Analysis: EU-U.S. trade talks promise both prizes and pitfalls

Mon Feb 18, 2013 3:06am EST
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By Alan Wheatley, Global Economics Correspondent

LONDON (Reuters)- Forthcoming transatlantic trade talks might offer a fresh incentive for Europe to worry a bit less about protecting past economic gains and focus a bit more on securing sources of future prosperity.

The negotiations, announced last week and due to start in June, are also an important chance for the European Union to rejuvenate political ties with the United States as Washington pivots towards a rising Asia.

The talks will be tough. Successive attempts to prise open markets over the past 15 years made some progress but ultimately failed. This time round, extensive consultations have convinced officials that an agreement can be forged at a lower political cost.

One reason is that agriculture, a constant thorn in the side of negotiators, is less of a bilateral bugbear than it was even two years ago thanks to changes in the global market for farm produce, said Fredrik Erixon, director of the European Centre for International Political Economy, a think tank in Brussels.

What's more, the world's two largest economies are anxious to tap into new sources of growth. They estimate that by 2027 a comprehensive pact could add 0.5 percent a year to the EU's gross domestic product and 0.4 percent to U.S. output.

But the belief in Brussels and Washington that they will not have to cross too many negotiating red lines drawn by powerful vested interests will be quickly tested, Erixon said.

"It will become much clearer that you're not going to get an agreement that can deliver short and medium-term economic gains or longer-term dynamic gains unless you're willing to do supply-side reforms," he said.


An European Union flag flutters outside of the European Parliament in Brussels October 12, 2012. REUTERS/Francois Lenoir