The Most Powerful Economic Area in the World

The European Union – United States Free Trade Agreement would slow down the global advance of Asia and protect liberal values

The European Union (EU) and the Unites States (US) are two of the most important global markets. Almost half of all gross domestic product of the world is produced there and their bilateral trade forms a third of global trade. Due to this, the recently renewed trade talks certainly carry a global meaning.

Closer economic cooperation between the EU and the US would balance the state capitalist economic model, which is increasingly prevalent in third party states, and which does not always value the principles of free market economy.

Plik Zbigniew Brzezinski gru2010.jpg znajduje się w Wikimedia Commons – repozytorium wolnych zasobów

According to the influential American academic and opinion leader, Zbigniew Brzezinski, the EU-US trade agreement may stop the downfall of the West, revive transatlantic relations and balance the influence of China. He added that this would create new vitality, greater security and a stronger feeling of unity in the West.

In 2011, the EU exported 387 billion euros worth of goods and services to the US. The US, in turn, exported 314 billion euros worth of goods and services to the EU. Nevertheless, the EU and the US have not entered into a free trade agreement. They attempted and failed to reach an agreement already in the 90s and more recently in 2006.

On 13 February 2013, president of the United States, Barack Obama, president of the European Commission, José Manuel Barroso and president of the European Council, Herman van Rompuy made a statement that the US and the EU will commence formal procedures necessary for the negotiations. The aim is to complete the negotiations in two years. In the US, the preparations for the negotiations started in February 2013, immediately after president Obama declared the initiation of negotiations for the free trade agreement in the State of the Union speech of 12 February. Promises given at such a high level give hope of actually reaching the trade agreement this time.

The broad free trade agreement will include market access for goods, services and investments and also update trade rules and move towards regulative systems that would overlap as much as possible.

In most areas, the agreement should be based on the agreements of the World Trade Organisation (WTO) and obligations arising from these agreements. The agreement cannot include provisions which could endanger the cultural and linguistic diversity of the EU.

The process of negotiations should lead to reciprocal liberalisation in the trade of goods and services and market access of investments. Import tariffs on goods could be completely abolished.

The greatest issues are said to include audio-visual services and the liberalisation of public interest services and areas related to the protection of intellectual property, more specifically the need to ensure greater protection of EU geographical indications (e.g. can Parma ham be used as a trademark only on Italian product, or on American products as well?). Additionally, the various EU regulations on agriculture – the changing of which raises concerns in the Member States – have been mentioned, including market access for genetically modified organisms, use of growth hormones and cloning.

The anticipated impact of the free trade agreement on the parties’ economy and bilateral trade relations should be significant.

According to the analysis prepared by the European Commission, the entry into a broad agreement would increase the annual gross domestic product of the EU by approximately 86.5 billion euros. The annual gains of the US from this broad agreement would be 65 billion euros. According to the impact assessment, among the industries of the EU, motor vehicle manufacturers and providers of marine transport services and insurance services would benefit the most.

Third party states would also benefit from the EU and the US agreeing upon standards and regulations amongst each other. As a result, producers from these countries need not comply with different standards for the two markets, making the production and marketing of products easier.

The Estonian government prefers the most liberal approach possible in terms of both goods as well as services. A more liberal economic environment has a positive impact on economic growth and would counterbalance the protectionist moods which during the crisis intensified on both sides of the Atlantic Ocean. Similarly to several other areas, in the case of free trade agreements, Europe can be seen as divided into two – the more protectionist Southern Europe and the more liberal North. Hopefully, in this argument, the forces focussed on openness and competition will prevail. A good indication of positive trends, however, is that free trade agreements are also being concluded with Canada and Japan.

Fighting against tariffs, regulations and protectionism helped the Estonian Reform Party to rise to the higher ranks of politics in the 90s. History has proven that the protection of liberal values and free market economy has raised the people’s quality of life and increased the international competitiveness of the economy. This has become the unquestionable success story of liberal forces. For these reasons, the entry into international free trade agreements should also be one of the priorities of liberal forces in Europe as a whole.