As pressure on the eurozone eases, Europe and the United States are becoming increasingly convinced that they need to strengthen their partnership in order to maintain a leading competitive edge in the global economy.
“The old boys need to say clearly that they are still in business,” said EU Ambassador to Washington João Vale de Almeida, speaking at an event organised by the American Chamber of Commerce to the EU (AmCham EU).
The state of the transatlantic economy has suffered the blow of the euro crisis but remains the largest and wealthiest in the world, with over 50% of world GDP in terms of value and 41% in terms of purchasing power, according to a report released yesterday (22 March).
“No other commercial artery in the world is as integrated as the transatlantic economy,” said Joseph Quinlan, an author of the report published by the Center for Transatlantic Relations at Johns Hopkins University. “Its health is vital to the health of the entire global economy.”
According to the report, the transatlantic economy generates close to €3.8 trillion ($5 trillion) in commercial sales a year and employs up to 15 million workers in mutually ‘onshored’ jobs on both sides of the Atlantic.
Ties are particularly strong in foreign direct investment: US FDI to Europe in 2011 topped $200 billion (€152 billion) for only the second time on record. By contrast, US firms invested $40 billion in China between 2000 and 2011, putting China 14th as a destination of US FDI behind Belgium, France, Germany, Switzerland, Ireland, Britain and the Netherlands.
“The eurozone crisis and Europe’s economic slowdown have not only knocked the wind out of the transatlantic economy but also have dealt a sizable blow to the global economy,” Quinlan added, while stressing that the crisis can be the catalyst for progress in the transatlantic relationship.
“The transatlantic marriage needs a spark,” he said.
There is growing momentum to upgrade the partnership with a comprehensive free-trade agreement. EU and US businesses are bullish on the prospect of reaching a deal within two years. EU trade Commissioner Karel De Gucht said an agreement could be reached before the end of 2013.
“We should be prepared to eliminate all tariffs affecting transatlantic trade,” De Gucht said. “Tariffs are important but they are much less important than regulatory obstacles to trade and services."
Business leaders are betting on the recently formed high-level working group on jobs and growth set during the EU-US summit in November to pave the way for negotiations on a comprehensive trade agreement.
A comprehensive agreement
US companies favour a legal pact that would become the template for the ‘next generation’ of economic and trade accords. This new instrument – a Transatlantic Economic Growth Agreement (TEGA) – should be as broad as possible, with a focus on issues that provide the most potential benefit to US and EU companies, farmers, workers and consumers.
“Together we will be able to set the standards and the rules of the global economy,” said Vale de Almeida, hinting at electric cars, nanotechnology and leveraging the digital economy. Also included could be the management of global financial and trading systems, energy security and climate change.
It would be a mistake, however, to go for a sector-by-sector agreement, some concur. EU and US leaders have the same agenda: growth, jobs and innovation, said the EU ambassador.
“We need to accelerate innovation and entrepreneurship,” said Christian Morales from Intel, adding that the Europe 2020 long-term strategy should be delivered way before its deadline.
Despite the momentum in transatlantic relations, Quinlan believes it is unrealistic to think that a comprehensive deal can be reached within two years, mostly because US elections this year will delay decision-making in Washington.
If negotiations are launched, that would be a first signal that Europe and the US are united. “It will be a wake-up call for the rest of the world,” Quinlan said, adding that other emerging economies will not be able to play transatlantic partners “one against the other.”