The United States and Europe have flirted for years with the idea of taking the world’s largest trade relationship to the next level. With growth lagging on both sides of the Atlantic, the concept is getting a fresh look.
In coming weeks, a joint White House-European Union committee is due to report on whether it is politically realistic to try to create a massive U.S.-E.U. free-trade bloc — pulling half the world’s economic output into a zone of lowered tariffs and coordinated regulation.
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By lowering costs for business, reducing import duties and further opening markets on both sides of the Atlantic, supporters say the benefits could be substantial — adding close to a full percentage point to the 27-nation European Union’s gross domestic product, or about $150 billion. A study by Sweden’s National Board of Trade said trade between the two sides could jump 20 percent — upward of $200 billion annually — if an aggressive agreement were enacted, and perhaps far more than that.
The allure for both sides is clear. Unemployment remains high — historically so in Europe — and both the European Union and the United States are trying to boost exports as a way to improve their economies. U.S. exports fell from October to September, the federal government reported on Tuesday, and are up just 4.5 percent this year compared with last — a poor showing for an Obama administration that promised to double U.S. sales abroad.
The push for broad trade talks has come mostly from the European side as the continent struggles to renew economic growth, the smaller euro-zone region of 17 nations battles a financial crisis and close U.S. trade partners such as the United Kingdom fight off recession. Officials there also have been concerned that the Obama administration’s “pivot” toward Asia — and its related push for the Trans-Pacific Partnership free-trade agreement — could leave Europe as an also-ran in the emerging global system, seen more as a source of risk because of its problems than as a region of opportunity.
But the effort was given a perceived boost late last month when Secretary of State Hillary Rodham Clinton highlighted the idea in a major speech on U.S.-European relations.
“If we work at it and if we get this right, an agreement that opens markets and liberalizes trade would shore up our global competitiveness for the next century, creating jobs and generating hundreds of billions of dollars for our economies,” Clinton said.
Many of the concepts are of long standing: President George W. Bush and European leaders established the Transatlantic Economic Council in 2007 to work on some of the same issues. And they have proved politically difficult to implement.
Unlike free-trade agreements with less developed nations, a pact with Europe is not expected to cause major changes in existing investment, trade and manufacturing patterns — unlike the realignment of the auto industry, for example, that took place after the North American Free Trade Agreement gave U.S. companies access to less-expensive Mexican labor.