BOSTON GLOBE: Prospect of free-trade pact with EU holds promise for Mass. As originally appearing in The Boston Globe
By Sarah Shemkus, Globe Correspondent
If President Obama’s plans for an ambitious free-trade agreement between the United States and the European Union are realized, the pact could provide outsized benefits for the economies of Massachusetts and New England, which already have strong ties to Europe, local business groups and employers said.
“It would open the doors for huge new increases in trade between Massachusetts and Europe,” said Jim Klocke, executive vice president of the Greater Boston Chamber of Commerce. “We’ll get more than our fair share of increased business.”
The idea of a free-trade partnership with Europe, similar to the North American Free Trade Agreement that opened markets with Canada and Mexico, has been percolating for more than a year, but came into the spotlight last week when Obama proposed talks to lower trade barriers between the United States and Europe in his State of the Union address. The United States and the 27-member EU already have the world’s largest trade relationship and, together, their annual economic output accounts for half of the global total.
Since the United States and Europe wield such economic clout, any new pact “has the potential to reshape the global export market,” said James T. Brett, president and chief executive of the New England Council, a Boston-based business advocacy organization. Supporters say it could strengthen the US and European economies, both of which are struggling to recover from the recent global recession.
In the United States, Massachusetts and other Northeastern states stand to reap particular benefits from a free-trade agreement with Europe, analysts said. Europe is Massachusetts’ largest foreign market, accounting for nearly 40 percent of the state’s exports, compared with 21 percent for the nation as whole, according to trade data.
More than 9,000 Massachusetts businesses engage in global trade, Brett said. In 2012, Massachusetts exported $9.4 billion in merchandise to Europe — more than Canada, China, and Latin America combined.
“Any policy that is geared toward opening up trade between the United States and the European Union would likely have a more concentrated impact on the Northeast,” said Karl Kuykendall, an economist with IHS Global Insight in Lexington.
Negotiations have not yet started and details are scarce, but any agreement is likely to include lowered tariffs, more compatible standards and regulations, and cooperation on issues such as environmental impacts and worker safety, according to information released by the Obama administration.
Spire Solar in Bedford would welcome a reduction in duties, said Ed Hurley, vice president of sales. The company, which makes equipment used to manufacture solar panels, faces taxes that can range as high as 23 percent, depending on the country to which it is selling, Hurley said. Rival European companies, however, are not subject to the same fees, which makes it harder for Spire to compete.
A free-trade deal would help the company as it starts to expand its business in emerging European markets such as Romania and Hungary, Hurley said.
“We see a lot of potential there for the future,” he said, “and it would be nice for us to sell products in there and not have to worry about what the import duties are.”
Hurley’s case may be atypical — many exporters face much lower tariffs — but even a small reduction could lower costs enough to help Massachusetts companies improve their competitive position in European markets, said Kristen Rupert, who is executive director of the Associated Industries of Massachusetts’ International Business Council, the global trade arm of the state’s largest business group.
“The reality is that, with the volume of the goods and services going back and forth, even a 1, 2, 3 percent difference make a big difference,” she said.
Massachusetts businesses have the advantage of producing “the kind of high-value products that sell well in Europe,” said Paula Murphy, director of the Massachusetts Export Center. Defense technology, medical devices, and even seafood are all in demand overseas, she said.
The state’s robust financial services industry could also benefit from an agreement if it made regulations on products such as mutual funds more uniform between the United States and Europe, said Klocke of the Greater Boston Chamber. Currently, he said, the divergent rules mean that many fund offerings must be designed differently for sale on either side of the Atlantic.
“If we can have consistent regulations in both the US and Europe, you wouldn’t have to have two products anymore,” he said.
The process of working out a free-trade agreement is not going to be easy, said Brett, the New England Council chief executive.
Coming to agreement on issues ranging from agricultural standards to intellectual property protections, and synchronizing complex regulations to everyone’s satisfaction could take as long as two years, he said.
The AFL-CIO, which often has concerns about the impact free-trade agreements have on American workers, is open to a potential European partnership, if both sides agree to ensure high labor standards, said Celeste Drake, the organization’s trade and globalization policy specialist.
Brett said he is confident an agreement will be reached, especially given the high-profile support Obama offered during his address last week.
“Even though he devoted a single sentence to that topic, it certainly was the green light,” Brett said. “By him signaling his support for it I think it’s going to be done.”