Trade Official Says U.S. Wants Deal With Europe

DAVOS, Switzerland â€" America’s top trade negotiator said late Saturday that President Obama was committed to reaching an agreement to smooth trade with the European Union, but only if it was written in a way that would overcome objections from farm groups and that could win congressional approval.

In an interview in Davos, Ron Kirk, the United States trade representative, responded to European leaders who in the last week renewed their calls for a United States-Europe deal to dismantle tariffs and other barriers, which they badly want as a way of stimulating their ailing economies.

At the World Economic Forum, David Cameron, the British prime minister, and Angela Merkel, the German chancellor, were among a number of leaders and business people pleading for a pact that would eliminate tariffs as well as regulations that impede trade. Even without changes, the United States and Europe already have the world’s largest trading market.

On both sides of the Atlantic, proponens have expressed frustration about the delaying of an official report by an American-European working group that would set the stage for formal talks. The delay has fed the widespread perception that Mr. Obama does not care much about a trade pact or, for that matter, about Europe in general.

‘‘We greatly value the trans-Atlantic relationship,’’ Mr. Kirk said in Davos. ‘‘We have devoted an extraordinary amount of time’’ to a possible trade agreement. But the administration wants to make sure objections from farmers and other constituencies are addressed, he said. Otherwise, officials might spend years negotiating an agreement only to have it rejected by Congress.

‘‘If we do this, we want there to be a bridge to somewhere and we want to get there on one tank of gas,’’ Mr. Kirk said. He declined to predict when talks might begin.
Trade had been a main topic of discussion at the World Economic Forum, which concluded Saturday. There were signs of pro! gress toward a trade accord, which, if it proved durable, could provide a riposte to the eternal criticism of the elite event: that the annual Davos forum is nothing more an expensive cocktail party where little of substance is ever accomplished.

While it is true that Davos is rarely the venue for concrete agreements, the event attracts a diverse international crowd in an informal setting. It can be a place where political and business leaders work toward consensus on difficult issues like trade. That may have been the case in the past week, some of the people involved said.

‘‘I’m carefully optimistic we will kick off negotiations this year,’’ Alexander Stubb, the Finnish minister for foreign affairs and trade, said after a panel on trade issues at the forum Saturday. ‘‘It’s going in the right direction.’’

Friction-free commerce between the United States and Europe could create jobs and add an estimated $50 billion a year o the United States economy, Mr. Kirk said. European political leaders fervently want a deal to help their anemic economies grow. There is also strong support from business groups on both sides of the Atlantic.

‘‘Half a dozen senior leaders in Europe are ready to move forward,’’ Thomas J. Donohue, president of the U.S. Chamber of Commerce, said last week in Davos, adding that a deal could be concluded within 18 months if both sides set their minds to it.

But others are skeptical, noting that Europe and the United States have been talking about a trade deal for years. While American companies like General Electric have expressed strong support for an agreement, progress has always been stymied by objections from interest groups, particularly over agricultural issues. Some Europeans, for example, object to imports of American food containing genetically modified plants.

‘‘I was surprised to hear all the speakers saying it will happen in the next two years,’â€! ™ said Ma! ximilian Zimmerer, chief financial officer of Allianz, a German insurance company. ‘‘What about the last 10 years’’

Mr. Kirk declined to go into detail about what specific issues might be delaying a report by what is known as a High Level Working Group, which he leads along with Karel De Gucht, the trade commissioner of the European Union. A favorable recommendation by the group would set in motion the process of negotiating a comprehensive agreement.
But Mr. Kirk noted that members of Congress with farmers as constituents far outnumbered those whose districts included big companies like Boeing or Apple that would benefit from a trade deal. ‘‘Agriculture tends to be a challenging issue,’’ he said.

That is partly because American farmers are already on the lighter side of the trade scale. The European Union exports far more farm products to the United States than vice versa: 14.6 billion euros, or $19.7 billion, compared to 8.2 billion euros, according to Europen Union figures for 2011, the most recent available.

Mr. Kirk has announced plans to leave his post as trade representative next month, and Mr. Obama has not named his successor. But Mr. Kirk said that his departure would not impede progress toward a deal.

Mr. Kirk and others say the biggest benefits of a trade pact would come from eliminating regulatory barriers. For example, while both the United States and Europe have strict requirements on auto safety and emissions, the rules are different. Harmonizing the regulations would free carmakers like Audi from having to make costly changes in headlights, exhaust systems and other components in order to export them to the United States.

Synchronizing regulations is much more complicated than eliminating tariffs. But, Mr. Kirk said, ‘‘These are all problems that are solvable.’’
Some trade experts argue that even bigger benefits could come simply from streamlining official procedures involved when goods move ! across bo! rders. The longer a product sits on a dock waiting for customs clearance, the greater the cost to companies and consumers.

A study by the World Bank and the consulting firm Bain & Company, published at the World Economic Forum, estimated that trade could increase by 15 percent if goods moved across borders more efficiently.

‘‘We’re talking about removing waste,’’ Mark Gottfredson, a partner at Bain, said. ‘‘Everybody can agree on that.’’

Beneath the Calm, SAC Works to Contain Fallout From an Inquiry

At last month’s Hurricane Sandy benefit concert, Steven A. Cohen sat near the Madison Square Garden stage, grooving to performances by Bon Jovi and Billy Joel.

Last week, he flew a private jet to the World Economic Forum in Davos, Switzerland, rubbing shoulders with world leaders and Fortune 500 chieftains. And on Monday, he will show up at the Breakers Resort in Palm Beach, Fla., for one of the year’s biggest hedge fund conferences and, if he can squeezeit in, a round of golf.

