EU-U.S. free trade deal offers painless stimulus for both

Source：| Bloomberg Business News Release Date：2012-06-18 331

Food & Beverage

Bringing tariffs on goods to zero would increase U.S.-EU trade by more than $120 billion within five years and generate combined GDP gains of about $180 billion

Before the end of the month, U.S. and European Union trade officials will recommend whether to pursue a free-trade agreement.

Such a deal has the potential to jump-start economic growth and create millions of jobs, even as it sidesteps the paralyzing debate on both sides of the Atlantic over austerity versus stimulus. A trade agreement is necessary, achievable and urgent.

The economic relationship between the U.S. and the 27 countries of the EU is the biggest in the world, accounting for almost one-third of all trade. About $5 trillion in trade and investment flows each year between markets representing 54 percent of global gross domestic product. This back and forth is largely in balance. (The U.S. runs a deficit in goods, a surplus in services and direct investment is roughly even.)

In 2011, Europeans bought three times more U.S. goods ($286.1 billion) than did the Chinese, and Europeans sold about twice as much merchandise to the U.S. ($368 billion) as they did to China. Investment flows dwarf these figures: In 2010, U.S. direct investment in the EU reached $1.9 trillion, while the EU’s share in the U.S. was $1.5 trillion. About 15 million jobs are directly linked to the transatlantic trade.

Low Tariffs

The benefits of increasing these flows are unequivocal. Although the remaining tariffs on goods are comparatively low (5 percent to 7 percent, on average), bringing them to zero would increase U.S.-EU trade by more than $120 billion within five years and generate combined GDP gains of about $180 billion, according to a study by the U.S. Chamber of Commerce, which, along with its European counterpart, BusinessEurope, is pushing hard for a comprehensive agreement. Further, more than one-third of transatlantic trade is conducted between affiliates of the same companies, and eliminating the tariffs they pay would make companies on both sides more competitive.

There are even larger prizes to be had from pruning regulatory barriers to trade -- the myriad restrictions on the sometimes specious basis of health standards, national-security concerns or consumer protection. A Nike Free Rn Flyknit