The proposed Transatlantic Trade and Investment Partnership (TTIP) deal between the U.S. and the European Union is facing real issues and it is going to take time, the secretary-general of the Organization for Economic Cooperation and Development (OECD) told CNBC on Saturday.
The deal would loosen the regulatory barriers to trade between the world’s two largest trading blocs. U.S. President Barack Obama is in favor of the project, but U.S. Presidential candidate Donald Trump has been critical of multilateral trade deals that he says may harm U.S. workers and industries.
Angel Gurria, the head of the OECD, said TTIP was a win-win proposition, but that it was “so difficult and so important and that’s why it’s going to take time,” in an interview with CNBC on the sidelines of the G-20 summit in China.
In recent weeks, European politicians have complained that talks to secure a deal are failing because their U.S. counterparts will not compromise sufficiently.
Gurria pointed to the upcoming U.S. Presidential elections and the anti-free trade rhetoric in the country as challenges, along with stagnant economic growth in Europe that might spur protectionism.
“We are only two months away from the U.S. election and again the mood in the U.S. is, at least from the speeches, very anti-free trade and at the same time in Europe, you have a very low growth period,” he told CNBC.
TTIP – and its Asia-Pacific equivalent, the Trans-Pacific Partnership – are key tenets of Obama’s policies and are designed to make trade simpler by eliminating many of the tariffs in place to protect particular goods and industries.
However, they have become a target for fears about the potential negative fallout from globalization. Trump has pledged to “never sign any trade agreement which hurts our workers or which diminishes our freedom and independence.”
But Roberto Azevêdo, the director general of the World Trade Organization (WTO), said the link between foreign trade and unemployment was small.
“When we talk about trade, most of the times, it’s making a relationship between trade and unemployment. Trade is not the cause of unemployment. In fact, the biggest drivers of unemployment are innovation and increased productivity. More than 80 percent of unemployment caused in those countries (U.S. and Europe) is due to those two factors, so trade is a minor component of that,” he told CNBC on Saturday on the sidelines of the G-20 summit in China.
While increased trade and the removal of barriers to trade should benefit both the U.S. and Europe, negotiations have stalled over whether the benefits would be evenly distributed.
Gurria added that global trade growth was below where it should be because of countries’ protectionism.
“Trade growth is below 3 percent, it should be at 6-7 percent and act as a locomotive and what are we seeing? We look like we’re going backwards,” he told CNBC.
“The reason is that in a crisis people want to protect ,which is exactly the wrong reaction, this is what makes the 1930s even worse when everybody closed the doors. And the idea is to have an open trade and investment regime,” Gurria later added.
French and German government ministers have blamed U.S. protectionism for the trade talks teetering on the brink of collapse – although the European Commission insisted on Monday that the “ball is still rolling” on the deal.
“Those who are protectionist are Americans; Europe is very open,” Matthias Fekl, France’s minister of state for foreign trade, tourism and French nationals abroad, told CNBC last week.
Fekl added that France was prepared to walk away from the TTIP negotiations if no progress is made.
Gurria told CNBC he hoped the deal would not fail.
“(The European Union) came out strongly saying no, (German Chancellor) Angela Merkel came out and strongly saying no, we’re on it and working on it. U.S. said we’re working it. All I’m saying is the symptoms and the signals are not good so we have to overcome them,” he told CNBC.
Meanwhile, WTO’s Azevêdo told CNBC that governments should not give up on TTIP. “A deal that important, that meaning(ful), will be tough,” he said.
“It is extremely difficult and the interests are very clear, visible and political as well, but it’s possible. We have proven (that) at the WTO often – we had the Bali deals two years ago; just last year, another one,” Azevedo added.
He said that if the TTIP talks dragged on too much, striking deal would get harder.
Azevêdo said that he was concerned about the emphasis on the negative effects of trade during the U.S. Presidential election campaign.
“That may lead to the wrong policies and the wrong decisions, as we come to the situation where a new government is in place,” he told CNBC.