The European Union does not want to use negotiations with the United States on a free trade agreement to weaken recent U.S. financial regulatory reforms, an EU official said on Thursday, responding to concerns raised by U.S. politicians.
But the EU is interested in exploring how financial regulations across the Atlantic can be made more compatible to allow new business opportunities, Peter Kerstens, a counselor at the European Commission's office in Washington, said at a discussion on the proposed U.S.-EU trade pact.
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"We do not want to include financial market regulations to liberalize or to deregulate the sector. We actually want to improve financial market regulation," Kerstens said.
President Barack Obama and his EU counterparts are expected at the G8 summit next week in Northern Ireland to announce the July date and location for the first round of negotiations on the proposed Transatlantic Trade and Investment Agreement.
Since tariffs on both sides of the Atlantic are relatively low, the main focus of the negotiations will be to reduce regulatory barriers to trade. The talks are expected to take at least one to two years.
Senator Sherrod Brown, an Ohio Democrat, last week said he was concerned that both "Wall Street and industry-friendly European regulators" hoped to use the U.S.-EU negotiations to roll back reforms made by Congress in the 2010 Dodd-Frank bill.
U.S. officials, sensitive to those concerns, say they want to discuss financial regulations in "parallel" talks outside the U.S.-EU pact and note there are several international forums where further reforms are already being discussed.
Kerstens said the EU has also tightened up its own financial regulation in the wake of the 2008-09 crisis.
"Any assertions that ... the European Union wants to deconstruct Dodd-Frank, or wants to assist the industry in deconstructing Dodd-Frank, I think is just illusionary. We did not spend more than five years of hard labor reforming the European financial sector to do away will all these reforms in a trade negotiations," Kerstens said.
At the same time, limiting U.S.-EU talks on financial services to market access issues would be of limited value since U.S. and EU financial services firms already enjoy good access to each other's market, Kerstens said.
Faryar Shirzad, a former White House official who works for the global investment company Goldman Sachs , agreed U.S.-EU financial services talks should deal with regulatory concerns as well as market access issues.
"It's not an issue of impeding or undermining the strength of the regulations, as much as thinking more strategically about how to make the systems more compatible," Shirzad said.
Also, drawing a distinction in the negotiations between regulatory issues and market access issues is not easy since differences in regulations can affect the ability of financial services firms to operate in foreign markets, he said.
(Reporting by Doug Palmer)