Monday, 18 February 2013

EU-US: ''Economic NATO'': EU should not test US's patience

The planned free-trade pact between the US and EU divides European governments in two bloc.
On one side, Germany, Sweden,Finland and the UK push for a broad '' free trade agreement between EU-US but on the other side France, Italy, Spain and Portugal would like to have a number of issues affecting their farming industries to be excluded from the talks. Washington could run out of patience.

France and other Southern European nations which want to exempt issues like food regulation and gene technology from the talks in order to protect the interests of their farmers, could damage the core essence of this planned free trade agreement between EU and US by limiting  the agenda from the start and to exclude certain areas and the US might in this case respond by demanding exemptions itself, which would end up producing only a modest agreement.

From Germany's, Finland's and Sweden's perspective, an "economic NATO" would be a sign of European unity and would open up the possibility for cooperation from countries with similar market philosophies from other regions. But France and other southern countries are not completely convinced yet over the farmng industries details of the planned free trade agreement.

The benefits would be greater if the governments also introduced common technical norms, safety standards and competition rules. In that case the standard of living would rise by more than 5 percent in the US, more than 6 percent in Europe and more than 8 percent in Germany in the coming two decades, Ifo predicts. Trans-Atlantic trade could more than treble.
Negotiations are due to start in June after President Barack Obama called for talks on a free trade agreement in his annual State of the Union speech last Tuesday.

"Tonight, I'm announcing that we will launch talks on a comprehensive trans-Atlantic trade and investment partnership with the European Union," he said. "Because trade that is fair and free across the Atlantic supports millions of good-paying American jobs."

Trade between the two regions already accounts for more than 50 percent of the global gross domestic product and secures an estimated 15 million jobs. US investments in France and Belgium alone in 2010 were as high as in India and China combined. Should this trade become easier due to the elimination of tariffs and, in particular, cumbersome regulations, it could generate economic growth of up to 1.5 percent on both sides of the Atlantic.

If customs duties are abolished, GDP per capita in the EU and the US would only grow by 0.1 and 0.2 percent respectively.

Obama regards a trans-Pacific trade agreement as far more important. But the proposal was intended as a political signal to encourage Europeans to stay together in the euro crisis -- and to preserve the idea of a "common West".

Obama's support does not mean the agreement is a done deal. The devil is in the details. Whether it has to do with the length of car bumpers, the permissibility of genetically modified corn or the correct method to be used when slaughtering beef, trade talks are often just as complicated as nuclear non-proliferation negotiations. By their very nature, they touch on issues that are often vital to the cultural identities of certain countries or regions. Already, small armies of officials have failed to find adequate answers to such questions.

Some interest groups have refused to budge. The powerful US agrarian lobby, for example, insists on unlimited access to European markets, including such products as genetically modified produce, which is controversial on the Continent. European companies, for their part, refuse to accept the diktats of US regulatory authorities regarding whether and how they can pursue state contracts.

Washington wants a swift trade deal, before the 2014 congressional election if possible, and that its patience with European power-plays and prevarication will be limited. Many economists are predicting a robust recovery for the US, while austerity-hit Europe is at risk of years of recession.
If the Europeans hesitate too long, America may switch its focus towards Asia with even greater vigor.

By Guylain Gustave Moke
Political Analyst/Writer
Investigative Journalist