For a man who has emerged as the Justice Department’s great white whale in its insider trading investigation â€" a Wall Street version of Captain Ahab pursuing Moby-Dick â€" Mr. Cohen, the billionaire owner of the hedge fund SAC Capital Advisors, does not appear concerned.

But inside the offices of SAC’s Stamford, Conn., headquarters, and at Midtown Manhattan law firms, Mr. Cohen’s employees and lawyers are working hard to contain the fallout from the investigation.

His executives have offered financial incentives to Mr. Cohen’s staff members to stay with SAC. Marketing officers are trying to persuade investors to keep their money at the fund. And defense lawyers are working furiously to persuade federal securities regulators not to file a civil fraud lawsuit against the firm.

“This has always been a stressful place to work,” said an SAC employee who requested anonymity because he was unauthorized to speak publicly about the fund. “Now itâ! €™s just more stressful.”

Neither SAC nor Mr. Cohen has been accused of any wrongdoing.

The main question now looming over the firm is whether its clients will stand by the fund, or its legal and regulatory problems will cause investors to head for the exits. Under the firm’s rules, SAC clients have until Feb. 15 to ask for their money back, and then cannot make another so-called redemption request for another three months.

Mr. Cohen’s fund was dealt a blow last week when a Citigroup unit that manages money for wealthy families disclosed that it was withdrawing its $187 million investment. The move by the bank was the most prominent client departure since November, when the multiyear investigation into SAC’s tradingpractices entered a more serious phase.

Citigroup’s withdrawal represents a tiny percentage of SAC’s $14 billion in assets under management. The fund has said it expects total investor redemptions for the first quarter of up to $1 billion, a number that an SAC spokesman has said will not adversely affect its business.

SAC is largely insulated from the potentially devastating effects that client defections can have on a hedge fund in part because of Mr. Cohen’s extraordinary wealth. Unlike other hedge fund managers who rely almost entirely on outside investors, Mr. Cohen has the comfort of knowing that about $8 billion of SAC’s fund belongs to him and his employees.

Still, the Citigroup decision stung, say people close to SAC’s business, because of the longstanding and lucrative relationship between the bank and the fund. Another concern, said these people, is that the move could influence other large SAC investors currently weighing whether to keep their money at the fund.!

Fo! r Citigroup, its withdrawal of money from SAC carries substantial business risk. The bank has a vast relationship with SAC, earning revenue by providing the fund with financing and trading services.

SAC could exact retribution on Citigroup by terminating, or at least scaling back, its broader relationship with the bank. An SAC spokesman declined to comment.

Citigroup’s move came two months after federal authorities arrested Mathew Martoma, a former SAC portfolio manager, in what they described as the most lucrative insider trading case ever uncovered. The Martoma indictment represented the first time that the government had brought charges stemming from a trade in which Mr. Cohen had been involved. The Securities and Exchange Commission has warned Mr. Cohen that it might file a civil fraud action against SAC related to the case.

In addition to Mr. Martoma, at least seven former SAC employees have been tied to insider trading while at the fund. Three have pleaded guilty to criminal charges.

Citigroup issued a statement that its decision “should not be construed as a statement on the merits of any outstanding legal proceedings or potential regulatory action.” But the bank specifically cited the Martoma case, explaining that “in the event these legal and regulatory matters are resolved favorably for Mr. Martoma and SAC, Citi Private Bank expects to reconsider admission of SAC’s funds to its hedge fund platform.”

Mr. Martoma has pleaded not guilty and rejected requests by federal agents to cooperate against his former boss. Mr. Cohen has told his employees and clients that he is confident that! he has a! cted appropriately at all times.

Yet the heightened government scrutiny has caused skittishness among SAC’s top ranks, forcing the fund to lavish even richer financial incentives on a group of employees that is already among the most highly compensated in the hedge fund industry.

This month, SAC told its stable of portfolio managers that it would increase year-end bonuses by three percentage points. SAC portfolio managers â€" the fund’s most senior traders, given the authority to make their own investment decisions and also feed Mr. Cohen their best ideas â€" are paid, on average, 20 percent of the profits they generate for the fund.

“The program is intended to retain our most valuable resource, our investment professionals,” said Jonathan Gasthalter, the SAC spokesman.

Another valuable resource is SAC’s outside investors, which account for about $6 billion, or 40 percent, of the fund’s assets. That money accounts for hundreds of millions of dollars in fees, which SAC use to finance one of the world’s largest and most sophisticated hedge fund operations, with more than 1,000 employees and 125 teams of traders and analysts. Its operation is also one of the most successful, posting average annualized returns of about 30 percent since 1992.

Those results have in the past kept SAC’s customers satisfied, but the government scrutiny has made many of them uneasy. The firm’s marketing team has reached out to the fund’s investors to address their concerns and reassure them that the insider trading inquiry will not affect its performance.

Despite those efforts, several investors in addition to Citigroup, including Titan Advisors and a unit of Société Générale, have notified SAC that they are withdrawing money. Other clients, like Chapwood Investments and SkyBridge Capital, have said they will continue! to inves! t with the fund.

SAC executives continued the charm offensive with major clients on Sunday, holding an annual golf outing in Palm Beach on the eve of a hedge fund conference at the Breakers sponsored by Morgan Stanley. The conference â€" a matchmaking event that connects top managers with the world’s richest investors â€" is considered an important stop on the hedge fund money-raising circuit.

Since Morgan Stanley does not invite the news media to its conference, there is not expected to be the same paparazzi-like reports on Mr. Cohen that emerged last week from Davos. Bloomberg News filed a dispatch that Mr. Cohen sat in on a panel discussion on data security called “The Digital Infrastructure Context.” And Henry Blodget, the editor of the financial Web site Business Insider, wrote a Twitter post on a sighting of Mr. Cohen.

“Steve Cohen was hanging in Davos lounge yesterday,” he wrote. “Didn’t look worried.”