Free Trade Si, Regulatory Harmonization No

Politics ruins everything, and in few areas is that truer than in international trade. Over the last two decades, the term “trade agreement” has become somewhat of a misnomer, as trade deals have expanded to cover a widening array of policy issues beyond trade itself. And that’s where the potential pitfalls lie in the announced trade talks between the United States and the European Union.

As CEI’s Iain Murray warned recently, while a U.S.-EU trade agreement ideally should focus on trade, the likelihood of it including provisions dealing with labor and environmental standards, among other issues, is high.

The problem is not in Berlin or Washington, but in Brussels. That particular federal “capital” has shown a complete misunderstanding of the benefits of free trade, having turned what was once a good idea — the European Economic Community — from a free trade zone into a highly-regulated customs union. Early efforts at trade liberalization, which bore fruit and helped expand trade, were replaced in the 1990s with “harmonization” of the single market through the imposition of uniform regulations. Brussels (by which I mean the European Union institutions) turned from a facilitator of trade to a supranational regulator with ambitions of its own, as evidenced by the failed EU Constitution (most of which was enacted by backdoor means) and the continuing failure of the Euro currency.

Indeed, regulatory “harmonization” often involves “harmonizing” up to whichever party has the strictest standards. But don’t take it from us. In the U.S., union leaders know this, and hope to utilize that process to advance their policy agenda, as The Hill reports. And what could the unions have in mind? Hill reporters Kevin Bogardus and Vicki Needham note France’s 35-hour work week. They further note:

In Germany, a country U.S. labor officials frequently point to, union representatives sit on company supervisory boards, giving labor a say in how the company is run.

With a union-friendly president in the White House, organized labor officials may be feeling confident enough to bluster about this as they are. Communications Workers of America senior director George Kohl told The Hill that U.S.-EU trade negotiations gave unions an opportunity “to benchmark against a more progressive economy and raise up labor engagement here in the United States. An unnamed United Auto Workers official said a U.S.-EU trade deal “could potentially become a mechanism for strengthening labor standards here. And Owen Hernstadt of the International Association of Machinists  said, “[W]e are looking for harmonization upward.”

Trade deals should be about trade, not about, as John Murphy of the U.S. Chamber of Commerce told The Hill, efforts “to try to alter U.S. labor law through the back door.”

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