Trade backers hope for ‘watershed’ Obama visit

Supporters talk of an ‘economic NATO,’ but the US campaign is undermining support for a transatlantic trade deal.

WASHINGTON/BRUSSELS — President Barack Obama will try to rally reluctant Europeans behind a U.S.-EU trade deal when he touches down in Germany Sunday, but he doesn’t exactly arrive with the political trade winds at his back.

Back home in the United States, anti-trade sentiment in both parties is the highest in a generation, and nearly all of Obama’s potential successors are hardening their views on the subject — with potential implications for the Transatlantic Trade and Investment Partnership (TTIP).

On the Democratic side of the U.S. presidential primary, Vermont senator and “democratic socialist” Bernie Sanders holds up former secretary of state Hillary Clinton’s past support for trade deals as evidence she is not “qualified” to be president. Clinton now calls the recently-concluded Trans-Pacific Partnership, which she initially supported, a raw deal. And then, of course, there is Donald J. Trump. The frontrunner for the normally pro-trade Republican Party has opposed TPP and decried the (Bill) Clinton-era North American Free Trade Agreement (NAFTA) as a “disaster.”

TTIP hasn’t faced the same vociferous public opposition in the United States that it currently does in Europe, but the tumultuous election-year maneuvering has complicated the political backdrop, say trade advocates. The Obama administration and other TTIP supporters want to conclude a deal before the president leaves office — a goal driven in part by a realization that a future president might not be a TTIP fan.

“I think there is a lot of pushback, it seems, on both sides of the aisle around trade and maybe trade has come to symbolize some of this anger we see out there about taking away jobs,” Eric Spiegel, the chief executive of Siemens USA, the American subsidiary of the German export giant, told POLITICO this week.

Spiegel will be at the Hannover Messe Sunday, as Obama arrives to open the massive industrial show with Chancellor Angela Merkel before the two meet with David Cameron, Matteo Renzi and François Hollande on Monday. But he’s not holding his breath for a TTIP deal anytime soon, he told POLITICO.

“I think it’s a huge opportunity, but in the current situation I don’t think anything is going to happen in the near term,” he said.

John Engler, a former governor of Michigan who now heads the Business Roundtable, told POLITICO “there is a sense it would be a miracle to see [TTIP] concluded” during the Obama administration — and U.S. politics are having “a negative effect.” The decline in Michigan’s auto sector played a role in Clinton’s narrow loss to Sanders in the presidential primary there in March.

‘New paradigm’

The limited polling data on TTIP seem to back up his caution. In a survey about TTIP commissioned by Germany’s Bertelsmann Foundation and conducted by U.K.-based market research firm YouGov in late February, only 18 percent of the 1,126 Americans questioned supported the deal, compared to 53 percent in 2014. That’s comparable to public discontent with the deal in Germany, where suspicion about Corporate America is longstanding.

With trade politics becoming more complicated at home and the clock on his presidency ticking, some Europeans worry that Obama will try to cut a less comprehensive deal this week in Europe before the latest round of talks start in New York.

“That’s a possibility raised by certain persons who are afraid of an American willingness to speed things up,” French Trade Minister Matthias Fekl told POLITICO, adding that a scaled-back deal is “completely contradictory” to what France wants.

All along, TTIP has been a victim of timing. The Obama administration’s decision to make the Trans-Pacific Partnership (TPP) its trade legacy priority — despite lots of grumbling from European governments — means the U.S.-EU trade negotiations have largely escaped the attention of the general public even as the trade policy community in Washington follows the negotiations closely. In the Bertelsmann survey, almost half of U.S. respondents said they did not know enough about the agreement.

TTIP has come up rarely in the campaign, and the few reactions it has gotten may give supporters pause. Asked about the arbitration mechanism uses to resolve investor-state disputes in TPP and TTIP, Clinton wrote last week in a questionnaire for the Pennsylvania Fair Trade Coalition that “I think we need to have a new paradigm for trade agreements that doesn’t give special rights to corporations that workers and [non-governmental organizations] don’t get.”

