US President Obama used his State of the Union address
this week to kick start negotiations for an EU-US Transatlantic Partnership, likely to provide a much needed boost to the two leading global economies. Citing job creation and a boost to American exports, the US President declared “trade that is fair and free across the Atlantic supports millions of good-paying American jobs”.
In a joint statement US President Obama, European Council President Herman Van Rompuy and European Commission President José Manuel Barroso announced that both trading blocs will initiate the internal procedures necessary to launch negotiations.
Prime Minister David Cameron welcomed the US President’s determination to begin negotiations and hailed the commitment in the EU and the US to reach an agreement. In a statement
he affirmed that “an EU-US trade deal will create jobs on both sides of the Atlantic and make our countries more prosperous”.
The importance of such a deal can not be emphasised enough. Together the EU and the US account for about half of world GDP (47%) and about a third of global trade flows. The EU economy is worth €12.6 trillion and the US economy €11.5 trillion (by comparison China’s is worth €5.5 trillion and Japan’s €2.7 trillion) Each day goods and services of almost €2 billion are traded bilaterally. With deep economic ties between the two economic blocs, with aggregate stocks in excess of €2 trillion, the relationship between both the EU and the US is of global significance and any trade agreement between the two is likely to have global ramifications – not least when you consider the likely affect of aligning rules and technical product standards, which anyone who will want to do business with this transatlantic “economic NATO” will have to abide by.
A 0.5% increase in GDP in the EU, the equivalent of €86 billion in annual income to the European economy is the much sought after gain this agreement promises to deliver. Prime Minister David Cameron speaking recently at the Davos summit suggested that the agreement has the potential to create an additional two million jobs across the European Union.
The agreement will focus on market access, regulatory issues and non-tariff barriers as well as rules, principals and more generally on global themes likely to have far reaching influence on the global trading system such as a closer alignment on intellectual property protection and enforcement mechanisms.
The removal of restrictive barriers is the central goal of the agreement. Improvements in services, investment and public procurement also form the basis of the desired outcomes of the trade deal.
Both sides have also highlighted the need for reform of the less obvious but no less costly barriers to trade, the differences between the two markets in areas of compliance and safety. The reduction of these aptly named “behind the border” obstacles, whilst maintaining consumer confidence in health, safety and environmental protection, will prove the most challenging, but also potentially the most rewarding element of the agreement.
As if the prospect of this trade deal was not enough to remind us how significant being a member of the EU can be in trade terms, a recent Defra report came to underline how important for British exports our membership of the EU is. The report highlighted that the UK exports more food to Belgium than to Brazil,Russia, India, China and Mexico put together. In fact the UK exports the most, by a significant margin, food to Ireland (£2,692m), followed by France (£1,925m), the US (£1,239m), Germany (£1,032m) and Spain (£963m). The food industry, worth £85 billion to the UK economy and employing 3.5 million people, has much to lose from a British exit from the EU – not least from the restoration of preventative trade barriers with its leading export sources, but potentially denying the UK the opportunity to utilise the EU-US trade agreement to bolster its exports to the US.
With fresh consternation following David Cameron’s speech on the European Union, coming from both at home, across the EU and even the White House, the importance of Britain’s membership of the EU has become a national question.
Following the launch of negotiations to establish an EU-US trade agreement, it seems the question for the UK becomes simpler still. Do we want to leave our main export market, just as it promises to become the platform for the biggest global deal between the world’s two biggest economies?
Policy officer, European Movement UK