Nov. 8 (Bloomberg) — The European Union slides toward another recession and the Eurozone flirts with dissolution. Meanwhile, the U.S. turns its attention toward the Pacific. China, the world’s second-largest economy and the most important engine of global growth, is foremost in the minds of U.S. trade negotiators. The EU? So 20th century.
The EU’s obituary may be premature. The bloc remains the largest U.S. trading partner and the second-largest U.S. export market. U.S. investment in the EU is more than six times its investment in the next most important destinations, Bermuda and Canada.
U.S. officials may now be banking on the EU to boost U.S. economic growth in the years ahead. By year’s end, officials are expected to announce that the two sides will start talks about a free-trade agreement.
Trade negotiations between the U.S. and EU are always difficult. The two sides have haggled for years over products ranging from Boeing airplanes to bananas to chicken. The EU requirement that U.S. airlines meet European carbon-reduction requirements on transatlantic flights is yet another thorn in the economic relationship.
The promise of a trade agreement probably will be so tempting that the two sides will want to sit down for talks. Bloomberg Government analyst Ken Monahan estimates that eliminating tariffs would cut more than $6 billion a year in EU duties on U.S. exports. At a minimum, U.S. exports such as chemicals, jet engines and autos would become more competitive in the EU with products from other countries.
Getting a U.S.-EU deal done may require a lot more than tariff reductions. Other issues — privacy, agricultural subsidies, aircraft subsidies, to name a few — will continue to be irritants across the Atlantic. Negotiators may decide that gains from tariff reductions on both sides are sufficient to grab them if a larger trade deal proves elusive.
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