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Tuesday, March 13, 2018

Europe rises against the economic pressure of the United States

“The US does not give anything or give little. With these words the French authorities explained the requirement as soon as possible to stop the negotiations on the establishment of a free trade zone between the European Union and the United States. Thus, we can assume that the agreement is designed to economically dominate Europe Washington actually broken. For Russia, this is good news.

Italy, Germany and France buried the negotiations with the United States to create free trade zone with the EU. In particular, Paris is going in September to appeal to the European Commission with the demand to suspend negotiations on the Transatlantic partnership agreement in the field of trade and investment (TTIP), said the country’s Secretary of state for foreign trade Matthias Fekl.

“As a result of 14 rounds of negotiations the parties have not agreed on any of the 27 heads of agreement”

“Need clear, clear, final stop”, – he told on air of radio station RMC. According to him, the refusal to continue negotiations due to the fact that “the US does not give anything or give the crumbs… the allies don’t have to negotiate that way.”

A few days ago, Vice-Chancellor, Minister of economy and energy of Germany Sigmar Gabriel also said the failure of negotiations on the “economic NATO”. According to him, negotiations with the United States de facto failed, even despite the fact that no one actually does not recognize”, RIA “Novosti” with reference to Associated Press. As a result, 14 rounds of negotiations the parties have not agreed on any of the 27 heads of agreement. “We, as Europeans, should not be subject to the requirements of the Americans”, – said the Vice-Chancellor.

On Tuesday, Sigmar Gabriel, once again assured that the negotiations on TTIP is stopped, although officially the Brussels about this and not said. He again noted that the Washington negotiations had been unwilling to comply with the minimum standards of the European Union. If the position of the American side won’t change after the presidential elections, the agreement on transatlantic trade is not at all, reports TASS the words of Gabriel.

Last month the Minister of economic development of Italy Carlo Kalenda was making a similar statement – negotiations have stalled. “For too long we have been negotiating. I think (the agreement establishing a free trade zone with the United States – ed.) fail,” – said the Italian Minister.

Thus, the strongest economy of the European Union did not believe the Americans and decided not to enter into unprofitable agreement.

And, of course, to change the position of the political leadership of France, Italy and Germany contributed to the dynamics of public opinion, says managing partner Kirikov Group Daniil Kirikov. “At least the appearance of leaks about the content of the draft agreement the level of support of this initiative, the population fell from 50 to 15%. Recent natural impact on electoral rankings: the representatives of the ruling parties realized that further support of the project may be defeat at the next election,” he says.

The technical side of the question

In the end, hopes us President Barack Obama that the US and EU will sign an agreement on creating free trade zone before the end of 2016 in jeopardy.

But technically, the EU could abandon the agreement with the United States? As you know, the Commission is negotiating with the United States on the basis of the mandate given by the EU Council. “To stop this dialogue, France must first initiate of the Council the abolition of the earlier decision on starting negotiations, and then to make in favor of the abolition of the mandate voted by the required number of representatives of the participating countries. In other words, the failure to establish a free trade area should support with their votes at least 55% of Council members representing at least 14 countries, representing 65% of the population of the European Union. At the same time against such proposals should be not more than 4 member countries”, – says Daniil Kirikov.

In his opinion, the consensus in Italy, Germany and France on the issue of refusal to continue negotiations can give almost one hundred percent guarantee the termination of the negotiations. “To prevent this, the United States can only by exerting pressure on the governments of individual countries, primarily Eastern European States, whose loyalty to Washington traditionally exceeds loyalty to Brussels (Poland, Latvia, Estonia, etc.). If the White house fails to convince the management of at least five countries to oppose the lifting of the mandate for negotiations, the vote on this proposal will fail,” explains Chirico.

Economically bad deal

From the statements of European politicians it is clear that the US offered Europeans a very bad deal. The draft agreement is still classified, the small light shed only leaks to the media in the last couple of years. On their basis we can say that it most likely is that the US offer to Europeans to copy their format and standards of business conduct. And the Europeans insist on keeping part of its own rules or offering a homogenized version. As you know, the American format is more soft and flexible, non-tariff rules and regulations are less stringent in the EU are exactly the opposite.

On the example of Germany we can consider some possible point of discrepancy between the positions of the US and the EU in the framework of the negotiations on the agreement.

So, large German corporations, such as the Federal Association of German industry (BDI), initially expressed their interest in creating a free trade zone with the United States. Their logic is that, first, German industry is strong and competitive, so the Americans will be difficult to crush it. Second, the U.S. is the largest market for German Industrialists after France. In 2014 total trade turnover between Germany and the United States amounted to 114.6 billion euros (more than Germany trade only with France, Netherlands and China). The calculation of German industry was an easier and less expensive to enter the us market, which should increase exports to the United States.

German industry like the idea to rewrite the rules of trade and investment on the American model because in the US the level of taxation below, the system of regulation of the labour market more flexible (easier to fire workers, for example), the cost of gas and electricity below. Finally, in the United States have the opportunity to cooperate with universities and research centres in the sphere of high technologies. Yes, and many German companies have subsidiaries in the United States. It is clear that all these concessions and flexibility are not quite to the liking of the recipients of taxes (municipal budgets), utilities and energy companies, and by workers and employees.

