Thoughts About Friday's Transatlantic Trade And Investment Partnership

The US and the EU are set to begin ambitious trade talks at the end of the week. It is hoped to cover areas that have previously frustrated trade negotiators, including agriculture, intellectual property rights, investment and non-tariff barriers today. It is also hoped to include provisions on employment and the environment, as well as regulation, government procurement and consumer protection rules.

However, even before the talks can get off the ground to create a deeper and broader free trade area that will account for nearly 50% of the world's GDP, is running into problems. A critical issue is that the EU negotiators require a mandate and France is threatening to block it, unless "audio-visual services" (movies) can be excluded from the negotiations. This is a traditional French issue and Hollande's Socialist government continues it. Recall that Paris' demand for protection from Hollywood had also bedeviled the Uruguay Round of trade talks in the early 1990s.

For its part, the US may push to exclude regulation of financial services. The US and Europe, for example, appear to be moving in opposite directions in treatment of systemically important financial institutions. Many key US officials, including at the Federal Reserve, address the too-big-to-fail issue with limitations on size as much as boosting capital requirements. European officials, where many banks are can still overwhelm a country's ability to support, are more inclined to limit size of financial institutions.

Nevertheless, the key decision for this week is not about the details. Making the decision to proceed with more detailed talks seems easier than saying no. On the other side of the EU's needed mandate is the end of the US government's 90-day legally required consulting period that ends in about 10-days time.

A poor tone at these talks would sour next week's G8 Summit. That meeting also has an ambitious agenda and agreeing to start the trade talks could give the summit important momentum. Efforts to introduce greater transparency on corporate ownership and to make the location of production and taxes on country-by-country basis publicly available are subject to heated discussions within the G8.

The effort to launch the TTIP talks is itself partly a function of the failure to conclude the global Doha Round of the WTO. It is also a way to keep Europe relevant, as the US makes its now famous Asian pivot and beings talks on a transpacific trade agreement. Europe would seem to have more to lose than the US from the failure of to initiate the TTIP in terms of economic stimulus, but the failure would also be a setback to the US ideologically, which wants to raise a high bar for what is possible in trade agreements.