The US Administration has dealt a considerable blow to the forthcoming transatlantic trade talks. By refusing to include the essential chapter on financial services it is dwarfing the liberalization exercise. Its fears on downgrading the tough rules on banking enacted through the Dodd-Frank Act may seem understandable. But putting aside this key sector from the overall negotiations will lead to downsizing the initial ambitions. The US banking community has already voiced its concern about a step that would prevent accomplishing any breakthrough in this sensitive field.
The EU started the skirmishes by flatly withdrawing from the table the audiovisual chapter, following a pressing demand by France. But should both parties embark on a retaliatory circle, the trade talks might simply collapse. A nasty prospect that would damage growth and jobs prospects. Let’s hope the last move from the US Administration stands only as an isolated gesture.
Doing away with custom duties would not bring much material benefits as the current levels are already low enough. The real task facing negotiators is tackling the non-trade barriers. Divergent regulation on goods and services represents a formidable hurdle for exporters on both sides of the Atlantic. Farm and processed food products are still subject to stringent conditions. Market access is almost closed in the US as far as public procurement is concerned.
Both parties have much to gain from a widespread liberalization in trade. It would increase competitiveness and allow for a better allocation of resources. Ever since Adam Smith no one can seriously challenge the welfare derived from wider markets. Only the narrow vision of those pretending to protect home jobs and industries prevents that aim from materializing.
Talks are still in a preliminary stage and early red lines could later on be lifted. Nonetheless, taking away full chapters from discussion stands as a bad omen for the forthcoming talks. Washington should think it over before taking the drastic step to dump finance from the negotiation table as it can only fuel similar demands by those reluctant to provide fair access to competitors.
Setting up an integrated trade zone between the biggest advanced economic areas in the world stands as the best way to anchor recovery and ensure growth in future. Any attempt to jeopardize that key overall goal should be forcefully resisted.