However, this is only the hope of German business, in reality the contract can be spelled out quite different. For example, it is believed that the agreement on free trade zone between the US and the EU interested in the business even not that will be eliminated customs barriers, because they are so low, but that will be simplified and harmonized standards and norms (eliminated non-tariff barriers). And this is true, but not for all industries.

As the United States control all planetunreal for the German automotive industry, what’s important is the abolition of customs tariffs. Standard duty on export of foreign cars in the US is small – 2.5 percent, but on pickup trucks and commercial vans can be up to 25%. In the EU the rate of single – 10%. Due to customs duties only German factories losing more than 1 billion dollars a year, according to the Association of German automakers. But is it easy the US is ready to give at the mercy of the strong, the Germans own the auto industry, which, as is known, retains its advantage in the local market only due to popular in America pickups and trucks? It is possible that the Washington agreement has tried to protect its own automakers, while retaining the high duties, or by providing a small duty-free quota that does not like the same in Germany.

From the agreement with the United States had hoped to win German manufacturers of machinery and equipment. This is the second article of the German exports to the United States. Due to the removal of non-tariff restrictions this German business could save 5-20% depending on product supply in the United States, calculated profile business Alliance industry – VDMA. But whether Washington for substantial relief in this matter, if the Germans and so increased the supply of machinery and equipment due to the fact that the fallen trade with Russia due to sanctions (imposed by American politicians)?

There is another issue that worries European Industrialists. They would like to have access to the market of state orders of the United States, the volume of which reaches 500 billion dollars. The U.S. Congress in 1933 passed a law “Buy American” (Russia has only recently begun to follow the same path), which is still in effect. And even the WTO could not prevent the Americans to change the current system of public procurement, although it does not fit the norms of the organization. Against this background, it is logical to assume that Washington has found ways to ensure that the agreement on free trade zone with the EU also maintained the current system of privileges for American suppliers in the framework of public procurement. So the big question is whether the Europeans by signing the agreement to access the us budget billions.

“If the EU will bury the creation of a free trade zone with the United States, for Russia it will be a great boon”

By the way, the EU also limits access of foreign suppliers to its government contracts. I wonder whether the United States prescribed in the draft agreement the obligation of the EU to allow American companies to European public procurement? The position of Brussels in this issue is equally hard to spend budget funds for the purchase of foreign goods, there are not willing.

Finally, a controversial issue certainly is the elimination of non-tariff barriers for chemical and food products (rates here are low). Here initially it was clear that Washington and Brussels will be difficult to negotiate. Because the EU standards is much stricter and very different from the American. Washington, of course, wants to unify all items.

For example, in Europe the principle on which the goods or the manufacturing process are permitted only if there is scientific evidence of their safety for man or nature. In the USA the situation is different. Here you can sell products without restrictions until it is scientifically proven that it is dangerous. For example, in the United States actively used the so-called fracking (hydraulic fracturing) for shale oil and gas. In European countries it is banned. The same situation with GMO foods (permitted in USA, Europe banned). Washington wants the agreement to loosen the strict restrictions in Europe on the use of harmful industrial and agricultural substances and their content in consumer products. This, of course, extremely dissatisfied with ordinary Europeans.

And it concerns not only food. Typical example: manufacturers of cosmetics and perfumes based in France, denied the right to use the 1200 substances, while their competitors on the other side of the Atlantic restricted the list to just 12 points.

What does that mean for chemical and agricultural business in Europe? While European farmers will switch to new forms of work, the European market will be overrun by American products. Local players will definitely lose price competition.

Based on leaks to the media about a secret draft agreement on free trade zone of the EU and the United States, it became clear that the US wants to open doors to other markets for its own transnational companies. The ultimate goal is to have national economies did not have its own industrial processing and any other strong companies. Capture all global players with headquarters in Washington. In fact, this agreement will have the same negative effect for the EU, which is now responsible for Ukraine Association agreement with the EU. Only, of course, in a larger format.

Consequences for Russia

If the EU is to bury the creation of a free trade zone with the United States, for Russia it will be a great boon. Otherwise, for Russia this may mean in the future, the loss of the largest trading partner of the EU, at least in the form in which there is trade today. Turnover in General can even be preserved, but in many ways it will be Americanized European products. Europe, in fact, could become a transit area through which the then American goods will fall in Russia and other CIS countries. The Russians will no longer be able to rely on fairly high-quality products from the EU.

Moreover, such a close cooperation of trade relations between the US and the EU will inevitably affect the strategically important Russian industries – oil and gas. Washington has long been nurturing the idea to displace the market of Moscow and the free trade area with the EU may accelerate this process.

“Obviously, the goal of the United States within these structures to monitor trading partner countries, and, of course, it will affect the interests of other countries”, – said the speaker of the state Duma Sergey Naryshkin after talks with Chinese President XI Jinping. He was referring to just the TRANS-Pacific and TRANS-Atlantic trade partnerships, which were initiated by the United States. China to the TRANS-Pacific partnership to join refused.

“Obedience almost all of Europe in military Affairs has been achieved in political, too much in control. The queue for trade and Finance”, – says Sergey Naryshkin.


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