Will Cheese Derail the Plan to Save the Western Economy?

By Paul Ames

Brussels, Belgium - Obama wants it. So do Hollande, Cameron and Merkel.

Supporters of plans for a free-trade agreement between the United States and the European Union say it could inject an additional $200 billion a year into economies on both sides of the Atlantic.

That could strengthen the world's largest economic partnership, boost global growth and set the standard for international trade agreements, providing a strong incentive for China and other emerging economies to fall in line.

"This has been out there as the Holy Grail of trade deals for decades, but no one has been willing to really go for it - until now," says John Clancy, the European Commission's trade spokesman.

"What's changed?" he said in an interview. "Basically the stars have aligned."

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"Europe and the United States need to firm up the recovery and this is one way of doing it that doesn't cost a cent of taxpayers' money. It's stimulus without having to put your hand into the government till."

Talks to form the world's biggest free trade zone are expected to begin within the first half of this year with the goal of wrapping up a deal within two years.

Despite bold words from US and European leaders when the news was announced last week, however, the reality may be far less splendid. Such deals depend less on grand visions and more on haggling over the minutiae of product standards, veterinary safety or hidden subsidies.

Those apparently minor issues may appear arcane set against the headline-grabbing potential benefits, but once in the hands of entrenched lobby groups, they can be inflated into vital national interests. To prevent them derailing a deal, both sides will require skilled negotiations and a hither-to-unseen level of compromise that, according to one German study, would raise living standards by 5 percent in the United States and 6 percent in Europe over the next two decades.

Agriculture is a traditional stumbling bloc for trans-Atlantic trade. European officials say recent reforms to the EU's $80 billion farm support program should make it easier for the Americans to swallow, but there are plenty of other problems - from European distrust of health standards in the US food industry to American wariness of Europe's cherished protection of traditional food labeling.

Will Wisconsin dairy farmers accept that only cheese produced in five provinces of northern Italy can carry the name parmesan? Will the French agree to tuck into hormone-infused American beef with a side of genetically modified fries?

The EU's first free-trade agreement in 1999 - governing $19 billion worth of annual trade with South Africa - was almost scuppered by a dispute over port wine and sherry, until the South Africans backed down and agreed that only tipples from Portugal and Spain could carry those labels. Napa Valley port producers may face a fight.

There are plenty of other sensitive areas, from US qualms about foreign airlines operating in domestic airspace to European demands for "cultural exceptions" to protect movie, TV and music industries.

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