The Obama administration's overall posture toward Asia has taken a heightened sense of urgency. In a strategy called a “pivot” his administration announced an enhanced engagement in Asia. The outcome would appear to be a commitment for the US to play an increasing leadership role in Asia for decades to come, perhaps at the expense of other regions of the world.
It was with great satisfaction that we heard the President in his most recent State of the Union address state that he will aggressively pursue a comprehensive Transatlantic Trade and Investment Partnership with the European Union. This initiative is important on many levels. Hopefully it could jump-start global trade talks that have seen round after round of negotiations end without progress. Of most immediate significance, however, will be the economic benefits of expanded trade and investment to the citizens of the US and the EU.
Few Americans understand the extent to which our standard of living, our economy and our quality of life are dependent on a strong, vibrant and successful Europe. The US and the EU represent the two largest economies in the world and, not surprisingly, they have the largest bilateral trade relationship in the world. Taken together, the economies of these two regions account for almost 50% of world GDP. Their combined trade flows with the world account for almost one third of global trade.
The US exports over $459 billion in goods and services to the EU annually, and Europe is our largest export market. This trade activity supports an estimated 2.4 million American jobs. Cross-border flows of investment between the United States and the European Union are also significant: The United States and the European Union have directly invested more than $3.7 trillion on both sides of the Atlantic. Over 3.6 million US workers are directly employed by European firms. While Asia is and will continue to be an area of immense importance to us, we cannot lose sight of the fact that total US investment in the EU is three times higher than in all of Asia and that EU investment in the US is eight times the amount of EU investment in India and China together.
This is why all Americans have an interest in the outcome of the Transatlantic Trade and Investment Partnership with the European Union.
Given the low average tariffs between the two regions (under 3%), the fact that the transatlantic talks will be between two economies that largely support free trade, and that the EU and US are at the same level of economic development, it would appear that our trade negotiators should meet with. But the challenge to reaching agreement will involve a number of difficult non-tariff barriers. These barriers are partially driven by diverging regulatory systems, deferring standards, concerns with security, consumer protection, sanitary and phytosanitary (SPS) issues. But these barriers are often erected by special interests seeking to fend off foreign competition.
Americans have an immediate, vested interest in the success of these trade talks. An agreement between the United States and the European Union will provide an impetus for new free trade initiatives worldwide. More immediately, it will help lift the world’s two largest economies, creating hundreds of thousands of jobs for our citizens.