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Sat, May 12th 2007, 14:02

Nina Peacock, Landmark Europe, (3)

TAFTA, in a classical free trade area sense, is unviable. The German Christian Democrats have been dedicated TAFTA supporters for the last decade, as evidenced by Merkel's willingness to bring it back into political discourse. It failed in the mid-1990s for two reasons. First, the domestic political climate in the U.S. and Europe was not ripe. Second, under the WTO, a free trade area must cover all aspects of trade, including agriculture.

One could argue that now the domestic climate in the U.S. and Europe is more amenable to TAFTA, as evidenced by the recent U.S.-EU summit and creation of a Transatlantic Economic Council. This body is not, however, as ambitious as it sounds. It is responsible for regulatory cooperation, not broader dispute settlement. Why does it not engage in dispute settlement? This requires issue-linkage. The advantage to settling disputes through the WTO is that they can be settled through a careful balancing of state interests and threats. One important example is the Cairns Group's role in pressuring the U.S., EU, and Japan to reduce agricultural subsidies. A "TAFTA" or transatlantic dispute settlement body that leaves out other countries' pressure groups could be less- not more- effective than the WTO.

What the transatlantic economic relationship needs is precisely the unambitious Transatlantic Economic Council which puts forth low-profile proposals for regulatory cooperation in goods like pharmaceuticals. What the world economy needs is for transatlantic relations to reinforce the WTO, not undermine it.

Tue, Jun 26th 2007, 15:02

Jon Frost, Ludwig-Maximilians-Universität, Bronze Contributor (11)

There is an ongoing debate about whether regional trade agreements are desirable at all given that they distract from more universal market opening. That aside, I would be very interested in what exactly such a proposal would look like. If it includes more tax loopholes for MNC's and the possibility to sue governments for their regulations (as in NAFTA), then I would be very skeptical.

Here are two other quick thoughts on TAFTA:

1) The EU and US have to reconcile with the fact that their share in total world trade and economic output will decline over the next few decades as other countries and regions "catch up". It is conceivable that other trade relationships - like that between the US and East Asia - will eventually become just as if not more important. One could take this as an argument for or against instituting TAFTA in the near future.

2) Although labor mobility is a central idea in European integration (with some rather hypocritical limitations on the citizens of the "new members") it is somewhat surprising how difficult labor mobility between the US, Canada, and EU is. The regulations in the US are particularly noxious, and have of course been tightened since the Sep. 11 attacks, making immigration but also student exchanges, foreign internships, and tourism much more difficult than previously. (Maybe Europeans who have studied or tried to work in the US can corroborate this). Anything that loosens these ristrictions - whether a transatlantic initiative or the election of a competent US president - is good in my book.