International media were quick to pick up news on the commencement of negotiations between Washington and Brussels on the establishment of a free trade zone to embrace Transatlantic space. Experts attribute the talks between America and the 28 European countries to geopolitical factors. Growing global-scale competition in the financial-economic field compels the big powers to take action. What could be the global implications of the process?
Union of two giant economic systems: objectives?
The news on the decision to conceive a free trade zone between the U.S. and Europe, announced on 8 February, 2013 sparked keen interest around the world. Initial phase of negotiations has begun. Analysts and experts suggest that this issue is capable of having a global impact. Analytic publications in the media on the issue of free trade zone display prospects of profound changes in the geopolitical landscape of the world. This aspect is of a particular interest.
Institution of a free trade zone is an economic matter. There are several examples around the world. For instance, Hungary, Poland, Slovakia, Slovenia and the Czech Republic signed a Central European Treaty on the establishment of the free trade zone in 1992. Naturally, upon their accession to the European Union such agreement was no longer necessary. U.S. has a similar agreement with the South Korea.
Effective as of 1994, a free trade zone, was created between the U.S., Canada and Mexico with the signing of the North American Free Trade Agreement (NAFTA). Envisaged actions within the organization included conception of efficient mechanisms regulating stage-by-stage lifting of customs duties, protection of intellectual property rights, creation of common investment guidelines, further liberalization of services sector, and a resolution of trade disputes between the participating countries (See: Петр Искендеров. США-ЕС: «свободная торговля» под электронным колпаком // Фонд Стратегической Культуры, 8 July, 2013).
Evidently, objective behind the creation of a free trade zone is the lengthy and complex process of convergence in the trade and economy fields. However, experts largely view the free trade zone between the U.S. and Europe in the geopolitical context. Certainly, it does not imply the lack of financial and economic dividends.
According to preliminary estimates, implementation of the plan would yield 0.7% and 0.3% GDP growth in the U.S. and Europe respectively. U.S. Chamber of Commerce forecasts that, in five years, the elimination of tariffs may generate additional 120 billion USD. Presently, U.S. imports from the EU stand at 700 billion USD. Research by the German experts shows that as a result of the agreement the U.S. would see 13.4% increase in the revenues while the respective figure for the EU would stand at 5% (See: Александр Гасюк, Анна Федякина. «Америка и ЕС начали переговоры о Зоне Свободной Торговли» //www.rg.ru, 10 July, 2013).
Speaking of the free trade agreement U.S. President Barack Obama underscored creation of millions of new jobs while European leaders also highlight the economic dividends of the process. It is only the France that has some reservations in the fear of U.S. dominance, and therefore, Paris has drawn a line on some issues such as cinema and music industry. France insists that these areas should be developed in line with the European interests. Germany, on the other hand, is ready to spearhead the process of free trade zone establishment.
Position of the countries with rapidly growing economies on the issue of the free trade zone is quite interesting. Russia, China and Turkey are cautious about the process. While visiting Washington, Turkey’s PM R. Erdoğan expressed concern with the potential negative impact of the free trade zone on his country’s economy. Ankara is troubled that, in the event of lowering the tariffs to minimum or their total elimination, between the U.S. and the EU, Turkey will face problems getting their products to the much-sought market. Similarly, competitiveness of products of Russian and Chinese origin would be affected. In the meantime, America and Europe appear quite indifferent with respect to concerns of others. What are the reasons?
Integration and geopolitical interests: what is more important?
This aspect underlies the developments around the issue of establishment of free trade zone. American and EU officials do not conceal the gravity of geopolitical factors here. Obama mentioned the necessity of creation of a free trade zone in his annual “State of the Union” address before the Congress. He reiterated that such an arrangement would “level the playing field” (See: Remarks by the President in the State of the Union Address, www.whitehouse.gov, 12 February, 2013) while German Chancellor had addressed the issue of the free trade back in 2007. European Commission President Jose Manuel Barroso was more specific saying that negotiations between the two biggest economies of the world “could be a game changer” (See: Петр Искендеров. США-ЕС: ”свободная торговля” под электронным колпаком // Фонд Стратегической Культуры, 8 July, 2013).
Nevertheless, along with the optimism some European politicians suggest exercising caution in this process. Interestingly, the fear of succumbing to the geopolitical interests of the power across the ocean overshadows economic aspects. EU’s Home Affairs Commissioner C. Malmstrom emphasized that: “mutual trust and confidence have eroded and I hope that the U.S. would do its best to restore them” (See: The Financial Times, 5 July, 2013). Former deputy speaker Belgian Parliament Lode Vanoost used harsher language. He accused the U.S. of “economic spying” against the EU, seeing a connection between economic decline and espionage (See: “American surveillance may kill U.S.-EU free trade talks” // www.rt.com, 1 July 2013). French and Dutch diplomats expressed views in a similar spirit.
On one hand, these developments are indicative of the geopolitical component of the free trade zone concept while, on the other, it underscores number of outstanding problems in the U.S-EU relations. Interesting aspects also emerged when viewing this issue from the perspective of geopolitical rivals of the West.
Western experts believe that Washington was compelled to introduce the free trade zone issue into the agenda, mindful of the rise of the BRICS countries (Brazil, Russia, India, China and South Africa). Source in Brussels said: “the West is not willing to relinquish its positions in the global economy to a group of developing countries, primarily BRICS” (See: Тайное объединение. ЕС и США ведут секретные переговоры о новом торгово-экономическом союзе, www.vz.ru, 27 December, 2013). The U.S. also takes into account another factor.
It is about an idea reflected in one of the recent reports of the U.S. National Intelligence Council. According to their forecast some fundamental changes are expected to take place in the global economic-financial system by 2025. Their conclusion is that the dollar will lose its superior currency position while several other currencies will become equally dominant. Such process may put America’s financial stability into dependence from foreign sources (See: World upon Crisis. Global Trends – 2025: Transformed World. National Intelligence Council Report. 2009). Thus, Washington’s maneuverability area may shrink. That is to say America is concerned about the aspects to be detrimental to its global leadership after 2025. Therefore, it aims to achieve financial-economic integration in the Euro-Atlantic space, and of course under America’s terms.
It attests to the direct link between the creation of the free trade zone and the geopolitical processes. Along with causing social, political, economic and other problems elsewhere in the world, the West attempts to forge more powerful financial-economic system joined by Europe. Evidently, BRICS countries and developing Muslim states are viewed as a source of concern.
Evaluation of global developments from this perspective prompts reassessment of correlation of real integration and the geopolitical interests. In the event of evolution of the trend and with no processes attesting to the contrary, chances of achieving stability in the world will be scarce. Possibly, free trade zones conceived by the superpowers today would cripple the fate of innocent millions tomorrow.