By Emre Peker
BRUSSELS -- U.S. and European trade negotiators are chasing
quick wins to cement a July cease-fire. Problem is, even seemingly
simple trade moves can take years.
President Trump and European Commission President Jean-Claude
Juncker agreed at the White House on July 25 to avert a trade fight
and work toward "zero tariffs, zero non-tariff barriers, and zero
subsidies on non-auto industrial goods."
As trade teams prepare to meet in Washington on Tuesday, some
U.S. officials, led by Commerce Secretary Wilbur Ross, are warning
the EU not to test Mr. Trump's patience with delays.
The president wants "quick negotiations that produce tangible
results," Mr. Ross said in Brussels on Wednesday, a day after
meeting EU Trade Commissioner Cecilia Malmstrom. "This is not meant
to be a five-year project," he said.
Negotiators, after disagreeing about the scope of a quick mini
trade deal, are now focused on aligning American and European
regulations on goods and services. U.S. Trade Representative Robert
Lighthizer hopes for "an early harvest in the area of technical
barriers to trade," his office said last month after his first
round of talks with Ms. Malmstrom.
The July détente suspended, for now, the threat of U.S. levies
on car imports, a top concern in Europe; EU officials say talks to
cooperate on auto regulations "could be particularly fruitful."
Because of the cost of adapting products to slightly different
standards, coordination could yield huge savings for both sides,
industry and trade officials say. When the U.S. and EU tried
aligning regulations a decade ago, Dutch consulting firm Ecorys
estimated their economies together would gain more than $200
billion a year by eliminating duplicative standards.
The EU-funded analysis remains the benchmark on regulatory
barriers, which industry officials say have increased. Putting a
price on regulation is difficult because it entails elements
including testing, inspections, legal analysis and filings.
In comparison, trans-Atlantic tariffs average less than 3% on
more than $1 trillion of annual trade in goods and services, or
roughly $30 billion.
But this is the third U.S.-EU attempt since 2007 to eliminate
non-tariff barriers. Finding common ground on regulations is "very
difficult and will not happen quickly," said Iain MacVay, a
London-based lawyer at King & Spalding who has advised clients
in the pharmaceutical industry during EU-U.S. trade talks.
Adjusting industrial standards can be technically complex, and
further complicated by lobbying on all sides. Unifying regulations
is no easy task even in industries where regulators and businesses
march in step, such as commercial aviation.
It took five years for Washington and Brussels to negotiate
mutual recognition on air-safety standards, and implementation of
their 2008 deal was delayed another three years over one sticking
point.
Chemicals companies long ago gave up on harmonizing regulations
across the Atlantic and now seek minor steps on the classification
and labeling of chemical products.
Relabeling the same product for sale in two different markets
costs billions of dollars a year. For U.S. chemicals exporters, the
cost of different safety labeling requirements runs at some $475
million annually, according to White House estimates.
Eliminating half the non-tariff barriers for chemicals would
result in total economic gains of more than $10 billion in the U.S.
and the EU, according to Ecorys estimates.
"The compliance costs are higher than the tariffs -- the
possibilities to really lower those cost are limited but still very
worthwhile," said René van Sloten, executive director for
industrial policy at the EU chemical industry lobby Cefic. "The
less divergence there is the better."
One path to quick results is to resurrect past agreements.
During three years of talks on the proposed Trans-Atlantic Trade
and Investment Partnership, which collapsed in 2016, the two sides
reached some preliminary agreements on standards, which got filed
away.
Officials could claim results by plucking out "an agreement
somewhere in the drawer" and presenting it as a deal, an EU
official said.
"We have done, over the years, a lot of preparatory work," Ms.
Malmstrom said on Oct. 5. "There are certain things that are quite
low hanging fruits."
An example is the EU-U.S. mutual recognition agreement on good
manufacturing practices for pharmaceuticals, which promises to cut
costs by ending duplicate inspections. Negotiated over three years
during TTIP talks and signed by the U.S. the day before Mr. Trump
took office, the agreement was built on a 1998 pact that U.S.
regulators refused to implement due to concerns about lax standards
in some EU countries.
The accord has been in force since November 2017 and is set to
be fully applied by July 2019. Industry officials and the European
Commission said the agreement could be expanded to include
vaccinations and veterinary medicines, two areas highlighted by EU
officials as ripe for potential deals.
For negotiators looking at trans-Atlantic differences in
regulations, "the deliverables in a very short period of time will
be limited," said Luisa Santos, international relations director at
lobbying group Business Europe. "The main change is that now we
have a positive narrative" following the July agreement, she
said.
Mr. Lighthizer meets again with Ms. Malmstrom next month. He
notified Congress on Tuesday of the administration's intent to
negotiate a trade deal with the EU. "We are committed to concluding
these negotiations with timely and substantive results," he
wrote.
On Thursday, Mr. Juncker, the EU's top executive, said his
agreement with Mr. Trump "will be done."
Write to Emre Peker at emre.peker@wsj.com
(END) Dow Jones Newswires
October 21, 2018 08:14 ET (12:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.