Q&A: Can a transatlantic trade deal help save the global economy?

Politicians and economists on both sides of the Atlantic have hailed plans for a comprehensive trade deal between the United States and European Union as an important step to revive the struggling global economy. President Barack Obama — who unveiled plans for the long-awaited Transatlantic Trade and Investment Partnership between the world’s two largest economies last month — said he hoped negotiations would start in June and last two years. But some fear battles over details will bog down the talks.

Among the deal’s most prominent champions, EU Trade Commissioner Karel De Gucht believes it would create hundreds of thousands of jobs, “the cheapest stimulus package you can imagine.” He recently promoted the plans in Boston, where GlobalPost spoke to him about the agreement, British moves to leave the EU and other issues.

GlobalPost: You’ve said the global financial crisis and ensuing euro crisis have shown how interdependent the world’s two large economies are — and the importance for a free trade deal to boost growth. Can a transatlantic trade agreement also be seen as a last best chance or possibly the last best chance for Western economies to compete with rising Asian economies?

Karel De Gucht: I wouldn’t push it that far because the European Union and United States together still make up for about half the world economy. So speaking about the last chance is a little bit escathalogical, no?

People should have a close look at figures. The Chinese economy is less than half of the European economy. So we’re still in the upper category.

But what I see as the most frightening possible development is that over time our IPR, or intellectual property rights, would be eroded by more and more forced transfers of IPR research and development facilities in emerging economies. I’m a very strong believer that we should make ourselves stronger not for limiting others, but for making sure we can guarantee the welfare of future generations.

What would the deal’s main gains be?

They could be very vast. We already have about $2 billion of trade on a daily basis — not monthly, but daily. So even if tariffs are low now — about 4 percent on average — if you apply that to a yearly trade flow of about $800 billion, that’s still a lot of money. It would give a boost to the economy, but would also result in a transparent market and lower prices for the customer.

Second, regulatory barriers are the main impediment for services. That’s also the bulk of what we should do — regulatory work: harmonizing of standards and norms.

A number of industries — the car industry, chemicals, medical devices, for example — on both sides of the Atlantic have established a common program of measures they think should be taken for their sectors. It’s very important that they agree on those measures, so you could expect they could have a rather quick breakthrough.

For the future, we should also think about how to establish norms and standards together. Because once the standards are set, everybody is of course convinced that his own is the best.

Take electric cars. For iPads, electric shavers and so on, we need adaptors when we travel around the world. They’re small, but if we’d need all those for a car, we’d have to carry a big bag with us.

Nevertheless, it’s precisely those regulatory details that some worry will bog down the talks. How certain are you that the current political goodwill can sustain negotiations over the next two years?

That’s what politics is about: We will have to make sure this momentum endures. And that’s also why I feel it is important that I make speeches on that in a number of US cities I plan to go to. We will really have to steer this carefully, and we will do so, because this could be a very, very important agreement. And that’s also one of the reasons I think we have to do it, as the Americans say, on one tank of gas. We can’t have that momentum for five years, for example. That’s why ideally we should start in June and try to finish it by the end of next year.

Switching topics, you’ve said you’re sure Britain will not leave the EU. Do you really believe Prime Minister David Cameron is being honest by saying he’s going to do everything to keep his country in the EU? Wouldn’t the first thing to do have been to not announce a referendum in the first place?

I’m not here to judge Mr. Cameron. What I have said is that I’m convinced he will do everything possible to stay in the European Union because any sensible British politican is aware of the fact that it would be a disaster if they left the European Union. And I believe that most people in the end are rational.

So you believe they’re acting irrationally now and will later come around?

I understand that Cameron is in a difficult position. You have this anti-European movement that already has a number of representatives in the European Parliament who are largely people that historically came out from Cameron’s party. Certainly they’re to the right of the conservatives.

The only thing I want to say is that this is a frightening evolution. I’ve been a party leader myself for five years and from that perspective — not only the prime minister’s but also the party leader’s — it’s frightening.

You say Cameron is under political pressure. Is he gambling with his country’s future in order to boost his party’s chances?

That’s not something I said.

But that’s the way it could appear.

What I have said is that a party leader is of course frightened by that kind of evolution, as  I understand it — that’s what I’ve been saying. I’m not saying he’s doing this instead of looking at the welfare of his country. That I have not said. And I don’t want to say that either. By the way, Cameron congratulated us personally when we made the [2012 EU trade] agreement with Singapore. I was in London and I was received by him personally, so he knows very well that trade is important for Britain. And Great Britain would certainly be one of the great beneficiaries of this [EU-US] agreement, if it were to come about. I’m saying that as a party leader, you cannot stay neutral. You have to ask yourself “What am I going to do about this?”

Some have hailed EU plans to cap bankers’ bonuses as the most significant development since the global financial crisis in 2008. However, David Cameron and [London Mayor] Boris Johnson have argued it would ruin the City of London [financial district]. What’s your response?

There’s no reason [the plans] would ruin the City. What’s most important about the EU’s legislation is that we shouldn’t forget that we have had a deep financial crisis at least partially because of the behavior of a number of bankers. There’s also something like responsibility in this society.

A lot of those bonuses were very short-term oriented. To my mind, the most important thing is that bonuses should be medium- and long-term oriented so that bankers get away from quick wins. Because quick wins were partially at the origin of the financial crisis. You can be sure about that.

Now saying that all our bankers will got to Singapore, the Cayman Islands… Look, if a big economy decides to do this [cap bonuses] — and to do this is to organize together with Britain — they can’t leave. It’s not that simple.

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