Atlantic trade accord could be boom or bust for U.S.

Shadow Government is pleased to run thus post from guest-blogger, Mark Kennedy, a former member of congress and former key advisor on trade issues in the Bush Administration.  He is currently Director of the Graduate School of Political management at George Washington University.

President Obama’s surprise announcement in his State of the Union address that he plans to start talks on a free trade deal between the United States and the European Union could serve as a boon to the nation’s economy or a bust for the nation’s competitiveness. Though reaching any sort of deal will be difficult, leaders in the United States should avoid a proposal that could make American markets more like their European counterparts and should instead seek a plan that helps introduce the best of the American labor markets to the EU in order to boost growth on both sides of the Atlantic.

A successful free trade agreement (FTA) will achieve the following: expand U.S./EU trade, renew the Atlantic political/economic alliance, improve competitiveness in both markets, and set a benchmark for future trade accords.

In order to walk across the finish line together, the United States and the EU must effectively resolve their differences on two key economic policies.

Agriculture

The EU has several long-standing regulations preventing many U.S. agricultural products from coming to market. America has long argued that European demonization of genetically modified (GMO) crops as "Frankenfood" is not grounded in science. With the pressing need to meet the nutritional needs of a growing planet, the potential of GMO crops should not be set aside so quickly.

The United States’ previous treatment of food controversies in free trade agreements can serve as a benchmark in this respect. The terms of the South Korean free trade agreement provided a timeline for when U.S. beef would gain access to Korean markets. A similar time-delayed structure with the EU would allow for officials to adjudicate the safety of American agriculture and for producers to make adjustments necessary to compete in a more open market. Allowing scare tactics to dominate what should be an economic and scientific debate is a loser for consumers on both sides of the Atlantic.

Labor Regulations

A common stumbling block for free trade agreements concern the differences between nations’ labor regulations. American labor unions often balk at FTAs with the countries from the developing world because they fear that their members will be unable to compete with the emerging market’s low-wage employees. This time around the shoe is on the other foot.

According to the World Economic Forum’s 2012-13 Global Competitiveness Report, the United States’ approach to labor flexibility is among the best in the world. EU nations tend to take a more populist and protectionist approach, which can limit productivity and harm young workers. Those protectionist policies have lead to high youth unemployment and unrest in EU nations like Greece and Spain. A final deal should recognize that and center labor arrangements around the idea that a growing economy can provide more job security than government rules.

European Commission President José Manuel Barroso warned at a press conference recently that the EU would not compromise on its "basic legislation" in trade talks.

Rather than approaching these trade discussions in a defensive posture, leaders on both sides should aggressively pursue outcomes that would be highly beneficial to their citizens and the world:

• Europeans should embrace the chance to remove labor restrictions that have for too long resulted in generational inequities and rigidities that hamper innovation
• Americans should be open to revisions authenticated by science and consistent with global competitiveness
• Both sides should seek to establish a standard that could serve as the template for the trans-Pacific trade agreement and others.

It is critical that those who support lower economic barriers stay engaged in support of a joint accord, but one that fosters openness rather than protectionism. A successful deal will expand Atlantic trade, strengthen the Atlantic alliance, improve competitiveness on both continents, and set a standard that stimulates expanded trade agreements with other regions

If the negotiating parties get it right, a U.S./EU free trade agreement could serve as a much needed shot in the arm for each side’s economy and a template for future market innovation.