Is a Free-Trade Agreement with Europe Within Reach?
The concept of a free-trade agreement between the European Union and the United States has existed in the liminal zone between politics and economics for years. Such an agreement could create an economic bloc worth $4 trillion, with annual trade of $650 billion across the Atlantic accounting for 40 percent of total global commerce.
The upsides of a free-trade agreement that smoothes out regulatory wrinkles, standardizes policies and tariffs, and opens up a European market for biologically modified foods are reportedly tremendous. Eliminating the five- to seven-percent tariffs that currently exist could boost two-way trade by $120 billion within five years, according to the U.S. Chamber of Commerce. A free-trade agreement could add between 1.5 and 2 percent to combined U.S. and European output, and pave the way for more competent trade agreements with China, India, and the rest of the world.
But nothing stands in the way of good economics like bad politics. While there are free-trade champions on both sides of the Atlantic, old sticking points that have prevented past deals remain. An agreement would require the support of all 27 EU member states, meaning disapproval of any one could drown talks in banality. What’s more, industry groups in the United States are only likely to support such a measure if it is totally equitable, which, given vastly different regulatory structures, would be difficult. Concern that negotiations would degrade into old-hat arguments seems to be the primary reason why U.S. officials are hesitant…
There are a number of individual sticking points, some minor and some major. Near the top of the list are compatible regulatory structures surrounding agricultural and food products. Europe has a ban on some U.S. meat products because of differing regulations surrounding the production and safety of food. The EU has also blocked imports of genetically modified corn and soybeans. Some member nations such as France are keen on keeping these policies in place, but American agricultural groups are unlikely to support a free-trade agreement that does not address — or remove — them.
Meeting in Brussels on Friday, European leaders agreed that, at the very least, it was worth pushing for the agreement. Major exporters will submit a proposal to the White House, and many are expecting that President Barack Obama will address the situation in his State of the Union Address on Tuesday.
Speaking in Munich recently, U.S. Vice President Joe Biden said that a comprehensive trade agreement was “within our reach,” but that he has reservations about longstanding differences in regulations.
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