Still, TTIP would seem to face a smoother road than TPP. It’s less about tariffs and more about regulatory standards. U.S. and EU standards are both high relative to the rest of the world, and there is less resistance to the negotiations from U.S. labor unions. The American Federation of Labor and Congress of Industrial Organizations, which is generally against free trade deals, notes on its website that it “believes that increasing trade ties with the EU could be beneficial for both American and European workers but as with all trade agreements, the rules matter.”

As Rep. Richard Neal, a top Democrat on the trade-writing House Ways and Means Committee, said last week in a speech, the White House faces a difficult challenge in getting the Trans-Pacific Partnership (TPP) trade deal approved in Congress this year — but a potential TTIP deal faces less resistance.

“At the moment, there’s not the organized resistance to TTIP,” Neal said. “There doesn’t seem to be the concerted effort that there has been on TPP.”

Chlorine chicken

Siemens’ Spiegel hopes this weekend’s meetings in Hanover will be a “watershed” for U.S.-European cooperation on high-tech manufacturing. Founded in Germany in 1847, Siemens but now does more business in the United States than it does in Germany — just under €20 billion in revenues in 2015 with just over €4.5 billion in exports. It’s just the kind of company that TTIP might benefit most.

Spiegel and other U.S. business leaders get excited about the prospect of a TTIP deal that would bring into line U.S. and EU standards and regulations so that, for instance, the brakes on a car could be certified so that an automobile from the same production facility could be sold in both Paris, Texas and Paris France.

They talk up the benefits and geo-strategic importance of the deal — an “economic NATO,” some call it. Proponents regularly point to data showing that a comprehensive TTIP deal would be a €120 billion boon to the European economy and a €95 billion boost for the U.S. economy.

Still, that study, conducted in 2013 by the London-based Centre for Economic Policy Research, assumes that a deal will reduce non-tariff barriers in goods and services by 25 percent — and public procurement barriers by 50 percent.

And at this point in the negotiations, both those issues remain key sticking points, says Gary Hufbauer, a former U.S. Treasury official and senior fellow at the Peterson Institute for International Economics in Washington, DC.

“There’s a general agreement that we should have international standards,” Hufbauer said. “But both sides think they have the best standards…and the Europeans have placed a premium on getting these going forward and I don’t think they’re getting close to working out modalities for that.”

Hufbauer, for one, thinks TTIP will become a campaign issue as the negotiation process plays out alongside the 2016 presidential campaign cycle. “There will be opponents,” Hufbauer said, predicting that the idea of the United States giving up sovereignty to investor-state dispute settlement courts as part of TTIP will rile up opponents.

The arbitration mechanism is hardly a new feature of trade deals or a new political issue, but become more controversial lately in Europe; after public outrage about how large companies can sue countries over trade disputes, the European Commission proposed a new series of courts to deal with investment disputes.

On this side of the Atlantic, many Americans, Hufbauer says, would likely say that that Europeans shouldn’t be telling them how to license their  doctors or engineers or accountants — not unlike in Europe, where Germans complain about the “Chlorhühnchen”, or chlorine-water-washed American chicken that many fear they’d be forced to eat under TTIP.

Meanwhile, political views on those types of issues seem to be shifting by the day.

Clinton seems to be backing away from the investor-state dispute approach taken by the administration in TPP, in favor of an approach more in line with social and environmental activists. On the Republican side, Trump’s chief Republican rival —senator Ted Cruz — initially supported giving President Obama the power to negotiate a Pacific Rim trade deal before turning around months later and opposing it. Trump’s stance on free trade has been all over the map, but boils down to a simple applause line: recent U.S. trade deals will decimate U.S. manufacturers and people will lose jobs.

EU trade chief Cecilia Malmström told reporters in early March that the heated verbiage on the campaign trail should not slow the TTIP trade talks. And business leaders hold out hope that the Obama-Merkel meeting this weekend may make a difference.

“I think if the President and Chancellor come out and talk about what we’re on the verge of and how the U.S. and EU can play a part in that, I think it will be a big moment and we may look back to it and say that it was really a watershed moment,” says Siemens’ Spiegel.

Victoria Guida in Washington contributed to this story.