As key trading partners, the European Union and United States have to be on good terms in order for both to get the best from each other. A new free-trade deal that is currently being negotiated between both parties could reap significant benefits for the EU in terms of growth. According to some of their leading lights, growth could be a possibility.
Trade between the two economic powerhouses is estimated to be worth just under £400bn a year, a huge amount which reflects the importance of strong economic ties.
Until the deal was discussed, both economies were struggling and still are, but with an urgent need to boost growth on both sides of the Atlantic, this free-trade agreement could provide much-needed stimulation.
Transatlantic turmoil coming to an end?
Speaking at Harvard University, EU Trade Commissioner Karel De Gucht sounded optimistic about the benefits the deal could bring, especially to Europe.
“This is the cheapest stimulus package imaginable. The income effects we feel could become apparent should be a 0.5%-1% change in growth, which could mean hundreds of thousands of new jobs.”
Negotiations between the EU and US are expected to end at some point in 2014. By that time, it’s possible that the economic picture for both may have changed significantly, either for better or worse.
Cautious optimism
Mr De Gucht’s sense of optimism over negotiations reaching a meaningful and worthwhile conclusion isn’t shared by everyone. A spokesman from Forex trading firm City Index explained why:
“Trade negotiations can be highly volatile and take a long time to bear fruition and so whilst the early signs are positive, we must take this news with a pinch of salt. We must also recognise this could be a negotiating tactic by the US in its effort to combat the global currency war, which is having a greater impact on exports”, he said.
Export anxiety
From the American perspective, this deal should help to bring them some benefits too, namely in their battle to prevent the Dollar’s value from falling against rival currencies including the Chinese Yuan.
However, negotiations for a possible free-trade deal are only in their infancy, and there are plenty of things which could derail any progress made.
Japan is one nation actively seeking to boost exports by devaluing its currency. This could have grave implications for both the US and EU if Japanese success comes at the expense of the two western powerhouses.
