The Obama administration may have signaled a strategic “pivot” to East Asia, but it hasn’t forgotten that the world’s largest economic relationship is between the United States and the European Union.
So it was welcome news when President Obama announced in his State of the Union Address in February that the administration would begin negotiations on a Transatlantic Trade and Investment Partnership with the E.U.
As with previous free trade agreements such as the North American Free Trade Agreement (NAFTA) and bilateral pacts with South Korea and other countries, an eventual agreement would seek to eliminate, reduce or prevent tariffs and quotas on goods and services, as well as make regulations more compatible between the United States and the 27 nations that comprise the E.U.
U.S.-E.U. trade is already robust. According to the Office of the United States Trade Representative, about $2.7 billion in goods a day flows between U.S.-E.U. borders. In 2012, the United States shipped $265.1 billion worth of goods to E.U. nations. While that was down 1.2 percent from 2011, it represented a 57 percent increase since 2000.
U.S. exports of private commercial services were valued at $194 billion in 2012 — a 2.8 percent increase from 2011 and a 108 percent spike since 2000.
U.S. agricultural exports totaled $9.9 billion in 2012 and, together, U.S. and E.U. investors owned about $3.7 trillion in direct investment in each other’s economies.
While the tariffs between the United States and the E.U. are already relatively low, the scale of the trade relationships suggests that even small adjustments could mean big economic gains. Even more upside exists if standards are aligned between the two trading partners.
And the scope of the world’s largest trading relationship means that an agreement might kick-start the stalled “Doha Round” of World Trade Organization talks. Already, many countries are rushing to fill the trade vacuum with bilateral pacts. But a U.S.-E.U. pact could offer “a de-facto rule-setting for the rest of the world,” said Joshua Meltzer, a fellow in global economy and development at the Brookings Institution.
That’s not just a U.S.-centric view, according to Ambassador Jukka Pietikainen, the consul general of Finland in New York. Pietikainen, Minnesota Rep. Erik Paulsen and others were in Minneapolis on Monday for a trade discussion organized by the Finnish American Chamber of Commerce Minnesota and the Minnesota International Center.
“We need to set the standards, and since the WTO negotiations have stalled completely maybe this would give a boost for those negotiations … and then maybe Europe and the United States would have an upper hand on the setting of global standards,” Pietikainen told an editorial writer.
Closer to home, the trade stakes are high for Minnesota, too.
State exports in the fourth quarter of 2012, according to the state Department of Employment and Economic Development. The E.U., along with North America, led the way with 6 percent growth. Overall, the E.U. is Minnesota’s third-largest export market, accounting for 20 percent of all sales.
Minnesota’s manufacturing base, particularly its medical device industry, as well as its services, stands to gain from expanded, streamlined transatlantic trade. More trade means more jobs.
Of course, as with previous pacts, a U.S.-E.U. trade agreement would need to adhere to appropriate labor and environmental standards, among other key details. So it’s too early to advocate for a specific deal. But it’s not too early to laud the president and the bipartisan members of Congress who are working to expand the already strong economic and political ties with Europe.