Study arms Czech government in support of EU-US trade deal

Foto: Europäische Kommission

Around two weeks ago we reported on how various Czech groups were putting pressure on the Czech government regarding its stance over the Trans-Atlantic Trade and Investment Agreement (TTIP), the deal aimed at paving the way for what might amount to a free trade zone between the EU and US.

Vladimír Bärtl, photo: archive of Ministry of Industry and Trade
The groups were asking for more information about the deal and undertakings that basic European rules and regulations would not be watered down in a drive towards common standards. Although far from a reply, a study by independent experts for the Ministry of Industry and Trade has been released this week which aims to put some figures on the possible benefits of the trade deal.

The deputy minister at the ministry most involved in the trade talks, Vladimír Bärtl, says many of the groups opposing TTIP have misunderstood its goals. He says some of the Czech sectors which stand to benefit most are the car making, engineering, pharmaceutical, chemical, and food sectors. As regards the study, Bärtl admits that it assumptions have been pretty broad as it is trying to get to grips with a work that is still very much in progress.

“First of all, it has to be said that this study – it’s unusual that we are actually asking to make a study when the final text is not completed. But considering that TTIP is an initiative which is different from FTAs [Foreign Trade Agreements], for many reasons we have decided to ask for and conduct such a study. Also, we have to say that this is an independent study, it is not a position paper for the Czech Republic.

“It is not about harmonization at all.”

“As regards the scenarios, since we don’t know the shape of the final text and also because the ties at the moment between the EU and USA are quite intense, there are still [customs] duties. In most areas of industry they are at a low level but there is still room to reduce them lower and this is the main goal for the interested parties. What we see as a crucial potential in the TTIP is the search for the elimination of non-tariff barriers to trade. You can understand that the effects of removing non-tariff barriers cannot be simply calculated at the moment because it is really hard to estimate the amounts of cost savings. So the group of authors who made the impact study worked with scenarios about the elimination of duties at the level of around 90 percent; and then the complete elimination of duties; and then the complete elimination of duties and at the same time decrease of costs for about 5 percent based on non-tariff barriers; and the last one is the complete elimination of duties and at the same time a decrease of costs of about 20 percent as a consequence of the elimination of non-tariff barriers.”

And how does that in the best scenario translate into growth, GDP growth, for the Czech Republic, increases in wages, improved balance of trade? What is the most optimistic scenario?

Photo: European Commission
“Okay, the most optimistic scenario - which is the complete elimination of duties and at the same time 20 percent savings on costs based on non-tariff barriers – is about plus 900 million US dollars a year, which is slightly less than one percent of GDP, We have to realize that this is not just a one off effect, this is continuous and will occur every year. We also have to look at the interpretation of the impact study and realize that as a part of the EU we will also benefit from the positive benefits for other member states of the EU. This is another aspect where it is difficult task to estimate the savings and benefits.”

So the study just deals with the direct results for the Czech Republic? If Germany’s economy grew by the same amount then Czech exports to Germany might increase, but this doesn’t look at that, it is just the direct affect on the Czech Republic?

“There are some simulations of this domino effect but it is really difficult to calculate that. We also have to look at these models, they work with historical data and there is limited room to judge what the future will be. At the moment for us the volume of trade between the Czech Republic and United States is quite low if you look at the volume as such but if you look at the value added of trade, then the United States is a key destination. They have around a 6 percent added value and they are just behind Germany in second position, together with France and Italy. So this is something which is unknown. Again, the collective of authors who made the study had a really difficult task because there are very, very many unknowns.”

“We still don’t have in some areas walls, so it is impossible to build a roof.”

How realistic do you think it is that this deal will be done by the end of the year or by the time that US President Barack Obama leaves office? And is realistic to expect that – I mean, there are many differences between the EU and United States laws and regulations covering everything and if we are talking about harmonization is it realistic to expect so much will be harmonized? Many people have the impression that if things are harmonized, these non-tariff barriers, then it will be Europe that gives more away than the United States?

“This is a typical mistake because in TTIP we are not looking at harmonization, we are just trying to identify the areas where regulatory cooperation could exist based on the existing level. Let’s take, for example, the automotive industry and the passive and active safety features. On both sides of the Atlantic they aim to have the highest possible safety regulation, but it’s different. So, it’s only possible to look at what is similar and at an equal level and then cooperate or better inform each other when they are creating new regulations, But it does not mean that we take the lowest standard and harmonize for both entities. That’s not going to work and the EU, the Commission, and Member States expressed that several times that they are not going to accept that at all. No-one wants that, the public does not want that, companies don’t want that, it is not about harmonization at all.”

Photo: Oziris / freeimages
“About the question of the timing, it’s true that there started today in New York a 13th round [of negotiations] and it will take the whole of this week. We have to say that the frequency of meetings of the top negotiators are increasing. In the last five months the Commissioner for Trade [Cecilia] Malmström met her counterpart from the USTR seven times and they really aim to solve the sensitive areas like regulatory cooperation. We will see, I think, before the Summer break how we are going. I don’t think it is impossible, but we still don’t have in some areas walls, so it is impossible to build a roof. The Czech priority for a long time is that we want a quality and ambitious agreement and speed for us is not that important. We will see, before the Summer break there will be another round, the 14th round, and we will look at that. I don’t think it is impossible, but even if the agreement is finalized by the end of the Obama administration we can expect that the new administration might look at some new chapters and ask them to reconsider.”

Some people say that if it is not more or less settled by the end of the Obama administration then you are looking at a delay of two to three years, partly also because of elections as well in France and Germany, but mainly for the new American administration to get to grips with it. Do you think that might happen?

“I don’t see a dramatic shift from the will that we want to see an ambitious, comprehensive and balanced deal.”

“This is really hard to predict. Any elections, any change of government, the same as in the US or in some big member states of the EU, might lead to a slight shift in the priorities but I think at the moment, and I’m a full member of the Trade Policy Committee of the Czech Republic for two years, and I see that really, really concentrated effort of the member states to support and facilitate the European Commission, which has got the mandate for the negotiations. So, of course we cannot say it is impossible, bit I don’t see a dramatic shift from the will that we want to see an ambitious, comprehensive and balanced deal. “