US, EU Trade Group Issues Interim Report

The High Level Working Group on trade and investment, co-chaired by the United States Trade Representative and the European Commissioner for Trade, and established following the meeting between European Union leaders and President Barack Obama in November last year, has issued its interim report.

It has been generally recognized that the US and EU need to work ever more closely together. They are said to have the largest bilateral economic relationship in the world. With around 50% of the world’s gross domestic product, and one-third of total world trade, EU and US trade and investment generates 15m jobs on both sides of the Atlantic. Europe accounts for approximately 70% of foreign direct investment in the US, and US investment is three times larger in Europe than in Asia.

The remit of the Working Group is to identify and assess options for strengthening the US-EU trade and investment relationship, and to produce its recommendations and conclusions by the end of this year.

The potential options to be looked at include: the elimination or reduction of conventional barriers to trade in goods, such as tariffs and tariff-rate quotas; the elimination, reduction, or prevention of barriers to trade in goods, services, and investment, as well as unnecessary “behind the border” non-tariff barriers; and the opportunities for enhancing the compatibility of regulations and standards.

In its interim report, the Working Group has reached the preliminary conclusion that a comprehensive agreement that addresses a broad range of bilateral trade and investment policies would, if achievable, provide the most significant benefit of the various options it has considered.

A comprehensive agreement could include ambitious reciprocal market opening in goods, services, and investment, and address the challenges of modernizing trade rules and enhancing the compatibility of regulatory regimes. While there are certain areas in which further substantive work is required, the Working Group certainly envisions pursuing such an agreement.

The goal of the agreement would include the elimination of all duties on bilateral trade, with the shared objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of all but the most sensitive tariffs in a short time frame. In the course of negotiations, both sides would consider options for the treatment of the most sensitive products.

On regulatory issues and non-tariff barriers, the shared ambition would be to progressively move to a more integrated transatlantic marketplace, while respecting fully the right of each side to regulate in a manner that ensures the protection of health, safety, and the environment at the level that each side deems appropriate.

In view of the importance of developing an ambitious and realistic approach to regulatory differences that unnecessarily impede trade, the two sides have invited stakeholders to present, before the end of the year, concrete proposals to address the impact on trade of those differences.

With regard to services, the aim of negotiations would be to bind the existing autonomous level of liberalization of both parties at the highest level of liberalization captured in existing free trade agreements (FTAs), while seeking to achieve new market access through efforts to address remaining long-standing market access barriers, recognizing the sensitive nature of certain sectors.

In like manner, the aim would be to negotiate on the basis of the highest levels of liberalization and protection that both sides have negotiated to date in other agreements.

In several additional areas that are important to trade and investment, the two sides would aim to develop a set of high quality rules, particularly in: trade facilitation/customs; trade-related aspects of competition and state-owned enterprises; trade-related aspects of labour and environment; horizontal provisions on small- and medium-sized enterprises; strengthening supply chains; and access to raw materials and energy.

However, the Working Group warns that careful preparation will be needed to ensure that the negotiation of a trade and investment agreement, if undertaken, would deliver concrete results and would be concluded in a timely manner.

June 24, 2012

Source: Tax News