|President Obama said during his State of the Union address that he wants a free trade agreement with the EU|
Courtesy of the White House
The European Union and the United States have agreed to start formal negotiations on a deal, which, if finalized, would create the largest free-trade zone in history.
During his State of the Union speech last week, US President Barack Obama announced impending negotiations on a “comprehensive transatlantic trade and investment partnership.” “Trade that is free and fair across the Atlantic supports millions of good-paying American jobs,” Mr Obama said.
The statements came after a year of preliminary discussions between representatives of the two economies regarding the phasing out of tariffs and the reduction of regulatory barriers in order to create closer ties at a time when the US and the EU face stubbornly sluggish growth at home and increasing competition from China.
“The future agreement between the two biggest economic global empires will be a game-changer,” said European Commission president José Manuel Barroso last week.
The negotiations are set to start in mid-2013 and Karel De Gucht, the EU Trade Commissioner, has said he thinks a deal could be in place within two years.
EU-US trade was worth roughly E445 billion in 2011. Some economists estimate that a trade agreement between both blocs could boost each of their gross domestic products by 0.5 percent annually.
How could it affect Poland?
“Polish industry has established very strong ties with German companies for whom they make components for their products. I think it could play a similar role in the US,” said Tomasz Demendecki from the Business Centre Club, an employers’ association.
“The only question I have [about the agreement] is why so late? Today, there are too many barriers to the exchange not only of goods but also of ideas and knowledge,” Mr Demendecki added.
“Right now the EU supports the scientific work only of its members as the US does only of its citizens. Hopefully, that could now change,” he said.
But Jan Filip Staniłko, an analyst at the Sobieski Institute, was somewhat less enthusiastic about the issue.
“The free-trade agreement is a kind of fetish and a sign that politicians in Europe and the US are becoming desperate in the quest for growth,” Mr Staniłko said. “However, there is no reason why trade cannot be liberalized or increased under the existing WTO agreements binding both blocs as well as through existing bilateral agreements.”
Mr Staniłko is also skeptical about the benefits of such an agreement for Poland. “The effects of a free-trade agreement are similar to the effects of rapid technological development. Some sectors will suffer an immediate loss of competitive advantage,” he said, adding that there was research showing that the removal of tariffs could sometimes
mean costs for the economy “20 times bigger than the benefits.”
Mr Demendecki, though in favor of a free-trade agreement between the US and Europe, acknowledges that there will be stumbling blocks to such a deal.
“The agricultural policies of both economies are not compatible. The EU provides a lot of support for its farmers and erects a lot of barriers to protect them, and the US does likewise.”
Mr Demendecki also mentioned the “never-ending” discussion about genetically modified organisms as a potential obstacle to an agreement.
Given the low average tariffs on goods traded between both economies (under 3 percent), it would seem the key to unlocking any untapped potential lies in the deregulation of non-tariff barriers. These consist mainly of customs procedures and behind-the-border regulatory restrictions.
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