The Need for an 'Economic NATO'

EU Trade Commissioner Karel De Gucht explains why the U.S. and the European Union need stronger trade ties.

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European Trade Commissioner Karel De Gucht speaks to Japanese Foreign Minister Fumio Kishida at Japan's Foreign Ministry in Tokyo, Monday, March 25, 2013. Japan's prime minister will discuss a possible free trade pact with the European Union even as a summit in Tokyo to launch the negotiations is postponed because of the financial crisis in Cyprus. De Gucht is in Tokyo and meeting with Japanese government and business officials as scheduled.

Robert Nolan is an editor at the Foreign Policy Association and producer of Great Decisions in Foreign Policy on PBS. You can follow him on Twitter @robert_nolan.

Back in January, President Obama announced in his State of the Union address that the U.S. would embark on one of the most ambitious and wide-ranging trade negotiations ever undertaken with its largest trading partner, the European Union.

The aim of the negotiations is to open up market access in traditionally protected areas like agriculture, forge common regulatory procedures across sectors including technology and transportation and reduce "non-tariff" barriers that impede trade between the U.S. and Europe.

The so-called Transatlantic Trade and Investment Partnership has been heralded since as an "economic NATO" that could result in export increases of up to $150 billion, boost economic growth by $250 billion and create half a million high-paying jobs – all within 5 years. If completed, it would be the biggest bi-lateral trade agreement in history, and champions say it's a key element in bringing growth back to Europe and much-needed employment to the U.S. economy.

[See a collection of political cartoons on the economy.]

This week in New York, I spoke on behalf of Great Decisions in Foreign Policy on PBS with the European Union's Trade Commissioner Karel De Gucht about the state of negotiations and the way forward. Below is a condensed, edited version of our discussion.

The U.S. and EU already have the largest bi-lateral trading relationship in world. Why is a new trade agreement necessary?

It is true there is already a tremendous highway of trade between us. But we can do a lot better. For example, tariffs average about 4 percent. You could argue that 4 percent is low and is not hindering trade, but it is, because in the worldwide supply chain the product goes back and forth a number of times, and that, of course, adds up. Then there is the regulatory challenge. You have the tariff-free barriers, but much more important in modern trade are the non-tariff barriers and we have to do away with them by making regulations compatible and sometimes equivalent. There is a lot of work to be done.

Economic growth in Europe is pretty dismal. Things aren't so great here as far as unemployment, and protectionism is popular among the American public. Is the timing a hindrance or an opportunity?

I think the time is ripe because both partners are willing to do it. It has been discussed and proposed several times in the past, but there has never been very much traction, for example, within the business community. But that is the case now on both sides of the Atlantic. The same goes for the political level. We are adamant about getting it, but also on the U.S. side there is a lot of traction to get this done, as some say, on one tank of gas. Let's get it done quickly so we can revamp our economies. I don't believe that the fact that we have very flat growth, meaning almost no growth  at least for the time being,  though we're picking up very slowly -- it's not because of that that you have the negotiation, but is also not because of that that you wouldn't have it. It's not about the next 24 months. It's about the next 24 years.

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Clearly there will be some winners and some losers. Who will those be?

That is always the case, of course. I wouldn't say winners and losers though. In a trade deal I would say the gains are spread across the economy. Certainly in this situation that would be the case. But the more difficult sectors that could foresee losses are much more concentrated and much more vocal. I don't see how this is any different from any other trade negotiation. I believe that there are no real losers in this. There might be more fierce competition in a number of sectors, but isn't that a good thing?

You've called this agreement a potential "global trade policy laboratory."

Yes. We need further developments in world commerce and world trade, because the world is changing. You now have worldwide supply chains. The face of protectionism is also changing. In the past it was manifested by tariffs and now it is by non-tariff barriers. Regulations are very commonly used to protect markets, the same for capital, foreign investment and lots of things. We should set a standard, and to me that's what these negotiations are about. It's about setting norms, standards and regulations between us. It's not that we would force those standards on others, but the result would be that nobody else could force a standard on us. That, I think, is a very basic point.

If we set norms and standards between us, these have a high probability of becoming worldwide standards. We should not forget that, in the end, the U.S. and EU together represent more than half the world economy.

[See a collection of political cartoons on the European debt crisis.]

The U.S. is pursuing a similar trade agreement with Asia. Is this in any way a response to that?

Oh no, certainly not. This is an agreement between the EU and U.S., and it is not because there is this negotiation of a Trans-Pacific Partnership that we would say now we are in a hurry to make that kind of agreement with the U.S. as well. Of course, a trade agreement of this order of magnitude has a duel, strategic significance, but for us it is not about cornering anybody. It's about maintaining the prominent position we have now and making sure we can continue to have it in the future, so that we can continue to support our welfare systems.

What do you see as the major barriers moving forward in next 6 months?

I see the opportunities. In whatever negotiations you are doing you are going to face difficulties, but I see the huge opportunities that lie ahead. We have a duty to get to a result. Some say this is too big to succeed, but I see it as too big to fail.

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