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First, the (continuing) bad news regarding a proposed US-EU free trade agreement (FTA): As I have observed previously, the near-term prospects for a comprehensive bilateral trade pact are not good, despite compelling economic and geopolitical rationales for a common set of rules and obligations — not least in the face of the increasing impact of China’s states capitalism model. Last week, EU Trade Commissioner Cecilia Malmström came to Washington for talks with US Trade Representative Robert Lighthizer. Once again, as has been the case for months, the talks ended with the two sides “still unable to agree on the scope of the FTA.”
Some quick background: During the Obama administration, the US and the EU began negotiations on a comprehensive FTA, the Transatlantic Trade and Investment Partnership (TTIP), which would have encompassed multiple disciplines — industrial goods tariffs, services, agriculture, intellectual property, regulatory convergence, and investment, among other major trade components. Though the Obama administration never admitted it, the TTIP always took a backseat to the parallel negotiations for a Trans-Pacific pact. In trade jargon, the EU was the demandeur.
Negotiations were suspended under the Trump administration; but meanwhile, EU political leaders had also faced a backlash against the TTIP, as populists in a number of countries protested against such agreements, and in particular against bowing to alleged US “neoliberal” doctrines (this all preceded the Trump administration). Facing these threats, and aware that under EU law parts of any agreement would need unanimous consent from all 28 EU member states, the European Commission drew back. At this point, the EU is proposing an agreement that includes liberalization of industrial tariffs, including major concessions on autos where a decades-old 10 percent tariff still obtains. Specifically, the EU is adamant that agriculture not be included in any future negotiation (The EU has thrown up a smokescreen by citing some individual US barriers such as the protectionist Jones Act for inland shipping and Buy America provisions, but they do not equate to the removal of an entire sector). Malmström repeated the EU refusal to go beyond industrial tariffs (and some vague regulatory and standard-setting convergence) during her talks with Lighthizer.
On Friday, however, the USTR published a comprehensive set of US negotiating objectives that included not only agriculture but also many of the substantive areas covered in the original TTIP. Though the document did not go into detail, the US also put down a marker on an area of huge conflict with the EU: digital trade and cross-border data flows. In various international trade fora, including the WTO, the US and the EU are going head-to-head on issues of free data flows and privacy rules.
In a bow to EU political realities, the USTR did indicate that negotiations could proceed in stages. It is not clear how this would work, but it is clear that no formal agreement could pass the US Congress (and fulfill congressional trade agreement mandates), that did not encompass the broad coverage such as that in the just concluded US-Mexico-Canada FTA. It looks like we are in for a long, and possibly inclusive, process.
Now for the good news. Also recently, the advocate general for the European Court of Justice ruled that France’s assertion that Google had to abide by European rules on the right to be forgotten on a worldwide basis was a step too far.
Again, some background: Several years ago the European Court of Justice (ECJ) upheld the so-called “right to be forgotten” rule that allowed an EU citizen to force Google to remove links to personal information from search results in the EU, even if the information was public and accurate. Then, the French data privacy regulator ruled that Google had to go further and remove the information worldwide. It was this bit of extraterritorial overreach that the advocate general overruled (The ECJ typically follows the advocate general’s advice).
Hopefully, the ECJ will indeed uphold this opinion, in contrast to its own misguided extraterritorial leap some years ago when it asserted the EU’s right to tax airline emissions beyond its borders, most particularly on long flights from Asia. Despite the ruling, EU leaders ate crow and backed down when Beijing threatened to cancel jet aircraft orders from Airbus. In the end, as a free speech NGO stated last week: “European regulators should not be able to determine the search results that Internet users around the world should see.”
Oddly, for two areas so closely aligned on democratic values, the US and Europe (even before Trump) still encounter serious barriers on the road to economic alliance convergence.
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