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Politics EU/US Free Trade Agreement

Discussion in 'Tilted Philosophy, Politics, and Economics' started by Remixer, Feb 13, 2013.

  1. Remixer

    Remixer Middle Eastern Doofus

    Frankfurt, Germany
    Source: BBC News - EU and US free-trade talks launched

    I found this on BBC today and, honestly, the very idea of it made me laugh.

    There is no question in my mind that a real FTA between the two would be very profitable and provide the basis for leaps in trade and corporate efficiency, on both sides.

    However, would the Americans really go along with a balanced FTA and stop their ages-old tradition of employing a mix of tariffs, subsidies and ridiculous favoritism (Defence industry)?

    With the current political climate in the US being that of a perceived fragile economic recovery, I cannot imagine the threat of real EU competition to be appealing to anyone over there at this time.

    Of course, the EU does not exactly walk the streets with the cleanest of hands. However, EU protectionism cannot be compared to that of the US. Economics Nobel-laureate Stiglitz makes a staggering case regarding the implications of overt US protectionism of its agriculture and manufacturing industries, and the wider global impact of these practices in this book: Making Globalization Work.

    I simply cannot fathom for the Americans to be willing to risk such a big trade hit, as EU manufacturing and quality control standards far surpass any of the, at best, flimsy regulations of US entities such as the USDA.

    Considering the massive cultural difference between EU and US consumers, it is fair to assume that success of US products, as before, would be limited, and for most of the success to gravitate around the innovative electronics market. "Made in America" is only appealing to Americans, with the US government being its biggest customer.

    Further, knowing the EU bureaucrats, they would insist on the corrupt nature of US defence contracts to be rectified to follow and implement fair-competition standards, and actually adhere to them. There are very good reasons why the WTO free-trade negotiations deadlocked.

    Overall, I believe this BBC comment to reflect the current sentiment of the EU population:

    What do you think? Is a fair and balanced FTA a realistic outcome of these negotiations? Would the US, or the EU for that matter, come out with an advantage by implementing it?
  2. rogue49

    rogue49 Tech Kung Fu Artist Staff Member

    It likely would end up being as effective as NAFTA.
    Good & bad points all-together.

    Wouldn't hurt...
  3. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    I haven't had the opportunity to read much about this yet. My first impression is that it could be disastrous to certain elements of both economies.

    Other free-trade agreements consist of economies of various sizes and makeups. NAFTA, for example.

    An E.U./U.S. free-trade agreement would be one between the two largest economies in the world, to the tune of approximately $16 trillion each.

    I'm not currently aware of the similarities and differences between the two economies, but there is the potential of certain industries or companies that have benefited from years of protection to now be at the mercy of competition whose absence they previously took for granted.

    I'd like to be wrong. But like I said, this is my first impression. The U.S. has a long history of "nanny statism" benefiting business and industry. I'm not sure how the E.U. compares in that regard.
  4. Remixer

    Remixer Middle Eastern Doofus

    Frankfurt, Germany
    I do believe that the US economy has an immense competitive advantage in the Service sector, as European businesses tend to lack serious customer relations management, especially at point of sale. Though I doubt this would have any implications on the EU/US trade relationship.

    Making it cheaper for EU businesses/manufacturers to compete with their US counterparts on US soil? Given the ever-growing trade deficit that the US is experiencing despite their government's constant obstructionism, I cannot help but think that Borla 's employer would not be very happy with that. :D
    • Like Like x 2
  5. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Taking a look at each economy by sector (i.e., GDP), the comparison is something like this:

    Services: 70.5%
    Industry: 27.3%
    Agriculture: 2.1%

    Services: 79.6%
    Industry: 19.2%,
    Agriculture: 1.2%

    So it looks like the E.U. has a stronger weighting towards industry, while the U.S. is stronger towards services. I'm not sure how the agriculture sectors will play out, as Canada will be a tough competitor for the E.U. for more than one reason.

    I'm still in the dark about the comparisons. A lot of this will depend on the makeup of each sector. How much of each is domestic vs. exported? How much will this shift with a free-trade agreement? There are so many variables here. It will likely be like it was with NAFTA: you only find out the net effects years after trade rules change.

    I must say I'm intrigued. I might have to geek out on some data later.

    Yes, but if I'm not mistaken, the U.S. service sector maintains a trade surplus across the board, even with China individually.
    Last edited: Feb 13, 2013
  6. Borla

    Borla Moderator Staff Member

    The one positive thing about most of my end users is that they often make products that don't ship cheaply from overseas. Think of how bulky and how much "air" a refrigerator, file cabinet, storage cabinet, desk, or washing machine has when filling up a storage container full of them. The profit in shipping those from Asia or Europe isn't quite the same as other, smaller and denser items. Or at least until you get to the higher end units (like the Bosch units I referred to in another thread). Those have more margin built in so you can spend more on logistics. But for the more basic levels of those items the main foreign competition is south of the border, not overseas. But my niche is fairly unique that way. Hard telling what impact this may have in other markets, or even in raw materials or steel imports, which could have an impact on me.