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Monday, January 8. 2007

Merkel's Blitzvisit and the Harmonization of Technical Standards

Posted by Editors in International Economics, Transatlantic Relations on Monday, January 8. 2007

The American Institute of Contemporary Studies has compiled a page of links to German and American press reports regarding Chancellor Angela Merkel's extremely short visit to Washington, D.C., on January 4, 2007.
The International Herald Tribune (IHT) points out that President Bush was "conspicuously silent about Merkel's bilateral trade proposal":
Merkel called on Europe and the United States to improve trade cooperation to withstand the challenge of Asian economies. She proposed harmonization in some areas, ranging from technical standards for patents to regulations governing financial markets. But some European officials were skeptical about the proposals.
"This is unlikely to get off the ground," said an official, who spoke on the customary condition of anonymity. "The Americans aren't keen on it, and creating a new free-trade area of sorts is way too ambitious."  Trans-Atlantic trade relations are in a fragile state after talks to reduce barriers to global commerce broke down in July. The United States and Europe have failed to agree on cuts in farm subsidies and industrial tariffs that are essential to concluding a World Trade Organization agreement on liberalization, known as the Doha round.
The IHT also explains the difficulties of the Doha round of trade talks and states that "efforts to clinch a trade deal could prove more difficult following the recent Congressional victory by the Democrats, who traditionally have more protectionist instincts than the Republicans."
Christoph von Marschall explains in Der Tagesspiegel (in German) that Merkel is not proposing an ambitious Transatlantic Free Trade Area (TAFTA), but common technical standards and patent laws so that European and American companies do not need to please two bureaucracies. This is expected to increase trade. Von Marshall sees the problem that the EU and the US would try to force their standards on each other for reasons of prestige and suggests that it would be better if the EU and the US would just accept each others standards: If the US considers a new child safety seat safe, then the EU should consider this seat to be safe as well and allow the import of that seat; and vice versa. How likely is that?
Related post in the Atlantic Review: European Union Directive: American exporters must only use the metric system after January 1, 2010.
Endnote: The United States Mission to Germany has created a website about shared EU-US trade interests, the latest US trade policy developments and the US position on the trade disputes with the EU. (The embassy also chronicles the latest developments in US-German relations.) (Photo source: White House)

UPDATE: Daniel W. Drezner, associate professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, recommends these recent newspaper articles on trade issues and posts excerpts in his blog
• William Overholt, "Globalization's Unequal Discontents," washingtonpost.com, December 21, 2006
• Jagdish Bhagwati, "Technology, not Globalisation, Drives Wages Down," Financial Times, January 3, 2007
• Susan Aaronson, "Labor Rights Not Optional," TomPaine.com, January 5, 2007.
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Merkel's Blitzvisit and the Harmonization of Technical Standards
[Source: Atlantic Review - Analysis of Transatlantic Relations and U.S. Foreign Policy] quoted: Christoph von Marschall explains in Der Tagesspiegel (in German) that Merkel is not proposing an ambitious Transatlantic Free Trade Area (TAFTA), but common technical standards and patent laws so that European and American companies do not need to please two bureaucracies. This is expected to increase trade. Comments ()
Weblog: EconWatch.com
Tracked: Jan 15, 06:57

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Markus - #1 - 2007-01-08 16:15 - (Reply)

"Democrats, who traditionally have more protectionist instincts than the Republicans."

Democrats are also afraid of Chinese competition.
Europeans and Democrats have that in common.
Consequently, a transatlantic trade cooperation deal should be possible.

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Tom - #2 - 2007-01-08 20:15 - (Reply)

Merkel travels all the way from old Europe to the New World just to have dinner with Bush and then return to Germany immediately.
And she does not even get a back rub from the groper in chief...

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Don S - #3 - 2007-01-08 23:02 - (Reply)

The Bhagwati piece was particularly interesting to me because I can see the effects of the J-curve in my life. I am a skilled software engineer with more than 20 years experience. Since the 1980's this has been a fairly lucrative and secure market niche but it is no longer. I'm convinced that it's because of technical change.

Things which used to be difficult to do in software are no longer, and many companies which once tried to gain competitive advantage by pushing the edges in software engineering either no longer exist or cannot afford to do so any longer. I've made my career in 'difficult' problems, but with the decline in demand for such specialists have seen the demand for my skills decline. My traditional response to market downturns has been to learn something. In the past 3 years many 'somethings'. I've not allowed myself to get out of date. Nevertheless the wage market for highly skilled software engineers has declined as much as 30% sice 2000. Seems like a classic J-curve to me. Low-wage competition from India has played a part - but mostly the complex kind of work which hhas been my market niche isn't sent to India. The demand is just down. Hopefully not forever - but don't bet on it.

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Don S - #4 - 2007-01-08 23:12 - (Reply)

Merkel's idea is not a bad one at all. I think the EU and the US could come to some resolution of certain things which would benefit both - and the world economy as well.

What Merkel (and the EU) need to watch out for is being too EU-centric in their thinking. All too often I see the EU attempt to propound something 'because it's logical'. Logical for the EU, but all too often illogical for the US. Then vast recriminations fall upon the US (and particularly upon poor George Bush) for being 'unilateral'.

Treaties and agreements which work have to have advantages for all the conferees. Roughly equal advantages at that. I'm afraid that many of the EU-driven initiatives over the past 15 years have obvious major advantages for the EU - and very little advantage (or outright disadvantages) for the US.

Merkel may have seen this. Instead of starting this initiative in EU councils she has taken it to the US at a very early stage, which may result in the US becoming a partner in this rather than an adversary or a proposed victim to be browbeaten into grudging agreement by charges of immorality and such - the most common pattern of the past decade in cross-atlantic relations.

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