US, EU considering world's biggest free trade pact

Updated 12 December 2012
0

US, EU considering world's biggest free trade pact

WASHINGTON: After years of battling each other on trade issues, US and European officials are contemplating a dramatic change in direction: Joining together in what could be the world's largest free-trade pact in an attempt to boost their struggling economies.
Discussions are in the most preliminary of stages and there would be significant obstacles to overcome, including sharp differences on agriculture, food safety and climate change legislation. Still, top European Union and US officials have said they want to see it happen. And America's main labor federation, often the biggest opponent to US trade pacts, says it wouldn't stand in the way.
Last month, US Secretary of State Hillary Rodham Clinton signaled the Obama administration's interest during a speech on trans-Atlantic relations.
"If we get this right, an agreement that opens markets and liberalizes trade would shore up our global competitiveness for the next century, creating jobs and generating hundreds of billions of dollars for our economies," she said.
European officials, including EU Commissioner for Trade Karel De Gucht, have also expressed enthusiasm. Both sides are awaiting a report by a working group they appointed to study the issue. The report is expected within weeks and a positive recommendation could lead to negotiations early next year.
The interest in Washington to take on a big free trade deal is somewhat surprising. US free trade negotiators have had a tough slog since the politically fraught debate over the North American Free Trade Agreement with Mexico and Canada which was signed in 1994. Since then, it has become increasingly difficult to push big deals through Congress amid opposition from labor groups. Smaller deals with countries, including Peru and South Korea, have been approved.
Efforts to negotiate further reductions in tariffs among the more than 150 countries in the World Trade Organization have also stalled in recent years — in part over disagreements between the US and the EU.
Negotiators would face a host of tricky issues that have previously led to trade spats across the Atlantic. The two sides are currently fighting over the EU's carbon trading scheme that could penalize airlines not meeting EU standards. There are also substantial disagreements over intellectual property enforcement and food safety issues. More broadly, agricultural issues, including EU restrictions on the use of genetically modified foods and pesticides, are likely to challenge negotiators. Tyson Barker, director of Transatlantic Relations at the Washington office of Germany's Bertelsmann foundation, says that the agricultural issues are particularly sensitive in France.
"This will not be smooth sailing in Europe, by any stretch of the imagination," he says.
The negotiations do appear to have the backing of both US big business and big labor.
Labor unions have opposed previous US free trade deals with developing countries, arguing that US workers would be at a competitive disadvantage because inferior environmental and labor standards in those countries allow for lower wages. But the giant US labor umbrella organization, the AFL-CIO, says it wouldn't have those concerns in a deal with the EU, because it says that European social welfare and environmental standards exceed those in the US.
"The AFL-CIO believes that increasing trade ties with the EU could be beneficial for both American and European workers," the union said in statement about the working group studying a potential deal.

Less surprisingly, the idea has the backing of the US Chamber of Commerce, a pro-business lobbying group. which says a deal could have sizable economic benefits for both sides.
Tariffs between the EU and the US are already relatively low, averaging 5 percent to 7 percent. But because of the sheer size of the markets, even marginal reductions could have a big economic impact. A study by the European Center for International Political Economy estimated that eliminating tariffs could boost US exports to the EU by up to 17 percent and EU exports in the other direction by 18 percent. The US Chamber of Commerce says a deal could add $ 180 billion to the US and EU economies over five years, with the U.S. seeing larger gains than the EU. A potential deal could also ease trade by streamlining regulations and expanding the mutual recognition of product standards that the two sides use.
"The opportunity is there. It is golden. We should take it," says Peter Chase, the Chamber's vice president for Europe. Chase says it's very likely the two sides will launch talks next year, but sees challenges for negotiators.
He says that both sides have previously negotiated deals only with much smaller economies and have therefore become used to negotiating from the strong position. In this case, they will be roughly equals.
But Jeffrey Schott, a fellow at the Peterson Institute for International Economics, sees a potential roadmap in trade deals already in place with South Korea. He says that the EU used the US deal with Seoul as a guide for their own deal, which is quite similar.
"What is notable is that each side has been able to make these commitments to Korea, but not to each other," says Schott.
If they follow the Korean agreements, Schott believes the US and the EU could have a deal.


Brent crude oil rises for a sixth day as supplies tighten amid strong demand

Updated 24 April 2018
0

Brent crude oil rises for a sixth day as supplies tighten amid strong demand

  • US West Texas Intermediate crude futures were at $68.98 a barrel, up 34 cents
  • The potential of renewed US sanctions against Iran is pushing prices higher

SINGAPORE: Brent crude oil rose for sixth day on Tuesday, passing $75 a barrel, on expectations that supplies will tighten because fuel is rising at the same time the US may impose sanctions against Iran and OPEC-led output cuts remain in place.
Brent crude oil futures climbed to as high as $75.20 a barrel in early trading on Tuesday, the highest since Nov. 27, 2014. Brent was still at $75 a barrel at 0311 GMT up 29 cents, or 0.4 percent, from its last close.
Brent’s six-day rising streak is the most since a similar string of gains in December and it is up by more than 20 percent from its 2018 low in February.
US West Texas Intermediate (WTI) crude futures were at $68.98 a barrel, up 34 cents, or 0.5 percent from their last settlement. On Thursday, WTI rose to as high as $69.56, the most since Nov. 28, 2014.
Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.
The potential of renewed US sanctions against Iran is also pushing prices higher.
Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA said new sanctions against Tehran “could push oil prices up as much as $5 per barrel.”
The US has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.
“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.
“Oil strength is coming from Saudi Arabia’s recent commitment to get oil back up to between $70 to $80 per barrel as well as inventory levels that are back in the normal range,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.
One of the few factors that has limited oil prices from surging even more is US production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.
As a result of its rising output, US crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.