Recently, the United States and the European Union began formal talks regarding what could be the largest free-trade agreement in history. The trade deal would create a free trade area between the US and the EU. After President Obama announced his desire to begin talks with the EU, the process towards creating one of the most important trade deals in history began. In the article on BBC Business, “EU ‘growth boost from US free trade deal,’ the EU Trade Commissioner Karel De Gucht said that by removing the trade barriers between the US and the EU the two countries would benefit from “the cheapest stimulus package you can imagine.” It is estimated that this deal would boost annual GDP growth between the two countries by 0.5% and create hundreds of thousands of jobs.
Not only could this agreement boost the economies of both countries, it is possible that once the two countries are united by the FTA, they will be able to act together within international institutions such as the WTO. This may create problems for what Mr. De Gucht calls “the rising stars,” or developing countries, as their power will be far outweighed by that of a US-EU coalition. An article from the Christian Science Monitor, “Why EU-US free trade agreement would benefit both sides,” draws attention to this fact saying that this agreement could possibly allow the EU and the US to act more cohesively when dealing with other regions of the world. “Reaching an ambitious economic agreement between us would send a powerful message to the rest of the world about our leadership in shaping global economic governance in line with our values.” That being said, this FTA may provide opportunities for the spread of democratic principles and practices for developing countries across the world. This may aid in avoiding the resource curse and the corruptions that go along with it.
It is obvious that removing trade barriers between the US and the EU would boost job creation and GDP growth, in effect benefiting both countries quite equally. According to the Christian Science Monitor, it is in the interest of the rest of the world for this FTA to be formed so that democratic values, as interpreted by the Western countries, can spread. Still, issues surrounding power balances in the WTO raise questions as to how beneficial this will really be for rising industrial countries of the East.
Alexa, I can’t believe there isn’t any comments on your blog posting yet. The quotes that you pulled out of the article are pretty abrasively shout “western imperialism” to me.
ReplyDeleteFirst, I think it is remarkable that they predict a FTA between the EU and the U.S. would bring about a .5% increase in GDP for both trade partners. Given that an average successful year we except economic growth of ~2% GDP, a 25% increase would be phenomenal, and it is intriguing to theorize on what those economies would look like.
Secondly, at first though I think this FTA is a great idea because, yes, the U.S.’s value system, and foreign trading system is very similar to the EU’s. Suggesting a lesser amount of predictable turmoil between the two partners.
However, to hear quotes from the Christian science monitor about sending a powerful message to the rest of the world about the leadership that is going to shape the global economy, and values, that’s quite imperialistic sounding.
It is a huge power move on both trading partner’s behalves and I wonder what the BRIC country governments have to say about this FTA. I also wonder why an agreement like this hasn’t happened sooner.