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North American business lobbies back U.S.-EU free trade; what consequences for CETA?

The “transatlantic relationship” for the European Union has always meant EU-U.S. relations. This week, officials from both sides of the pond in Washington for a Transatlantic Economic Council (TEC) meeting suggested the relationship might soon include a free trade agreement.

“Led by EU Commissioner for Trade Karel De Gucht and Deputy National Security Advisor for Economic Affairs Michael Froman, TEC principals welcomed considerable progress over the past year following up on the mandate from the November 2010 EU- U.S. Summit to foster closer regulatory cooperation, share best practices, and develop joint policy principles in the areas of the greatest benefit to our businesses and consumers,” said a joint statement dated November 29.

The U.S. and EU have established a High Level Working Group on Jobs and Growth, to be co-chaired by the EU Commissioner for Trade and the U.S. Trade Representative, which will “identify and assess options for strengthening the EU – U.S. trade and investment relationship, especially those that have the highest potential to support jobs and growth.” The working group will “report its findings, conclusions, and recommendations to Leaders by the end of 2012, with an interim report in June on the status of this work.”

Today, Inside Trade magazine is reporting a free trade agreement is among the options on the table for how to deepen ties and stimulate economic activity.

“We will be exploring options ranging from ‘TEC plus’ to a potential FTA with an open mind toward seeing what is feasible and what would have the greatest impact on our economic relationship,” Froman is quoted as saying after the TEC meeting had concluded. An inter-agency discussion is planned, including business stakeholders, labour and environmental groups, just as it would be for other U.S. trade initiatives.

The Trans Atlantic Business Dialogue immediately called on U.S. leaders to “seize this moment” in a press release after the TEC meeting. Jim Quigley, Senior Partner at Deloitte LLP and U.S. Co-Chair of TABD, said, “An ambitious transatlantic economic and trade pact will demonstrate our enduring belief in open market principles, strengthen the transatlantic marketplace, and directly benefit American and European companies and citizens.”

The business lobby continues:

TABD believes that, in order to deliver its full potential, a 21st Century transatlantic agreement must go beyond elimination of conventional trade barriers and include services, investment, procurement practices, reduction of non-tariff barriers, and regulatory and standards cooperation. These are front of mind opportunities that government, business and other stakeholders should to reflect upon rapidly in 2012, before pressing buttons for action.

The process is similar to the one leading up to Canada and the EU announcing free trade negotiations, though notably there was no prior discussion with labour or environmental groups in Canada as is U.S. practice. The Comprehensive Economic and Trade Agreement (CETA) began as a joint study into the potential to improve the economic relationship. This study, which made no policy recommendations, has been seriously undermined by more recent economic analysis of the Canada-EU relationship by Jim Stanford and others. Still, the results were used by Canada and the EU to justify announcing at the 2008 Canada-EU Summit they would be pursuing a free trade agreement.

The CETA, as the deal became known, was supported by the Canada-Europe Round Table for Business (CERT), which formed in 1999 “in response to the need for an effective Canada-Europe business dialogue and to advocate for comprehensive bilateral free trade and investment liberalization.”

In fact, CERT is the little brother or sister of the TABC, created, not formed, in partnership with the federal Liberal government of the day to make sure Canada didn’t miss out on any EU action. According to an early statement:

CERT in no way wants to duplicate the work done in the Trans Atlantic Business Dialogue (TABD) between US and European companies, nor does it want to be seen as an extension of the TABD. Within its limited scope as described above, it hopes that it can contribute to improved bi-lateral Canadian and European relationship and cooperation, and to more effective and efficient negotiations in the context of the ECTI, the EU-Canada Trade Initiative.

The limited scope has grown in the context of the CETA negotiations, with the business lobby presenting on at least two occasions over the past two years before, after or at the same time as Canada’s CETA negotiators on the status of the talks. Call it cooperation more than consultation. In March 2009, CERT released a set of policy priorities for CETA, saying it:

supports International Trade Canada’s creation of a high-level industry advisory committee. Once negotiations commence on a Canada-EU trade and investment agreement, more focused industry and professional groups will be required to address the levels of detail required to negotiate outcomes in areas such as labour mobility and competition policy.

Interestingly, CERT has said on a few occasions that an EU deal is less about market access to Europe and more about interprovincial differences in regulation and economic policy. And getting back to the possible, U.S.-EU deal, CERT Canadian chairman Roy Maclaren said it was an inevitable result of the CETA negotiations.

“If both Washington and Brussels do not yet view a full transatlantic agreement as an early possibility, that is another reason for Brussels to welcome, rather than shun, the prospect of an EU-Canada agreement,” wrote Maclaren in an article for the University of Calgary’s School of Policy Studies. “Europe could use the agreement as a reason for arguing that the United States should follow its two NAFTA partners in engaging in broad transatlantic negotiations. Certainly, US companies would be prompt in recognizing the fact that their Canadian and Mexican competitors had gained preferential access to the world’s largest market. Washington would face strong pressure from its business community to strike a similar transatlantic agreement, as happened in response to the Canada-Chile and Mexico-Chile free trade agreements of a decade ago.”

Maclaren argues there’s a philosophical (or imperial?) reason for North America and Europe to cooperate in this way. His article concludes:

Broader and deeper transatlantic relations should be seen as a cornerstone – and a foreshadowing – of relations in the wider global order. The Atlantic community is a set of countries that ultimately must stand together, work together, and continuously reinforce shared global interests, as Canada continues to do within NATO. To the extent that technological change is altering the foundation of international relations and creating friction, Canada and Europe need to discover together the ties that bind. It is not that deeper transatlantic cooperation is an alternative to broader global cooperation; rather, it is that a strong North Atlantic architecture is central to our mutual ability to manage and advance a larger global agenda.

The U.S. TABD emphasizes the precedent a U.S.-EU trade and investment agreement would create:

Our goal is to achieve the freest possible exchange of capital, goods, services, people and ideas across the Atlantic. We believe a barrier-free transatlantic market will serve as a catalyst for global trade and investment liberalization and help stimulate innovation, job creation, and economic growth.

With the new TEC working group set to report initial findings next summer, are there implications for the CETA negotiations? If Canada and Mexico can jump on board Trans-Pacific free trade negotiations after two years, is there anything to stop the U.S. from joining the CETA talks? Hard to say. But business lobby groups from CERT to BUSINESSEUROPE and the European Services Forum have always seen CETA as a stepping stone to a bigger NAFTA-EU partnership. I don’t think they would complain if Obama and Harper wanted to come to a friendly agreement.