Thursday, March 21, 2013

Obama fights the last (trade) war

So think Simon J. Evenett and Robert M. Stern, pointing to this sentence in last month's State of the Union speech;
“And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs”.
There's no there, there, they say;
  • Outside of agriculture – where barriers remain high and vested interests remain entrenched – the potential for trade diversion is slight; almost 70% of exports from the EU enter the US on tariff lines where there are zero tariffs. Even the comparable percentage for agricultural products exceeds 47%;
  • On the other side of the Atlantic, the percentages of US imports of manufactures and agriculture products that pay zero tariffs are 66% and 47%, respectively.
  • No room at the 'in', one might paraphrase.  But, how about regulation?  Not so much there either;
    What have researchers shown about the impact of reducing de facto or de jure cross-border discrimination in national regulatory regimes? ...the form and implementation of national regulatory regimes is an important determinant of incumbent firm strategies and investment decisions. Changes in regulations that promote competition threaten the rate of return on prior investments and will be resisted. Although the policy instruments are different from those in trade in goods, none of this should come as a surprise to students of political economy.
    Moreover, to the extent that US firms have subsidiaries in the EU which have invested around host-country regulations, then these firms will not be keen on regulatory reforms in the EU that facilitate exports from rivals based in the US. And of course the same holds for EU firms with US affiliates. The presence of so much investment across the Atlantic – trumpeted with such fanfare by US and EU supporters of the Partnership – actually reduces corporate support for greater alignment of existing regulations.
    It was thought important enough to include in the SOTU.  Why?

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