Talks over EU-US deal marred by setbacks
Washington shutdown delays negotiations to create the world's largest free-trade deal while split is emerging over the finance sector
Even before the cancellation of the latest round of EU-US talks, negotiations to create the world's largest free-trade deal were getting into difficulty 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 that Washington may pursue opt-outs for its shipping industry on security grounds.
Then the first round of talks in July was overshadowed by reports that the United States had bugged European Union offices.
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."
EU and US officials say the deal, known as the Transatlantic Trade and Investment Partnership, could boost economic output by about 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, which account for a third of world trade, when China's might threaten 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".
Since tariffs between the EU and the US are already low, about 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 to common 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 US$2.7 trillion of US stocks and bonds, while US residents hold almost as much in Europe.
However, the US and European countries regulate banks, insurers and traders in very different ways, particularly in the US$630 trillion derivatives industry, and Washington is demanding that global trading involving US firms be subject only to US rules, regardless of where it happens.
Europe wants a pact that spells out which regulators are responsible for what activities.