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U.S.-EU Free Trade Agreement: Global Game-Changer?

Obama raised the possibility during his State of the Union. He's right, it's a great idea.

by
Daniel S. Hamilton and Joseph P. Quinlan

Bio

February 23, 2013 - 12:00 am

At a broad and macro level, a study by the EU Commission found that eliminating or harmonizing half of all remaining tariffs and non-tariff barriers on bilateral trade could add up to 1.5 percentage points to growth over the medium term on both sides of the ocean. The European Center for International Political Economy, meanwhile, estimates that a deal could boost U.S. exports to the EU by 17% and EU exports to the U.S. by 18% over time. The figures are not overly large, but given how large the U.S.-EU economies are today — combined, the U.S. and EU account for over half of world GDP — even a small percentage increase in trade or investment translates into a large increase in aggregate output.

In addition, given that both parties are hobbled by massive debt obligations and chronic deficits, any growth strategy should have a net positive effect on the transatlantic economy.

A free-trade and investment deal would help create jobs and income on both sides of the pond, and spur more cross-border trade and investment in goods and services. The more far-reaching the agreement, the greater the impact on key sectors of the transatlantic economy, notably in services where there is plenty of scope for further integration.

A U.S.-EU free-trade agreement would do more than trigger economic activity. It would help reinvigorate a critical bilateral relationship that has been badly frayed and fractured over the past decade. Indeed, the last ten years have been among the rockiest in decades for the transatlantic partnership. Transatlantic solidarity and cohesion have been undermined by the increasing frequency of economic recessions on both sides of the ocean. The U.S. dotcom bust and ensuing transatlantic recession in 2001, the U.S.-led financial crisis-cum-recession in 2008, and Europe’s sovereign debt crisis of 2010: all of these economic shocks have taken a toll on U.S.-EU economic relations and have eroded bilateral trust and cooperation.

Add in Europe’s sovereign debt crisis juxtaposed against robust economic growth emanating from China, India, and the developing nations, and there is little wonder that many in Washington now believe Europe is increasingly irrelevant on the global stage. The rapidly aging, heavily indebted, and increasingly fragmented continent is viewed as more of a withering partner of the United States than as an engaging, forward-looking, and dynamic ally. Hence the strategic “pivot” towards Asia.

But enter the prospects for a free-trade and investment agreement. Such a deal — if comprehensive and far-reaching — could be just the spark that regalvanizes a bilateral partnership responsible for constructing and maintaining the global economic order of the post-war era. A free-trade agreement could halt the divergence of interests between the U.S. and Europe, and instead spawn a new dawn of cooperation and convergence between the world’s two largest economies.

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Liberty involves not just political freedom but also ecoomic freedom.

While bureaucrats find central control intoxicating, I prefer ordered liberty.
1 year ago
1 year ago Link To Comment
The authors did not notice, one presumes, that the European Union set up a single market some few decades ago, that was supposed to bring about all of the wonderful effects the authors predict would come out of Barack Obama' implementation.

What this would do is not free commerce but chain it to a centralized hyper-regulatory hydra, benefiting government. We don't need more steps in the direction of an Orwellian end state, a human face stomped on by a boot, forever.

Here is a counterproposal for our ingenious authors. Let's try having free trade, economic freedom that is to say, the corrolory of freedom writ large, AT HOME in the USA. You know, let me buy an insurance product of my choice out of those that insurance companies coast to coast would like to offer me, free of government mandates and intrusions. Let me buy a pistol in another state than my home state. Basics.
1 year ago
1 year ago Link To Comment
I'm no economist and I didn't even read the entire article but, I see a one world economy as a very bad idea for reasons that everyone should plainly see. OOur forefathers came to the New World to get out of europe. We have different cultures, different standards of living, and different costs of living. Besides with just one economy that economy lives and dies. Keep the economies separate and modular. Use tarrifs so that countries with poor standards of living and wages don't take advantage of those with higher standards. We can't finance everyones economy. With modular economies when one goes down it won't pull the others down with it. The ones that don't get pulled down can help the the others back up. But really, one world economy? what's next a one world government? Besides if obama likes it the quicker we shitcan this idea the better!
1 year ago
1 year ago Link To Comment
Another bunch of experts who are either mendacious or ignorant.
It must be recalled that the establishment stuffed shirts (experts) are the people who helped our society get into the sad state it is in today!If we were to to put a name on all of this we could call it the "Krugman effect".
These guys nibble around the edge of a huge economic crisis that is coming down on the world at this very minute.They speak of bandaids for a global economy which is suffering from fatal hemorrhaging.We are in a series of financial traps with no visible way out & these guys are offering nickel & dime cures which will do very little for our problems!
1 year ago
1 year ago Link To Comment
I'm no economist, but know for a fact that the only things we'll export to Europe are food and raw materials. . . increasing the domestic cost of both.

The only thing that will happen by "harmonizing" obscure, bureaucratic rules is that the more bureaucratic option will always, always, dominate.

I know that this will cost the US money, lots of money, the author sites the "post war" economic order, but then there is the pesky memory called the Marshal plan. If you tie two balloons together they will become the same size as the gas equilibrates.

This is another step toward becoming Europe, a step backwards and a huge mistake on every level. In my simple, non-economist, realist opinion.
1 year ago
1 year ago Link To Comment
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