LETTER : Obstacles to European free trade agreement with the US

From Mr Michael Johnson

Sir: Further liberalisation of trade between the European Union and North America, ultimately perhaps with some form of free trade area, has a lot to commend it economically and politically.

However Andrew Marr reports ("Prodigal's return disguises lack of any new thinking", 11 October) that the Foreign Secretary or his supporters presented this proposal in Blackpool as "a reverse gear for European integration". If a new transatlantic trade agreement is seen as an alternative to further integration in the EU, that idea is a dangerous delusion for five reasons:

1. Transatlantic trade liberalisation, even a full FTA, would be restricted to the economic field, where EU internal policy is already largely integrated. It could not in any way be a counter to the pressures in next year's intergovernmental conference for further integration, which will be mainly in the defence, political and social fields.

2. The US would not discuss full-scale trade liberalisation with the EU unless it covered such areas as access to the European audiovisual market, telecoms and above all agriculture. France and some other member states would object strenuously. On the (unlikely) hypothesis that France did agree to early transatlantic liberalisation in these areas, it would exact a massive price in other areas of EU policy.

3. It is doubtful how far the US wants to go in this direction anyway. America would have to make important concessions on, eg, banking rights and its long-standing restrictions on coastal shipping. There seems no conspicuous enthusiasm among American politicians for a transatlantic FTA. In the multilateral negotiations which led to the establishment of the World Trade Organisation the US settled, for domestic reasons, for a disappointing degree of reform of tariffs and agricultural policy, and stood aside from the recent WTO agreement on financial services.

4. If the US were to take on the domestic lobbies on these issues for the purposes of a bilateral agreement with Europe, the matching benefits would have to be huge. America would demand higher standards from a bilateral agreement than from one in the WTO framework. The obvious precedent is the Nafta agreement of 1993 with Canada and Mexico. Apart from tariffs, standards, etc, Nafta imposes far-reaching obligations in areas such as investment, services, government procurement, intellectual property and travel restrictions, which are much less comprehensively dealt with in the WTO. There would be little advantage for the US in negotiating with Europe if it did not get real bilateral concessions in these matters.

5. Not only would the EU (including Britain) have to bite on some unwelcome negotiating bullets: in some of these sensitive subjects the European Commission, according to opinion 1/94 of the Court of Justice, does not have exclusive negotiating rights. If there were to be a serious transatlantic negotiation for real liberalisation and if Europe were adequately to protect its legitimate interests in that process, then Europe would have to negotiate as one for an outcome based on single agreed standards. The perverse result (from the Tory party's point of view) would be an unavoidable increase in the EU's central negotiating powers.

Yours faithfully,

Michael Johnson

London, N6

11 October