By Elizabeth Pond
It's not low-hanging fruit. But it's at least medium-hanging. In the bleak world of fiscal cliffs, Syrian bloodletting, and ominous Chinese radar targeting of a Japanese destroyer in the East China Sea, even medium-hanging foreign policy fruit is tempting.
So let's go for it at long last—a Transatlantic Free Trade Agreement, or TAFTA. It's doable—and it's suddenly sexy. In an era of slump, it could stimulate global growth—with no new budgetary allocations—by an estimated 1.5 to 2 percent and help pull both sides of the Atlantic out of their lingering financial crises. It could expand the European Union's single market to include North America and cover half of today's global output and 800 million high-end consumers—or 950 million, if Canada and Mexico join in. With that weight, it could set the world's regulatory benchmarks for trade in goods and services for decades to come.
Most dramatically, a comprehensive treaty covering two-way trade (currently more than $600 billion per year) and foreign direct investment (more than $3 trillion) could even become the 21st century's prime institutional link between the North American and European twins. It could take over the crucial unifying function that the NATO alliance no longer provides in the post-cold war world of no existential Soviet threat.
A no-brainer, right? Not quite. In the past, for instance, French farmers always successfully defended their tariff and regulatory protection against the competition of cheaper American agriculture. American trade unions—in the days before mass offshoring reverted to today's inshoring—always vetoed export of jobs. All previous TAFTA attempts failed just as miserably as the last eight-year round of Doha talks to reduce multilateral trade barriers failed.
This past domestic resistance to a transatlantic free-trade agreement explains why Europe and Washington are coy at present about reopening TAFTA negotiations. Before doing so, each seeks confirmation that the other is serious and is ready to move fast. U.S. Vice President Joe Biden, reassuring Europeans at a Munich security conference last week that Washington still loves them despite its pivot to Asia, said any TAFTA negotiations would have to come to a conclusion "on one tank of gas." Clearly, he meant that the United States needs to have results before Congressional elections heat up in 2014 and politicize all issues. In the arcane ways of trade talks, the European Union responded two days later by lifting its ban on the import of (American) live pigs and beef washed in lactic acid.
The next signal may well come in President Barack Obama's State of the Union address on Tuesday—if he ventures into foreign policy at all. Shortly thereafter, a joint U.S.-EU study on the win-win prospects of a trade and investment deal will be released.
"Talks can be started politically when the European Commission and the White House agree, but both sides are trying to build [domestic] support" first, explains Marietje Schaake, a Dutch member of the European Parliament, which is rapidly expanding its role in ratification of EU treaties. She notes that transatlantic tariffs and other trade barriers are already very low, but "given the high volume" of bilateral trade and investment, any agreement "would bring beneficial results for both sides."
More fundamentally, she argues that "a combination of crisis and geopolitical change" is driving the current TAFTA revival and could well overcome the opposition of domestic lobbies this time around with the promise of restoring economic growth. Both sides of the Atlantic have been experiencing the "traumas" of financial crisis and the gradual "decline of Western dominance" in the world. TAFTA could give a boost to their self-confidence as well as to their economic recovery.
We all know how dynamic Asia and the rising BRICs are today—and how serious President Obama is about pursuing a trans-Pacific free-trade zone. This is just the time to show how dynamic the long-standing trans-Atlantic alliance is too by institutionalizing its extraordinary existing trade and investment community.
[Photo courtesy of Galushko Sergey.]