State of the US-EU Trade Pact


After several years of President Barack Obama stumping for increased exporting activity and the importance of multilateral trade pacts, like one to expand what is already in place with Europe, the issues were barely addressed at this week’s “State of the Union” address before quickly and almost awkwardly segueing to other topics. Perhaps a column this week by NACM Economist Chris Kuehl, PhD, gives clues as to why.

The trade pact between the US and the EU is looking less and less likely all the time. There are new barriers appearing on almost a daily basis and precious little that could be termed “progress.”

The latest set of problems stems from the renewed demand for financial sector reform coming from the Europeans. They no longer want to deal with a pact that doesn’t include some tougher regulations on banks and other financial institutions. This has been strenuously resisted by the US Treasury Department, as it insists that these are not trade issues but regulatory concerns that need to be dealt with in some other forum. The Europeans are not impressed with the often vague rules that came out of the Dodd-Frank legislation and are concerned the effort risks a repeat of the 2008 disaster that plunged the world into full economic crisis.

The European objections focus on the sense that little was done to curtail the kind of high-risk behavior that characterized the pre-2008 financial period. The biggest banks are bigger than ever, and there seems little more oversight than there was in the past. Meanwhile, the smaller and community banks have come under much tighter scrutiny. Importantly, the Germans do not like the approach of the US system and want deeper bank reform on the table as these talks get more focused.

The talks are still in the very beginning phase, and that means that the majority of the commentary right now is positioning as opposed to solid proposals. Meanwhile, the French are trying to protect their cultural heritage, and the US is still watching out for attacks on its tech sector. Recent contentious issues don’t necessarily doom the talks, but there is no expectation that anything substantial will emerge this year or even next.

- Chris Kuehl, PhD, Armada Corporate Intelligence

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