Cato Looks at Free-Trade Prospects

Monday, 11 Mar 2013 03:01 PM

By Robert Feinberg

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The Cato Institute held a panel discussion on Feb. 27 on the state of U.S.-EU negotiations toward more comprehensive free-trade arrangements titled “US-EU Free Trade Agreement: Recipe for Growth or Road to Nowhere?”

The panel consisted of Fredrik Erixon, director of the European Center for International Political Economy (ECIPE); Simon Lester, a trade policy analyst at Cato; David Talbott, director of international government affairs for Eli Lilly; and Charles Levy, a partner at Cassidy Levy Kent (USA) LLP. The panel was moderated by Daniel Ikenson, director of the Herbert A. Stiefel Center for Trade Policy Studies at Cato.

The panel started on a promising note when Ikenson quoted French economist Frederic Bastiat as saying the distance between Paris and Brussels as marked by obstacles to trade. Readers might enjoy reviewing Bastiat’s classic The Law. Today, Ikenson observed, nations “gum up the works with manmade barriers that amount to subsidies for national champions.”

The release of a high-level working group paper earlier in February provided the background for the discussion on free-trade agreements. Ikenson remarked that reaching an agreement “would be huge, with potential for significant economic gains and to act as a catalyst for broader multilateral progress.” This might include a willingness by the European Union to give ground on the issue of meat inspection, he added.

Erixon stressed that the achievement of progress toward trade reform is more important than the format through which it is achieved is. He warned that some veterans of trade negotiations see them as a means toward the advancement of the European-social model, and he accused both the United States and the European Union of complicity in what he called a “protectionist” trend marked by “aggressive regulatory unilateralism” in the fields of energy, finance, data and information technology, especially on the part of the European Union.

He lamented that given the lack of progress under the World Trade Organization, negotiations with the European Union offer some hope of progress, but the most realistic outlook is for continued, protracted decline, and he advised that better prospects lie elsewhere, because “fear and profits” dominate the debate, and both the United States and the European Union have come to favor the status quo.

Lester continued in a pessimistic vein, and he noted that proposals are being characterized as “partnerships,” and the negotiations might exclude such major issues as agricultural subsidies and trade remedies. He worried that social issues, such as the environment and global warming, are crowding out these trade issues.

He concluded with an expression of skepticism on two points. First is that international coordination and harmonization of regulation could add another layer of regulation on top of domestic regulation, and second is that such a development could complicate any trade negotiations that do take place. He urged that negotiations work in any format that offers promise and not get caught up in a single format or strategy, because if they do, they could end up with nothing.

Levy dismissed Lester’s presentation as representing “a 19th century point of view.” In contrast, he defended the process of negotiation as important, and he lauded the decision on by the United States and the European Union to move forward with regulatory cooperation. He compared the breadth of the current agenda to the circumstance of 1948, before a succession of limited trade pacts narrowed the range of trade issues and introduced non-trade issues into the negotiations.

However, he predicted that the process could be “the toughest ever,” because of the focus on regulatory cooperation that is intended to produce a higher degree of certainty for business than currently prevails.

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