Britain’s vote to leave the European Union has cast into further doubt the future of a far-reaching trade deal between the EU and the U.S.
The world’s two biggest economic blocs have been negotiating the Transatlantic Trade and Investment Partnership, or TTIP, since 2013, and still say they hope to conclude negotiations before the end of the Obama administration in January.
But with the loss of one of the bloc’s strongest trade advocates that has often been a counterweight to more-protectionist EU countries, EU diplomats say the deal’s prospects are now more uncertain than ever.
Britain is the U.S.’s largest trading partner in the EU, as measured by the total export value for goods in 2015, according to the U.S. Department of Commerce.
TTIP’s troubles didn’t start with Brexit. The deal has suffered from weakening political support in Europe as well as growing public criticism, as antiglobalization sentiment has gained traction on both sides of the Atlantic.
Longstanding sticking points in the negotiations persist, including over European rules protecting regional food names such as feta, Parma ham or Champagne and U.S. rules protecting domestic companies bidding for government contracts.
Zsolt Darvas, a senior fellow at Bruegel, an independent Brussels-based think tank, said TTIP was faltering before the U.K vote, but the result has complicated the trade pact’s chances further. “Even before the Brexit vote, the chance for TTIP was very low,” Mr. Darvas said.
Senior U.S. and EU officials insist the agreement is moving ahead. “We want to conclude these negotiations before the end of this year,” Jean-Claude Juncker, president of the European Commission, the EU’s executive arm, said this month.
Secretary of State John Kerry said this week in Brussels that the agreement, initially billed as an economic NATO, carried geopolitical significance for both sides and could become even more important post-Brexit, given its economic benefits.
Daniel Caspary, a European Parliament lawmaker and spokesman on international trade of the center-right EPP party grouping, said Brexit makes the need for TTIP even more pressing. If Britain leaves the EU, “then that really makes TTIP more urgent,” he said, because the EU will want to quickly make up for the loss of relative weight in the global economy.
Dan Mullaney, the chief U.S. negotiator, after the end of the latest round of negotiations on Friday, said that “we’ve been clear with respect to TTIP that the economic, strategic rationale remains strong.”
Nonetheless, he said Brexit has made the deal less significant economically to the U.S. “Obviously a withdrawal of the U.K. from the EU market would affect the value of the EU market,” he said, pointing out that 25% of U.S. exports to Europe are to the U.K. and that Britain is the U.S.’s largest market globally for services.
Meanwhile, coming elections in 2017 in Germany and France, as well as the U.S. election in November, could further complicate the deal’s prospects.
In May, public broadcaster ARD’s DeutschlandTrend survey showed that 70% of Germany opposed the deal, a 15-point increase since 2014.
Vice Chancellor Sigmar Gabriel, the country’s top TTIP negotiator, has openly criticized the lack of progress in talks recently, while senior members of his center-left SPD declared last week that the deal is dead.
“The only thing we can say with a high degree of certainty is that there won’t be much happening until we have passed the election cycle first in the U.S. then in France and Germany,” said Fredrik Erixon, Director of the European Centre for International Political Economy a Brussels-based think tank.
In the U.S., TTIP is still largely under the public’s radar, but strong criticism by presidential candidates of the recently agreed Trans-Pacific Partnership underscores the lack of appetite and possible resistance to similar deals. With antitrade sentiment running high across the political spectrum, prospects for a swift TTIP deal will likely remain dim at the end of Mr. Obama’s administration.
“We need bilateral trade deals. We do not need to enter into another massive international agreement that ties us up and binds us down, like TPP does,” said presumptive Republican presidential nominee Donald Trump in June, referring to the trade pact among the U.S., Japan, Canada, Australia and eight other countries around the Pacific.
Even the EU’s less-controversial free-trade deal with Canada is facing opposition. The commission said in July said that more than 30 national and regional parliaments across the EU should get a say on the Canada agreement. That marked a sharp shift from an earlier view that the deal would only need to be agreed in Brussels and followed criticism from European capitals including Berlin and Vienna.
A study prepared for the EU in 2013 estimated that a decade after TTIP’s enactment, the bloc’s economy would be ?120 billion ($132 billion) bigger than without it.
TTIP opponents in Europe list a litany of potential dangers, including that the deal would lower food and labor standards and that special courts to resolve disputes between companies and governments would give more power to large multinationals.