Secretary of State Hillary Clinton tipped the U.S. hand on Nov. 29 when she said at the Brookings Institution, “We are discussing possible negotiations with the European Union for a comprehensive agreement that would increase trade and spur growth on both sides of the Atlantic.” She noted the “long-standing barriers to trade and market access” that would have to be removed to make any such deal possible, such as the European Union’s protectionist agricultural rules.
Clinton is said to envision an “economic NATO” — a comprehensive agreement covering trade in goods, services, investment and agriculture. Indeed, a joint working group of U.S. and E.U. officials is about to release a final report arguing for such a comprehensive deal.
Curious as to whether Clinton’s speech was just window dressing from a departing secretary, I asked the White House this week whether the TAFTA talk is real. The answer was yes: Obama is considering making a trans-Atlantic trade initiative an important part of his second-term agenda. Combined with the North American Free Trade Agreement in Latin America and the Trans-Pacific Partnership in Asia, this could create a global trading system that might be an enduring part of Obama’s legacy.
What’s appealing in particular about the trans-Atlantic initiative is that it could be a big job creator for economies on both continents that are still recovering from the effects of the recession. It would enhance trade and investment flows that are already powerfully established. There’s an estimated $2.7 trillion in cross-investment between Europe and America, and trans-Atlantic trade in goods alone totaled an estimated $674 billion in 2010. Trade between the United States and Europe isn’t a matter of sweatshop competition; labor standards in Europe are, if anything, higher than in the United States.
I like the idea of an “economic NATO” because it addresses fiscal problems through growth and expansion. The alternative “austerity pill” advocated by conservative Germans (and some American budget-cutters) is doomed to fail. Big, new spending initiatives are not a realistic growth strategy, either, given debt worries on both continents. To many economists, it’s a no-brainer: Expanded trade offers the best path to new jobs, markets and investment opportunities.