US-Europe: A New Atlantic Pact

In the century of the Pacific, the U.S. is relaunching the Atlantic. While Europe is wondering if and how “Obama 2” will undertake the strategic “pivot to Asia” at the Monaco Conference, Vice President Joe Biden has asked the Europeans to build a free trade area: a unique market between the two sides of the Atlantic, not in the remembrance of the old times but rather in the name of the future.

Better to say it right away: It’s not a new idea. New is the firm belief held by an American administration that still sees in Europe, but not in China, a decisive economic partner. The data are here to prove it. Europe and the U.S. generate together a daily €2 billion trade flow, a third of the total world amount. A free trade agreement project — supported in recent years above all by Germany, Great Britain and France — would have tangible economic benefits. But this idea has never gone further than an agreement of principle due to the complexity of the discussed matters and the forbidding power of the different lobbies that draw huge profits from the protected markets. Today, with the failure of the Doha negotiations on global trade, with the American election over (a period when any trade openness is a taboo) and with the conclusion drawn in Europe that the demand is external or, if not, nonexistent, the necessary political and economical conditions were finally met to go forward with the negotiation. In theory, at least.

Let’s start with the theory then — the first report delivered by the high-level group between the U.S. and the European Union, which is working on lowering the barriers (a second report is about to be published soon). The objective is an agreement that is not limited but rather global and that includes trade flows, services, investments, public contracts, small and medium enterprises’ dispositions and access to raw materials and energy. A comprehensive Free Trade Agreement (FTA)* would set — considering the dimensions of the two economies — the international standards in a lot of sectors of economic activity.

The benefits for Europe and for the U.S. are estimated to be GNP growth of 0.5 percent per year, with an increase in trade and especially direct investments whose importance is often underestimated: American investments in Europe (on which a lot of job positions depend) are three times those directed to Asia. European investments in the U.S. are eight times those in India and China put together. How can we put it? The Atlantic economy is real.

Such an agreement with the U.S. is a very relevant objective for Italy, which currently has an ever-growing volume of exchange with the U.S., worth more than $40 billion. There is no plausible substitute for this market; if there is something that has become clear throughout the years of crisis in the Euro zone, it is that the emerging markets, even if they are expected to grow quickly and significantly, cannot, at the moment, bail us out or replace the American consumers and their purchasing power. Especially for an economy such as the Italian one, where foreign demand compensates for the hardness of the domestic slow-down.*

There is something else: The trade agreement could allow Europe to engage in the economic recovery, which certainly should interest the U.S. Welcome back, America:* There is almost no doubt, in my opinion, that the American driving force seen as a relic from the past is about to start again, thanks to a series of competitive advantages that the U.S. still has. Let’s examine them. First of all, the availability of low-cost energy: The tight oil* and shale gas* revolution will allow the U.S. to reduce its foreign dependence and could allow it to become a hydrocarbon exporter, with a lot of benefits for American companies. It is something that from now on we should keep in mind; it will help to reduce the geopolitical interests of the U.S. in the Mediterranean basin, reminding Europe to their own responsibilities with regard to foreign policy. Second benefit: the global control of information technology and the new media, as Franco Bernabè reminded us at the entrepreneurial forum in Santiago, Chile. And last but not least, the weak dollar that will stay remain so in the foreseeable future. In this worst-case scenario, the competitive advantage for the U.S. turns out to be a serious problem in Europe. The weak dollar, added to the expansive monetary policy of the new Japanese government, could result in a euro so strong that it could damage European trade interests. But precisely for that, a free trade agreement would help to limit the damage of a currency war not yet declared but already in progress.

The conclusion: Reaching a transatlantic agreement won’t be easy. The devil, as usual, is in the details and these details — the non-tariff barriers — are significant. But the benefits are undeniable. There would be an extra political benefit inside the European Union: to help us keep London in Europe. In this century, at least on this side of the Atlantic, losing Great Britain wouldn’t be convenient from an economic or security perspective, neither for the U.S., the European Union nor the British.

* Translator’s Note: These phrases were in English in the original text.