Cancellation of EU-US talks complicate trade ambitions

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BRUSSELS: Even before the cancellation of the latest round of European Union-US talks, negotiations to create the world’s largest free-trade deal were getting into difficult territory.

France won a concession to leave European movies and entertainment out of the pact, to shield them from Hollywood and Silicon Valley, raising concerns Washington may pursue opt-outs for its shipping industry on security grounds.

Then the first round of talks in July were overshadowed by reports the US had bugged EU offices under its surveillance programme made public by fugitive former NSA contractor Edward Snowden.

Now, just before negotiators were due to get down to the nitty gritty in the search for a deal by the end of next year, the US government’s partial shutdown has forced next week’s talks in Brussels to be scrapped.

If that were not enough, a split is emerging between Europe and the US on one of the most critical areas of the proposed pact: finance.

“This delay is not fatal, but if the US shutdown drags on and you are taking things off the table like culture and financial services, it is not a good way to start,” said Stuart Eizenstat, a former US ambassador to the EU.

“This postponement may complicate the timetable of completing the talks by the end of 2014,” Eizenstat said.

EU and US officials say the deal, known as the Transatlantic Trade and Investment Partnership, could boost economic output by some US$100 billion a year on each side of the Atlantic, creating a market of 800 million people.

After five years of crisis, both see a deal as a way to reinvigorate their economies that account for a third of world trade when China’s might threatens their global standing.

So it was with some frustration that US Trade Representative Michael Froman rang his EU counterpart Karel De Gucht on Friday to cancel the second round of talks because of the effects of the Congressional budget dispute.

De Gucht, who handles trade for the EU’s 28 countries, said the postponement “in no way distracts us from our overall aim of achieving an ambitious trade and investment deal.”

Assistant US Trade Representative Dan Mullaney is expected in Brussels to find a date for a second round of talks. Much depends on the US shutdown, while Congress must act by October 17 in to avoid a US government debt default.

Agreeing a deal by the end of 2014 is the goal of both sides, because the European Commission’s term ends in November next year and the US holds mid-term elections.

Since tariffs between the EU and the US are already low, around 80 per cent of the gains of any agreement will come from creating common rules for business.

The great, hoped-for benefit is that by agreeing shared regulatory standards, many costs and hurdles hindering transatlantic business will be removed, making the two economies even more dynamic and speeding the wheels of trade and industry. However, an emerging dispute is over finance.

The EU wants financial regulation to be a central part of the deal, whereas Washington is resisting, worried about losing control over its financial industry.

Financial ties between Europe and the US are already huge, accounting for 60 per cent of world banking. EU investors own  2.7 trillion of US stocks and bonds, while US residents hold almost as much in Europe. — Reuters