US-EU Trade Deal In Trouble Before It Even Starts?
from the well,-look-at-that dept
For the last few months, Techdirt has been following the surprisingly rapid embrace on both sides of the Atlantic of the proposed transatlantic free trade agreement, known variously as TAFTA or TTIP. Coming out of nowhere, the agreement is being talked about as if its success and benefits are more or less guaranteed.
But this huge project is being driven as much by politics as by economics: both the US and EU see it as a way of re-asserting their influence against the background of a constantly more powerful and assertive China. And that makes progress highly vulnerable to local political shifts, as a bombshell comment from the US side, reported in the Guardian, makes clear:
The Obama administration has warned British officials that if the UK leaves Europe it will exclude itself from a US-EU trade and investment partnership potentially worth hundreds of billions of pounds a year, and that it was very unlikely that Washington would make a separate deal with Britain.
That refers to UK Prime Minister David Cameron’s growing problems with the UK Independence Party (UKIP), which wants the UK out of the European Union. The sudden rise of the nationalist and traditionalist UKIP, which recently has won seats in local government and is riding high in the opinion polls, has forced Cameron to agree to hold a referendum on whether the UK should leave the European Union in order to blunt UKIP’s appeal to right-wing voters, and to quell a growing rebellion in the ranks of his own Conservative party.
That vote will take place sometime before 2017, which means it may not happen for a few years. But the new uncertainty, coupled with a prospect of the EU being weakened by the UK leaving — and the US losing its main ally there — was apparently enough for the Obama team to issue the veiled threat quoted above: that if the UK does leave, it won’t be part of TAFTA, nor of any separate trade deal.
Some believe that the ramifications of UKIP’s success in forcing Cameron to hold a referendum might be even more significant than simply putting pressure on Cameron to make the case to stay in the EU. For example, Gary Hufbauer, a former US Treasury official, is quoted in the same Guardian article as saying:
the administration’s hopes to complete a far-reaching partnership in Obama’s term may be over-optimistic and would be torpedoed altogether by a British exit from the EU.
“If the UK separates from the EU, I think will go a long way to derail the TTIP project entirely,” Hufbauer said. “There would be a lot of questions raised. The administration has many battles ahead of it. It will add another layer of confusion on an already confused picture, and there will be lots of commercial concerns in the US [from those who] have had their eye on the UK markets.”
This unexpected development is a reminder that nothing is certain about TAFTA/TTIP at this stage, least of all the much-touted benefits, which may well prove just as illusory as those of the free trade agreement between the US and Korea.