{"id":38616,"date":"2013-05-28T13:39:41","date_gmt":"2013-05-28T17:39:41","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38616"},"modified":"2013-05-28T13:39:41","modified_gmt":"2013-05-28T17:39:41","slug":"the-transatlantic-trade-and-investment-partnership-will-it-happen","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/05\/28\/the-transatlantic-trade-and-investment-partnership-will-it-happen\/","title":{"rendered":"The Transatlantic Trade and Investment Partnership: Will It Happen?"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

What do you get when you have a second-term American president eager to secure a positive legacy and a European continent desperate for economic growth?<\/p>\n

If all goes well, you\u2019ll have a game-changing free trade agreement between the United States and the European Union.<\/p>\n

The agreement\u2014tentatively called the Transatlantic Trade and Investment Partnership (“TTIP”)<\/b>\u2014will potentially be the biggest trade deal in history, covering half the world\u2019s economic output and roughly a third of all global trade. It makes NAFTA and the (alas, defunct) attempt at the Free Trade Area of the Americas look puny by comparison.\u00a0 Negotiations are supposed to formally begin in July and might take as long as two years.<\/p>\n

A free trade deal of this scale is no easy project; even small deals, such as recent pacts with Colombia and South Korea, have political stumbling blocks.\u00a0 What may be liberating for consumers in the form of lower prices and better selection is the protected turf of favored industry and labor groups.<\/p>\n

Past attempts at comprehensive trade deals across the Atlantic have lost steam.\u00a0 Neither side was committed enough to challenge the subsidies given to their coddled farmers and some of their \u201cnational champion\u201d industries (think American Boeing vs. French Airbus).\u00a0 France has also consistently insisted that there be \u201ccultural exceptions\u201d for French-language films, music and art\u2026which gums up negotiations on media and intellectual property.\u00a0\u00a0 And the United States government procurement market is much harder for foreign firms to break into than most European government markets.\u00a0 Congress tends to play the populist \u201cBuy American\u201d card when it comes to supplying the government\u2026which, of course, jacks up expenditures for American taxpayers.<\/p>\n

So, while Americans and Europeans both like the idea of free trade in theory, in practice the status quo has been too hard to overcome.<\/p>\n

But today, the timing might finally be right.\u00a0 You have free-trading Republicans controlling Congress and a Democratic president who sees an opportunity to strengthen political and economic ties with \u201cOld Europe.\u201d<\/p>\n

The Democratic Party\u2014traditionally hostile to free trade for the perceived damage it does to American labor\u2014has also been gradually getting more comfortable with it since the presidency of Bill Clinton, and the fact that European labor markets are regulated as high (or higher) than America\u2019s makes a deal easier for them to swallow.\u00a0 This isn\u2019t a giveaway to Big Business using cheap third-world labor; it is partnership between two large players with similar income levels.<\/p>\n

And for the geopolitical strategists and foreign policy hawks, uniting the Western world under a giant trade umbrella allows the West to effectively set the rules for the world economy for the next 50 years and waters down the influence of China, India, and other emerging countries.<\/p>\n

And on the European side, it amounts to one word: growth.\u00a0<\/strong><\/p>\n

The Eurozone crisis has stabilized in the sense that the breakup of the currency union is off the table, at least for now.\u00a0 But the entire continent is suffering from having too much debt and not enough growth to realistically pay it back\u2026or even stop it from snowballing.<\/p>\n

As the past two years have proven, Europe\u2019s leaders will push through major reforms only when they have the bond market pointing a proverbial gun to their heads.\u00a0 But shaking up their protected industries, while politically hard, is easier than raising taxes and cutting spending in perpetuity. A free trade deal with the United States give Europe a potential way out of the malaise.<\/p>\n

The potential deal has broad support, but it also has two powerful enemies on both sides of the Atlantic: populism (of both the labor left and the isolationist right) and entrenched interests.\u00a0\u00a0 Let\u2019s hope the voices of reason prevail.<\/p>\n

SUBSCRIBE\u00a0<\/b><\/a>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

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