Rising Hopes for Free Trade Agreement Between EU & US

European Union FlagPhoto: http://www.flickr.com/horiavarlan

European Union Flag
Photo: http://www.flickr.com/horiavarlan

A few sentences from President Obama’s State of the Union Address were all it took to make the world perk up its ears in interest.  Obama’s call for a free trade agreement between the United States and the European Union is the source of much optimism in France. After twenty years of failed trade agreements between the two sides of the Atlantic, many experts believe there is no better time than the present for such an arrangement.

Obama said that such an agreement could “boost American exports, support American jobs, and level the playing field in the growing markets of Asia.”  He reminded Americans that, “today’s world certainly has its dangers, but also its opportunities.”  In other words, the agreement is a call for leadership in the West.

It will be the largest of its kind in history — the economic equivalent of NATO.  As if the economic benefits weren’t great enough already, the deal could pump as much as 200 billion dollars a year to these two economies, setting the economic world pace.  Everyone is quick to target China as a motivating presence, as its economic rise encourages the West to secure its dominance and unification. The trans-Atlantic arrangement will bring economic and political fortunes for the US and the EU, respectively. The two parties account for about half of global GDP and one-third of world trade.  The trade between them is valued at around 455 billion Euros, and they are already the biggest investors in each other’s economies with low tariffs at around 3-5%.

Senior Obama administration officials in Europe desire a pact in as little as 18 months — in 2014 before a new European Commission is seated.  Giving a speech at Harvard University, the European Union Trade Commissioner, Karel De Gucht said, “this is the cheapest stimulus package you can imagine,” adding that “the income effects of the deal we are now trying to achieve should be between 0.5% and 1% of GDP, supporting hundreds of thousands of jobs.”

Certainly, today’s economic environment begs for more jobs and growth, yet the US and EU. also want to remain leaders in the economic arena.  The European Commission President, Barroso said, “this negotiation will set the standard for the development of global trade rules.”  Thus, in light of Asia’s quick ascent, a new foundation for a global economic order is a worthwhile venture.

Although leaders are clearly eager to begin, there is no denying that the negotiation process will be difficult and complex.  A number of issues will need to be considered: the liberalization of services, regulatory convergence, environment policy, intellectual property, and, perhaps above all, agriculture.

Both France and the United States are sure to be vigilant on agricultural trade decisions.  In 1998, France blocked a US international trade deal due to an agricultural policy disagreement.  Since American farmers hold some of the strongest lobbying powers, experts say that Congressional leaders in the US will not support anything that doesn’t include American farming.  This means that Europe’s aversion to what it calls “Frankenfoods,” hormone treated beef and genetically modified crops, will require tough negotiation.

Naturally, the French would like to conserve their culture through it all. At moments like these, French groups will argue against the invasion of American ideas into French society. Europe has met the Americans halfway and has recently opened up its markets to live pigs and certain types of treated beef in addition to other American products. No doubt, the French will call upon Americans to respect French wine and protect French-language audio-visual products.

Many complex issues will be brought to the table in negotiations that typically take years to accomplish, but the two superpowers don’t want to shut out countries that lie outside of the EU and US. However, these two Western leaders will take the first steps together in the dialogue. In the words of De Gucht, “we [The United States and France] are the leading economies, and it’s important we remain leaders, but in a way that allows others to develop.”

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