The formal launch of negotiations on a transatlantic trade and investment deal is an opportunity for the world’s two largest economic blocs to deepen their economic links and jointly prolong their dominance of the global economy. But the fact that the launch was very nearly scuppered shows the hurdles the EU and the US will have to jump in order to achieve anything of lasting significance.
David Cameron, UK prime minister and host of the summit that launched the talks, estimates the benefits of a deal at about £100bn for each of the EU, the US and the rest of the world. Even that is no mean prize, though it amounts to only about 1 per cent of annual output for either bloc. The true rewards of comprehensive trade deals go beyond static economic benefits. They include the impetus to innovation and scale that access to larger markets gives to economies. Both sides of the Atlantic should enjoy a higher long-term growth trend with a serious deal in place.
The shift to Asia of the global economy’s centre of gravity cannot be stopped. But a broad deal would be likely to delay the impact on the Atlantic region’s influence. By integrating their markets now, the US and Europe would, through their combined magnetic power, secure their ability to set market standards in the rest of the world. That would be strengthened further by opening the final deal to other countries such as Canada and Mexico if and when they are ready. The common objection that bilateral deals divert trade as well as create new trade has little force when “bilateral” already covers half the world economy.
