Since Obama’s second term, the U.S. administration has begun shaping an older idea concerning the economic-policy approach that needs to be changed; an approach driven by global economic developments and by those of the U.S. economy. The results already bear fruit: Japan has recently joined the Transatlantic Strategic Economic Partnership (TPP) and the first round of negotiations for the Transatlantic Trade and Investment Partnership (TTIP), known as the EU – U.S. Partnership, took place recently.
Against the background of the economic crisis, the U.S. now approaches the problem from a different angle and tries to redefine its position in the international context. The economic ties UE surrounds itself with, the same it uses as basis for its strategies, come from two major directions: Asia – Pacific and Europe – Atlantic.
The arguments for the Asia – Pacific orientation have clearly been exposed by the Secretary of State, Hillary Clinton, in her speech at APEC Summit held in November 2011:
“It is becoming increasingly clear that in the 21st century, the world’s strategic and economic center of gravity will be the Asia Pacific, from the Indian subcontinent to the western shores of the Americas. And one of the most important tasks of American statecraft over the next decades will be to lock in a substantially increased investment – diplomatic, economic, strategic, and otherwise – in this region”.
The new orientation towards Europe and the interest especially shown in the economic area cannot stop us from paying attention to a U.S. foreign economic policy repositioning.
In recent years, the US focus on the continent was almost nonexistent, its major concern being to deal with its internal problems. A repositioning of this kind is a powerful message and an equally symbolic one.
Reinventing a substantial economic cooperation becomes a supportive characteristic for the two power poles in the current economic and for the balancing/rebalancing environment in international politics. This project has an immediate consequence in the sense of a considerable increase of the trade between the two entities and, implicitly, the overall economic activity. Let’s not forget that the European Union and the United States have about 50% of world GDP and that they are responsible for one-third of the total world trade.
What has US (re) found interesting on the Old Continent?
After a period in which the U.S. had looked only in one direction, now it has repositioned and looks with interest and determination at the European market. This is natural. The economic and political dependence on the Asian market has become too big and uncontrollable.
In addition, this dependence considerably limits the U.S. foreign policy options, especially in the military area (see the Sino-Japanese tensions and the sensitive and complex US position).
The approximately 500 million European citizens make the EU one of the largest import markets in the world for goods and services, especially for those with high added value; also this area is one that attracted the larger part of foreign companies’ investments and is responsible for huge numbers of external investments.
It is also a market with a certain special appeal (due to its markets’ structure and customers’ profile), it obviously has a slower growth potential than the Asian markets, but it has a more accentuated predictability and stability.
The reasons underlying this agreement come from multiple directions. The U.S. and the European Union, through their interconnected markets, could counter balance the emerging states’ advance and might redistribute the world engines of economic growth in an equally effective and fast manner.
As for the European Union, such an agreement is seen as a rescue leverage, although it brings itself challenges to the single market, one of the strength pillars of the European project.
A decrease in BRICS countries exports to the U.S. and the European Union is estimated at 30% and respectively 10%, according to a Bertelsmann Foundation Report who has analyzed the impact of implementing the Transatlantic agreement – “The Transatlantic Trade and Investment Partnership (TTIP). Who benefits from the free trade deal? “.
Through these economic partnerships the U.S. does nothing else but implementing the unfulfilled objective of the Doha negotiations, namely the global trade liberalization project blocked by the animosities around eliminating subsidies and opening the goods markets.
There was expected an infusion of $ 500 billion per year in the world economy through the Doha agreement, which would have helped getting millions of people out of poverty.
TTIP’s impact – creating an economic partnership network
The project’s impact can be analyzed from several points of view: the benefits for ordinary people, the influence on trade liberalization and international dynamics, the possible changes brought to an EU market caught in a continuous redefinition, the change in both soft power and hard power, and a shift in EU and US foreign policy paradigm.
The Final beneficiary:
Following trade relations, a European family could save 545 Euros per year, while a U.S. family could save 655 Dollars per year. The EU gain will increase by 119 billion Euros per year, and the U.S. gain by 95 billion Euros, according to the study “Reducing the transatlantic barriers to trade and investment” published by the Centre for Economic Policy Research in London.
The transatlantic trade will stimulate the economies of the partnership members, it will increase the products and services supply and demand, it will create jobs and ultimately will lead to economic growth.
The EU Single Market:
I mentioned about the challenges facing the EU single market. This free area zone is continually redefining itself and the remove of trade barriers with the U.S. could mean a loss of benefits held by the Member States regarding their preferential treatment.
On the other hand, this will inevitably lead to a trade-relation diversification that may be capitalized. The European internal market needs such a boost. Although it is possible a decrease in the trade value between Member States, the overall trade value will increase by merging the two markets. Faced with a new global market display, where actors have multiplied, and given that the single market is shaken by structural problems, the U.S. Free Trade Agreement brings more benefits than losses, according to a simple SWOT analysis.
The world economy and power relations between economic poles:
The TTIP can influence the global economy. It has connections with other forms of partnership, such as the Strategic Transatlantic Economic Partnership, thus generating a new model of global economic cooperation.
Both partnerships having reached a consistent mature stage, they can interconnect, thus creating a huge functional economic space. This may be the trend, considering the intentions and interests of all parties involved.
Clearly the partnership does not limit or restrict the third-party involvement, but not necessarily from the position of beneficiaries. In the long term, the TTIP will need more raw material, more components, it will facilitate a technology exchange between the two parts; all this means increasing imports in order to sustain exports, labor force and skilled and trained employees, mediating a transfer of know-how, concepts and management principles. The projections estimate a contribution of € 100 billion to the world economy through the TTIP.
The idea of creating a network of these economic partnerships can generate a greater and equally shared economic growth in larger areas.
The interconnection of markets, raw materials demand, patents and licenses will restore the image of a global free trade. The economic crisis turned the trade liberalization and development into priority targets, seen as antidotes to the contraction and protection tendencies, including even the national economy protectionism, so that connection and mutual support could equally stimulate the economy and provide premises for economic growth in the long term.
Faced with such a cooperation model, the BRICS or the emerging markets, generally speaking, will decrease their speed and their influence will be diluted.
Equally, considering the extraordinary adjustment speed in these economies, very soon we can see the birth of a similar concept of the BRICS. This trend should be predicted and anticipated because otherwise there is a risk of excessive polarization of the world economy; and polarization cannot bring anything good.
A world economy recalibration determined by the agreement between the U.S. and the EU comes with major benefits for the two actors and influences the global economic relations and architecture known at this time. Eventually, this agreement is an opportunity that must be effectively seized by the two markets.
The fundamental question remains: how will Romania capitalize from the global economy reconfiguration?
What are our advantages that could be exported in the best manner?
What are the vulnerabilities that we have to cover?
We will approach this analysis and possible answers in a future article.
Author : Adrian Marius Dobre