 6.2 percent. Fiscal deficit will reduce from 5.8 percent to 4.8 percent in 2014. The current account deficit was of particular concern because Indias oil imports were shooting up. The deficit was $88.2 billion last year, and it is expected to be $50.4 billion in 2014, so all and all it looks like a much better year. The latest World Bank report shows that Indias growth is expected to be 6.2 percent this year, 6.6 percent in 2015 and 7.1 percent in 2016. Thus, by 2017 China and Indias economies may be growing at the same pace. One factor, however, might create a problem. India has elections coming up this spring, and Indian elections are not very predictable. If there is a strong, stable government, a continuation of good economic policies will be seen. If there is a coalition government, it means trouble for the economy, so Indian business interests are keeping fingers crossed that there will be strong leadership and a strong government. In sum, the three main takeaways from the meeting are: 1. It remains vital that the U.S. Congress grants trade promotion authority to the president in order to move the TTIP and TTP trade deals forward and reach a final agreement. 2. While the NSA revelations created tension between the United States and Europe, negotiators are setting this aside and not allowing these concerns to sidestep the upcoming round of negotiations. 3. Mexico will be a major player in TPP negotiations given its recent reforms and opening of Mexico to business partnerships in the energy industry.
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