Neptune’s Harvest, a Gloucester manufacturer, makes organic fertilizer from the scraps of filleted fish and exports it to countries around the world — with one huge exception.
The company bypasses Europe, one of world’s largest markets, because of onerous regulations, inspections, and paperwork that largely duplicate US rules and add to costs. “Without that hurdle,” said Sandy Parco, Neptune’s president, “my company would probably be able to grow and expand.”
Neptune’s Harvest is among the many Massachusetts businesses that could benefit from two massive free trade proposals that would lower regulatory and other barriers to Europe and open fast-growing markets in the Pacific Rim. Those deals, under negotiation, could face key congressional votes this year that may determine whether they go forward.
The stakes for Massachusetts and its increasingly globalized economy are high. The countries involved in the trade talks account for nearly two-thirds of the state’s merchandise exports. A European deal alone, one study found, would increase the state’s merchandise exports there by more than $2 billion a year and create nearly 18,000 new jobs in the state.
“The numbers don’t lie,” said Kristen Rupert, the executive director of the trade affiliate of Associated Industries of Massachusetts, the state’s largest employers group. “Free trade deals have a very positive impact.”
Both deals, however, face significant hurdles. As with all trade agreements, negotiations are complex, involving myriad and often conflicting interests that require the parties to balance international relations with domestic politics.
In the United States, organized labor, environmentalists, and some lawmakers are raising concerns about worker protections, wages, and pollution laws in some countries, as well as the transparency of the negotiations which have been conducted in secret. Also at issue is the role Congress will play in shaping the treaties as the Obama administration seeks authority to present the completed trade deals to lawmakers as up-or-down votes without amendments.
The Trans-Pacific Partnership, entering its fourth year of negotiations in March, involves 12 countries, including Mexico, Canada, Japan, and — most controversially — Vietnam. It is intended to be a traditional free trade agreement focused on the removal of tariffs and the improvement of labor and environmental standards in developing Asian-Pacific countries.
The Transatlantic Trade and Investment Partnership, which was first proposed last year, has the potential to be the largest free trade agreement in history by linking two of the world’s biggest economies, the United States and the 28-member European Union. The deal has been promoted on both sides of the Atlantic as a way to spur economies that have recovered slowly since the global financial crisis of 2008.
Susie Kitchens, Britain’s consul general in Boston, said Prime Minister David Cameron has made the trans-Atlantic trade agreement his top trade priority. A successful deal, she said, could bring more British investment to the New England region, where British companies such as medical device maker Smith & Nephew and utility National Grid have major operations.
“We really believe it’s a once in a generation opportunity between these two trade powerhouses,” Kitchens said.
The trans-Atlantic partnership would go beyond lowering tariffs by seeking to streamline redundant regulations in the United States and European Union. The Neptune’s Harvest fertilizer, for example, gained the “certified organic” designation from the US Department of Agriculture after a lengthy review. The EU’s rules are similar, but the Gloucester company would have to go through essentially the same process again to sell its product in Europe.
Paula Murphy, director of the Massachusetts Export Center, said reducing or eliminating duplicative rules would be a particular benefit to Massachusetts, where many of the leading industries, such as biotechnology and medical devices, are highly regulated. Pharmaceuticals, for example, accounted for $1 of every $10 in goods that Massachusetts companies sold in the European Union last year, according to Wisertrade.org, which tracks international trade.
“We have a disproportionate stake in these negotiations,” Murphy said. “For a lot of small to mid-size businesses, complying with both sets of standards and regulations can be challenging.”
The similarities between the United States and Europe have made that proposed free trade agreement less controversial than the Trans-Pacific Partnership, which includes emerging nations with lower living standards and less established regulatory regimes.
Celeste Drake, head of trade and globalization policy at the AFL-CIO, said she is concerned about deals with countries such as Vietnam that have low wages, few worker protections, lax environmental standards, and poor human rights records. Unions and some companies worry that a free trade agreement with such countries would cost American jobs as cheaper products flood the US market.
Matthew LeBretton, vice president of public affairs for New Balance, a Boston footwear maker, said his company would have a hard time maintaining US manufacturing operations and its 1,350 jobs if tariffs were lowered on products from Vietnam, the second largest footwear maker in the world after China.
“Giving them that advantage has one result, and that is to eviscerate what is left of the footwear industry in the United States,” LeBretton said. “It makes zero sense to us.”
But US Trade Representative Michael Froman said the Trans-Pacific Partnership would open markets in countries with growing middle classes and hunger for American goods. He said the United States will use the leverage of its market to improve labor and environmental standards in developing countries.
“We want to ensure that it’s a race to the top and not a race to the bottom,” he said.
Both free trade deals face a major hurdle in Congress, where President Obama is seeking trade promotion or “fast-track” authority. Without such authority, it would be nearly impossible to conclude the trade agreements.
Fast-track allows the president to negotiate trade deals, then present them to Congress for ratification through up-or-down votes. Since trade deals are so complex, any amendments to a negotiated agreement would likely unravel it.
“Nobody will sign the agreement knowing Congress will hack it apart,” said Jim Kolbe, a former congressman and senior transatlantic fellow for the German Marshall Fund, a Washington think tank.
Legislation to grant fast-track authority for both the trans-Atlantic and trans-Pacific trade deals was filed this month by Senator Max Baucus, Democrat of Montana; Senator Orrin Hatch, Republican of Utah; and Representative David Camp, Republican of Michigan. But many lawmakers remain skeptical of the trade deals, including Senator Elizabeth Warren, who last week signed a letter opposing fast-track authority, along with her Massachusetts colleague, Edward Markey, and 10 other senators.
Warren voted against the confirmation of Froman in June, concerned about the secrecy of the negotiations, particularly for the Trans-Pacific Partnership. She has asked for drafts of that trade agreement to be made public, which the Obama administration has declined.
In Massachusetts, many businesses are watching the debate carefully. Exports account for up to 30 percent of commercial sales for Randolph Engineering, an eyewear manufacturer in Randolph. Peter Waszkiewicz, the chief executive, said his company faces tariffs that make its products more costly and less competitive in Europe.
But a trans-Atlantic trade agreement could level the playing field. “We hope it could make our products cheaper,” he said. “Europeans like American-made products.”