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What is the likelihood, and potential impact, of a U.S.-EU Free Trade Agreement?

Question submitted by Colette Mazzucelli, from NYU Center for Global Affairs, December 9, 2013

Answered by: James P. Dougherty, Adjunct Senior Fellow for Business and Foreign Policy

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The likelihood of a U.S. – EU trade pact is slim, at least for the medium term.

First, even if President Obama were to successfully negotiate such a pact, the divisions in Congress would likely make it impossible to pass in the House. The president does not currently have fast track authority and it is a low probability Congress will grant that in a timely way. In addition, there are concerns being raised by industries such as automotive, agriculture, and energy about some of the proposed terms that need to be addressed before a pact could go forward.

Second, the NSA spying scandal, while not directly related to trade, has created some anger and distrust on the part of some European countries, especially Germany. There is some talk of getting the United States to commit to certain promises around spying and espionage that will be tied to the trade pact. U.S. officials have tried to separate the two issues. It's not clear if they will succeed.

Lastly, next year is an election year in Congress. If a pact is not concluded early in the year, it will be far riskier in getting a positive vote closer to the fall elections.

From an EU perspective, there is not a consensus to move forward. Many of the EU economies are still struggling and the prospect of EU parliamentary elections next year has caused some political concerns that are slowing down decision making. A meeting near the end of 2014 between U.S. and EU trade delegations will determine what happens next.