Ask CFR Experts

PrintPrint EmailEmail ShareShare CiteCite
Style:MLAAPAChicagoClose

loading...

What are the potential benefits and pitfalls of the proposed U.S.-EU Free Trade Agreement?

Question submitted by Bill Wanlund, March 14, 2013

Answered by: Robert Kahn, Steven A. Tananbaum Senior Fellow for International Economics

Share

A U.S.-EU Transatlantic Trade and Investment Partnership (TTIP), proposed by President Obama in his State of the Union speech, aims to expand U.S.-EU trade and investment by reducing already-low tariffs and streamlining and harmonizing regulatory and other non-tariff barriers. Negotiators hope to strike a deal within eighteen months.

With trade in goods and services between the two regions near $1 trillion per year (about one-third of global trade), TTIP could provide a significant boost to U.S. jobs, growth and trade. Advocates also argue that a strong and integrated U.S.-EU marketplace would create an incentive for others to liberalize their trade. Over time, a string of bilateral trade deals could produce a more globally integrated market.

Conversely, the primary pitfall to the agreement would be if it caused a retreat from multilateralism. Bilateral agreements can create new trade, but also divert trade from third countries (e.g., emerging markets) that might be more efficient producers. Countries not included in this or other initiatives could react with restrictive measures, leading to less trade overall, and weakening multilateral institutions such as the World Trade Organization.

A recent Pew Research Center report suggests strong majorities on both sides of the Atlantic support a deal. Nonetheless, negotiations will be difficult, with agriculture and harmonization of regulations particularly thorny areas. Labor and environmental concerns also will need to be addressed. It will take strong political will on both sides to get it done.