A few months ago, Zheng wrote a blog post about a possible Trans-Atlantic trade agreement. Recently, talks have been heating up between the United States and the European Union with negotiations on a trade deal likely to begin by the end of June. The free trade agreement, if passed, would remove tariffs and reduce other barriers to trade, spurring economic growth, exports and job creation for both parties. Given the stagnant state of the global economy, there is much excitement over a potential deal and optimism is high that an accord will be reached.
Negotiations for the free trade alliance would probably take at least two years, meaning that the deal could be finalized as early as 2016. The proposed deal would create a $5 trillion trade bloc that would add nearly 0.5% to both the U.S. and EU gross domestic product annually, according to a European Commission (EC) report. The U.S. and 27-member EU are the largest economies in the world, accounting for 45% of the world’s GDP. This would deepen an already strong trade relationship and provide a boost for the economy and cut unacceptably high unemployment in both regions.
Given the already relatively low average tariffs (under 3%), the real value in creating a trade bloc lies in non-tariff barriers to trade. These consist primarily of customs procedures (aspects of security and consumer protection) and regulatory restrictions due to different regulatory systems between the two groups. Greater transparency and regulatory coherence under the agreement would further deliver benefits to consumers by cutting costs and making businesses more competitive.
It is important that politicians and trade officials move swiftly and complete a comprehensive deal as soon as possible. If a deal can be reached, we will certainly see further investment and increased trade among the largest bilateral trade relationship and most integrated economic relationship in the world. Expectations are high that a free trade agreement will open markets and bolster economic growth on both sides of the Atlantic.