The figures are impressive: a comprehensive free trade agreement between the European Union and the United States could be worth 100 billion euros a year for both sides. Two million new jobs could be created. The two largest economic markets in the world are heading toward a golden era, according to an extremely euphoric EU Commission.
But, where there are so many winners, there are also bound to be a few losers that are left behind. Especially since the volume of world trade will not see a rapid increase with a deal between the US and Europe; it will just be redirected. The large trading blocks will only end up dealing more with each other, while exports to other world regions and especially imports from Latin America, Asia and Africa into the new super free trade zone could decrease. This is according to a study by the renowned Ifo Institute in Munich.
The study said that if tariffs between the US and Europe are eliminated, then states in West Africa, that traditionally trade with France or Belgium, will be at a disadvantage. Suppliers from the developing countries would be displaced by American companies. Even Canada and Mexico, which have so far joined the North American Free Trade Agreement with the US, would lose out, with their market shares taken over by Europe.
Other losers would be China and Australia, as products exported from these countries into the new free trade zone would become more expensive. Countries like Brazil, Kazakhstan and Indonesia, however, could belong to the winning side as they would be able to unload their raw materials in a much larger market.
Raise the barricades?
If a real free trade zone is established across the Atlantic, without restrictions, and products are freely exchanged, then it would be the US in particular that would benefit. In Europe, growth would be seen in the Baltic States and the Mediterranean countries, aside from France, according to experts.
Critics have called the new free trade agreement a sort of "trade-NATO," which aims to divide the world. The danger is real and negotiators from the US and Europe should bear that in mind in their discussions. The future transatlantic free trade area should be designed so that it takes into consideration the specific needs of the weaker market in Africa and the Caribbean.
Now, however, it seems as if trade talks with the responsible party, namely the Word Trade Organization, have collapsed. The WTO is virtually paralyzed by the dispute between the US, China, Brazil and India over agricultural products and market access for industrial goods, leaving every country to negotiate bilaterally with each other.
The US and Europe do this from a position of strength. They will set the world standard, and the rest must follow. The EU, however, is making offers. For years it has negotiated with 80 countries, among them many developing nations, on free trade. Perhaps the transatlantic free trade discussions will be enough to give these tough and very specific trade negotiations a new impetus.
Complaints about the evil Americans and Europeans will not help now. Africa needs to establish a free trade zone on its own continent, in order to be able to throw its weight around in negotiations. To date, it has been easier for an African country to trade with the EU rather than deal with the tariff and import barriers imposed by immediate neighbors.
Being there is everything
Chinahas long recognized the trend towards free trade agreements and has made an effort to forge regional trade zones in Asia. A free trade agreement between China, the world's third largest economy, and the EU is conceivable to European trade experts - some day. Free trade, without customs duties and with equivalent standards and procedures, will be the defining issue of the next few years. The big trading blocks will go ahead, and those that don't join up in time will count among the losers.
How fast everything will progress is unclear. The US and the EU want to come to an agreement by the end of 2014, but that's probably too ambitious. Hundreds of individual issues need to be resolved. The objections of the French film industry, which recently made headlines, is just one such issue.
Unity within the EU is fragile. Europeans are now making profit and loss calculations. Germany would probably benefit, France barely. Luxembourg will have to pay, while Romania can look forward to a brighter future, according to the Ifo study.
The EU has been negotiating with Canada, a much smaller nation, for the past four years. It will hardly be any quicker with the US. The other regions of the world should therefore use this time to get themselves into position and bring free trade in their regions to the fore.