Financial services could derail talks on EU-US free trade

Financial services have loomed as the first serious stumbling block ahead of the second round of negotiations on a EU-US free trade agreement.

With talks due to resume in Brussels next week, both sides were anxious to set out their stalls in separate sessions with the media.

While both are playing down apparent differences, there is clear divergence on what aspects to focus on, with the EU emphasising the need for agreement on specific sectors such as chemicals and cars, and the US keen to find ways of each recognising the other’s standards and regulations.

US trade representative Michael Froman was clear in setting out his government’s position on financial services regulations, saying there was so much work going on in this area in other fora, including the G20, that it should be left there.

Mr Froman, US president Barack Obama’s principle adviser, negotiator, and spokesman on international trade and investment issues, said: “There has been an explosion of regulatoryactivity post 2008, 2009. Our view is that work should continue in parallel alongside the TTIP [Transatlantic Trade and Investment Partnership] regulation.”

US representatives are interested in market access for US insurance and banking institutions under the TTIP.

EU officials were adamant, however, that they wanted the area to be included in any deal.

EU Trade Commissioner Karel de Gucht, while echoing Mr Froman’s statements on mutual recognition of regulations across a broad range of sectors, focussed not just on food safety but also on financial services, such as the regulation of derivatives.

“We need to establish the rules and institutions that ensure this effective regulatory co-operation,” he said.

The October and December rounds should establish a commonly agreed outline of the regulatory and rules component of the partnership for political review in January.

“On that basis, the political guidance can be given to try to make a maximum of progress next year,” said Mr de Gucht.

The EU feels making progress on specific sectors, including cosmetics and pharmaceutical and medical devices, would serve to give more political momentum to the talks, rather than concentrating solely on mutual recognition of standards.

With many fearing the US will force the EU to lower its health, food, and environmental standards, Mr Froman was at pains to emphasise the US did not want to undermine these areas.

He hoped talks partners would agree on equivalents in food — a sensitive area because of US hormone meat and GM products.

Mr Froman was critical that the EU include only those bodies that are in the EU when consulting stakeholders, saying the US includes businesses from both sides of the Atlantic.

The principles to be applied must be transparency, participation, and accountability, he said.

He said the divergences between the EU’s precautionary principle and the US emphasis on cost-benefit analysis was becoming decreasingly important in terms of the ongoing work in the partnership.

The talks were considering what aspects of climate and environmental elements should be an integral part of an agreement, or whether it should be “on the side”.

Mr Froman said: “We have a question about the transparency and methodology of certain rules, but this does not mean we do not have a concern about the environment.”