The Challenges of Negotiating a Transatlantic Trade and Investment Partnership

4 Pages Posted: 5 Mar 2013

Date Written: 2013

Abstract

In his State of the Union speech, President Obama announced that the United States will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union. This initiative is big news, and potentially a game-changer for trade liberalization. For years now, trade talks at the World Trade Organization (WTO) and other fora have been stalled or grinding along slowly. By limiting the transatlantic talks to two economies that are relatively supportive of free trade, and are at the same development level, perhaps trade negotiators will at last have some success. A completed agreement here could generate momentum for broader trade liberalization around the world. More immediately, the economic benefits of this trade deal would be great, as the United States and the European Union are the two largest economies in the world, and their trade flows with the world account for almost one third of global trade.

However, there may be some stumbling blocks along the way. If the United States and the European Union take on an agenda that is too broad, it may turn out that these trade talks fare no better than other current trade talks. In order to succeed, it is important that the negotiations have realistic goals and a clear path to completion.

The precise scope of the talks remains somewhat vague at this point, but a framework is set out in the Final Report of the U.S.–EU High-Level Working Group on Jobs and Growth. The report indicates that various forms of protectionism will be addressed, and also suggests that the talks will delve further into domestic regulatory issues than most current trade agreements do. While such an expansion of international trade rules does hold the potential for significant economic benefits, it also tests the limits of how far trade agreements can go in terms of global trade governance. Including issues that the trading system cannot handle may doom the talks from the start, and negotiators should be careful about how they approach this.

Keywords: US-Europe trade agreement, WTO negotiations, transatlantic trade agreements, European Union exports, international trade liberalization, U.S. imports, American tariffs, protectionism

JEL Classification: F10, F13, F19

Suggested Citation

Lester, Simon, The Challenges of Negotiating a Transatlantic Trade and Investment Partnership (2013). Cato Institute Free Trade Bulletin No. 51, February 26, 2013. Available at SSRN: https://ssrn.com/abstract=2228721

Simon Lester (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

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