WASHINGTON — Negotiators trying to finalize a sweeping Transatlantic Trade and Investment Partnership trade deal between the U.S. and the European Union are facing new complications on the heels of the U.K.’s vote to leave the EU.
While U.S. officials tried to calm the waters and reassure the American public that their economic and diplomatic ties would remain strong with the U.K., many in the trade community were concerned about how far the reverberations would be felt.
U.S. companies are concerned about the uncertainty surrounding not only T-TIP but also their export business with the U.K., which ranks among the top five markets for finished apparel exports, according to the American Apparel & Footwear Association.
U.S. and EU negotiators have been negotiating T-TIP for more than three years, seeking to forge a deal that would eliminate tariffs on imports, streamline regulations, remove burdensome technical barriers and eliminate redundancies in areas such as customs procedures, product safety testing, and certification and labeling requirements.
The U.K. has been at the negotiating table as part of the EU during the talks. What T-TIP policy goals were shaped by the U.K.’s influence and how that will change once it pulls out of the talks are all questions now being raised by U.S. companies.
Treasury Secretary Jacob Lew, in opening remarks Monday morning at the 2016 Bretton Woods Committee annual meeting, said the U.S. “respects” the decision of voters in the U.K. and “will work closely with London, Brussels and our international partners to ensure continued economic stability, security and prosperity in Europe and globally.”
Lew also briefly mentioned the T-TIP negotiations, noting the U.S. is continuing to “make progress” with the EU on the trade pact.
U.S. Trade Representative Michael Froman also sought to calm concerns about the trading relationship between the U.S. and the EU and U.K. on Monday at the Bretton Woods meeting.
“The people of the United Kingdom have made their choice. Our relationships with the U.K. will remain special, and our relationship with the EU will remain strong and enduring,” Froman said.
“We are evaluating the effect of Brexit on the T-TIP negotiations. The economic and strategic rationale for T-TIP remains strong. We’ve made a lot of progress on the agreement during the last eight months, and our goal remains to continue working with the EU to conclude an ambitious, comprehensive and high standard agreement this year,” he added.
Froman said negotiators will now need a “a creative, pragmatic approach to resolve the outstanding issues, not ideology.”
He acknowledged that the Europeans “have a lot on their plate,” citing the Brexit vote, migrant crisis and “rise of skepticism about Brussels.”
“We sympathize and we hope they can summon the needed focus and political will to get this done,” Froman said.”Indeed, there is more at stake now than ever, given the questions that are being raised about the nature and future of the European Union,” he said.
He issued a call to the EU, asking whether the region can continue to promote economic growth and create jobs across Europe.
“Will the EU be able to play a leadership role in defending the open, rules-based system, raising the standards for the global economy,” Froman asked.
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, called the vote a “game changer.” He said the scope of policy that has been developed with the assumption that the U.K. is part of the EU “goes back our lifetime.”
“It is just generating an enormous amount of questions and enormous amount uncertainty,” Lamar said. “Entire generations of businesses and leaders have grown up with the United Kingdom as part of the European Union.”
Lamar noted that there appears to be a sense that T-TIP negotiations will continue. But those negotiations could at least be slowed down if some of the same trade negotiators from the EU have to work on the U.K.’s exit.
“It could put things on hold inadvertently,” he said. “But people will still want to push forward and we may still see activity.”
Julia Hughes, president of the U.S. Fashion Industry Association, said many companies didn’t expect the U.K. to vote to leave the EU.
“It is definitely a bit of a wake-up call,” she said. “Companies are obviously assessing the impact, especially those that have retail operations in the U.K. and in the rest of Europe. They want to know what this will mean. It is impossible to know that today but there is a lot of anxiety.”
Hughes said the message from the Obama administration appears to be that the T-TIP talks will continue and noted that she is confident the next negotiating round of talks slated for mid-July will also go forward.
“The vote just happened,” Hughes said. “Everyone is reeling from dealing with that. Clearly there will be a process, but it is not something that will happen overnight.”
Cecilia Malmstrom, trade commissioner of the European Commission, the executive body of the EU, is slated to speak about the implications of the Brexit vote for T-TIP at a conference hosted by the Atlantic Council on Wednesday.
Malmstrom issued a statement from Brussels on Monday.
“In this unprecedented situation, let me stress that we are clear and united in our response with regard to EU trade policy, ” she said. “Trade makes a vital and positive contribution to the EU’s economic and external policy and we will make sure that it continues to deliver real benefits to EU citizens.”
Mamstrom said the EU will remain committed to pursuing an ambitious trade agenda.
“I am determined to make as much progress as possible in the months to come. This is particularly true for our negotiations with the United States on a Transatlantic Trade and Investment Partnership. I will travel to Washington D.C. tomorrow to meet my counterpart, in order to advance further in these negotiations,” she said.
She also noted that the commission will make a proposal soon for the ratification of a trade agreement with Canada and touted the benefits in that trade pact.