Cultural Disconnect in Trade Negotiations

The June, 2013 G-8 Summit began with the announcement of the launch of negotiations between the United States and the European Union to conclude a Transatlantic Trade & Investment Partnership, or TTIP. The first round of negotiations concluded in Washington, D.C. on July 12, 2013.

At first glance it seems a very obvious thing to do. Already, trade between these two transatlantic giants accounts for about half of the world’s Gross Domestic Product (GDP) and nearly one-third of world trade flows.  Furthermore, as the biggest proponents of trade liberalization and open economies, EU and U.S. goods already enjoy very low tariffs upon entering each other’s markets. In other words, there is already a lot of trade happening between these two.

But, wait a minute! Why then is a trade agreement being negotiated?

Most of the benefit from a concluded TTIP is expected to come from removing or reducing regulatory barriers to trade – called non-tariff barriers or NTBs. Given the amount of trade already happening, the different regulations and standards on either side of the Atlantic Ocean create increased costs for businesses. Companies doing business in Europe and the United States face two or more sets of product approval processes, consumer safety standards, and inspection requirements. One anticipated outcome of the TTIP negotiations, then, are common standards or mutual recognition of each other’s regulatory requirements. Companies doing business on both sides of the Atlantic would then need to comply with only one set of standards and requirements.

US flag (courtesy of wikipedia)

US flag (courtesy of wikipedia)

At the same time, there is wide acknowledgement that this is not going to be as simple as it sounds. Arguably, there are some key areas in which regulations and standards differ for cultural reasons which may be difficult to overcome.

Food Standards: While genetically-modified or genetically-engineered foods (GMOs for short) are very much a part of the US agricultural and food landscape, European citizens have resisted the introduction of

EU flag (courtesy of wikipedia)

EU flag (courtesy of wikipedia)

“frankenfoods” into their food supply. The US sees the negotiations as an opportunity to revisit this issue. However, the European Commission —  the EU’s executive arm and negotiating party in these talks, has said that:

Basic laws, like those relating to GMOs or which are there to protect human life and health, animal health and welfare, or environment and consumer interests will not be part of the negotiations.

Buy American Act provisions: Legislation passed in 1913 restricts the purchase of non-US goods and services by the US Government. Need I say more?

Privacy: EU laws place a much higher value on protecting the privacy of European citizens. This interesting article by NBC news explains. This difference helps to explain why the negotiations almost broke down before they could even get started over revelations of the National Security Agency (NSA) spying activities. “US must justify why they treat us like enemies” said Martin Schulz, President of the European Parliament, in a Facebook interview.

 Copyright & Culture: The European Parliament is the EU’s directly-elected legislative body. It has issued its position paper on the US-EU negotiations, which included the request that cultural and audiovisual services be excluded from the negotiations.

Citizen Concerns: On both sides of the Atlantic, citizens have expressed concerns that “common standards” could actually mean a dilution of the national standards for which they have fought so hard.

Some of this disconnect even extends to the name. What the U.S. has dubbed the Transatlantic Trade & Investment Partnership or TTIP, Europeans have preferred to call the Trans-Atlantic Free Trade Agreement, or TAFTA.

These differences in cultural values help to explain why trade negotiations are so difficult. They are about more than reducing tariffs. As negotiators discuss the dry issues of regulations and standards they bring to the table cultural perspectives that they will have to work hard to first understand, then resolve.