Rhein on Energy and Climate

After the suspension of the Doha talks on a global round of trade liberalisation under the auspices of the WTO in 2006 many countries have turned to bilateral free trade agreements.

So far the EU and USA, the two biggest trading countries, after China,have abstained from negotiating free trade among themselves, preferring to give priority to their Asian trade links.

This should change with the incoming US Administration.

In 2011 both sides have repeatedly stressed their willingness to consider bilateral free trade. Business across the Atlantic support it. Provided the new US Administration and the EU give green light, negotiations might start in the course of 2013.

From the European perspective, there is a convincing case for trans-Atlantic free trade.

It will inject overdue vitality into a fledgling relationship. This is crucial as a balance against the emergence of the Pacific as the future centre of the world economy. Europe depends much more than the USA, which is both an Atlantic and a Pacific power, on such a counter balance.

The agreement must be comprehensive, starting with the abolition of all obstacles to trade in goods, including agricultural products. It must also encompass all services, which represent a rising share of total trade. Public procurement must be part of it. Last not least, the two sides have to harmonise their regulatory frameworks to the extent necessary for removing trade barriers, even if this may arouse political and cultural sensitivities.

Agriculture should be much less of a problem than in the past, thanks to the abolition of EU market organisations. Agricultural free trade would induce farmers to specialise in those fields where they enjoy comparative advantages.

Of course, there will be opposition from vested interests from both sides. This can be overcome by providing for appropriate transition periods that allow sensitive sectors the necessary time for adjustment.

An agreement with the USA will complement EU free trade with Mexico, dating since 1997, and the free trade agreement with Canada likely to be signed before the end of the year. EU would thus be linked to the three NAFTA countries. After some adjustments to the bilateral agreements with Mexico and Canada, the four countries would form the biggest comprehensive free trade area ever concluded.

An EU-NAFTA comprehensive free trade agreement will knit the two sides of the Atlantic into an increasingly integrated economic ensemble, governed by similar regulatory frameworks, requiring constant monitoring.

Over time this is likely to change the geopolitics of the planet.

Eberhard Rhein, Brussels.


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