TRANSATLANTIC FREE TRADE AGREEMENT NEGOTIATIONS AND REQUIRED PUBLIC POLICY ADVOCACY

The trade deal between the U.S. and the EU  will undoubtedly provide enormous opportunities for both the EU and American industry. The benefits to businesses on both sides of the Atlantic will most certainly come from the elimination of tariffs, in particular in those sectors where they have been remarkably high. But tariffs alone have not been the only barrier to trade. Most benefits for the industry, in fact will mainly derive from the smoothing out of the regulatory differences that so far have been an impediment to trade. Numerous contentious issues, such as copyright, patent regulations, subsidies, procurement, foreign ownership limits and so on will also be addressed during the negotiations. Agriculture is sure to find itself in the limelight during the coming negotiations. The sensitive issue of agricultural subsidies will certainly be up for discussion. Other sectors such as pharmaceuticals, autos, maritime freight sector and aircraft manufacturers could also potentially benefit during the trade talks.

If successfully concluded, this would be the most significant bilateral Free Trade Agreement (FTA) to date, covering approximately 50% of global output, almost 30% of world merchandise trade (including intra-EU trade, but excluding services trade), and 20% of global foreign direct investment. The United States and the European Union are each other’s primary investment and trade partners. In 2012, 63% of US FDI went to the European Union and 44% of FDI inflows to the United States originated from the European Union. Bilateral investment flows between the United States and European Union generated a fifth of all international merger and acquisition (M&A) activity. The US accounts for 20% of EU exports and 20% of EU imports (excluding intra-EU trade), while the European Union accounts for 28% of US exports and 24% of US imports. Measured in value added terms transatlantic trade flows are even more important than when measured in gross terms. The United States receives 23% of total EU exports and provides 21% of EU imports on a value added basis, while the European Union accounts for 29% of US exports and 27% of US imports . In other words, the United States is by far the most important destination of EU value-added and the United States is by far the largest supplier of value-added in EU imports. Measuring trade in value added also reveals the hitherto underestimated importance of services which, on a gross basis, represent about one-third of EU and US total exports . The services share in value-added exports of the United States jumps to 52% and that of the European Union to 56%. In the United Kingdom, France and Spain the share of services is even higher. Moreover, the share of services in value-added trade is higher in trade between the European Union and the United States than it is with other trading partners: 63% of EU bilateral exports and 61% of US bilateral exports.

While the EU-US FTA talks is an exciting opportunity for greater access of EU products and services in the United States and for U.S. products and services in Europe, interested firms should not underestimate Brussels or Washington. Effective public policy advocacy campaigns in the EU  capital and in the U.S. capital should be paramount for all European and American firms if they want to maximize the benefits from the talks.

Public policy advocacy during the trade talks is particularly important since the negotiations will be based on compromise. As a result, the comprehensive trade talks will benefit some sectors more than others. Some industries will also lose as a result of the package deal. U.S. and European companies that will engage in the process and that will come up with the most convincing arguments by understanding the political and social realities on both sides of the Atlantic will have the best chance to make the most of the trade talks.

European companies must increase their Washington public policy advocacy and conversely U.S. firms  must increase their Brussels advocacy .  While many European firms cover their advocacy needs in Brussels pretty well, this is not the case in Washington and while many U.S. firms cover their advocacy needs in Washington pretty well, this is not the case in Brussels.
 

There is a need on both sides to engage seriously through government relations’ campaigns instead of simply public affairs work.
 

Brussels and Washington DC are both complex and yet very different environments. What works in Brussels does not necessarily yield results in Washington and vice-versa what works in Washington does not necessarily yield results in Brussels . European companies should seek professional public policy advocacy services, and especially firms that understand the politics, process and rules of engagement in Washington .  They should rely on firms that understand sensitivities in the United States . Similarly U.S. companies should seek professional public policy advocacy services and especially lobby firms that understand the politics, process and rules of engagement in Brussels. Public policy advocacy in either Washington or Brussels should not be a learning exercise.   Most important is to rely on firms that have the expertise, the knowledge and contacts. Effective public policy advocates know their topics inside and out. They know the technical data and the political stances taken by major players, as well as why those stances are taken and what can get them to change.

Timing will be crucial. Considering the ambitious agenda and the deadline set for the conclusion of the talks, interested parties should start engaging now to make the most of the opportunities and avoid disappointment.

AALEP is in position to provide references about highly professional public policy advocacy firms both in Brussels and Washington DC.