G-8 round up: EU-US trade deal doesn’t address economic ills

By Steven Hill, Guardian, June 19, 2013

The Guardian home

(scroll down the Guardian website page)

The excitement over a new EU-US trade deal is understandable:  some of the numbers being thrown around about the potential impacts are fairly significant (i.e. boosting the EU and US economies by 119 and 95 billion euros a year respectively). It gives both sides something to crow about, and to claim they are working to alleviate their respective ailing economies. It allows the EU to show its relevancy by doing something that member states cannot do, and helps “renew the transatlantic alliance,” which I regard as positive.

But on a practical level, this trade proposal is more problematic. First, it will not be easy to negotiate. From GMO foods to cigarettes to household chemicals, the EU has much stronger regulation than does the US. Numerous goods and services would be covered, including insurance and financial products. So will Europe reduce its standards to that of the US? Or will the US increase its standards to that of Europe? Could higher standards even get through the US Senate, which will have to approve this? It’s hard to imagine President Obama being able to line up 60 Senators for anything these days.

Second, the ironic thing about this whole proposal is that it doesn’t really address the fundamental economic ills that plague both the US and Europe. What ails the US economy is a lack of stimulus and a lack of fairness. The lack of stimulus has resulted in a barely slow recovery, and the lack of fairness has left a bitter realization that the economy is rigged for the wealthy while the middle class is falling further behind.

And as for Europe, what ails the economy is a lack of union — fiscal, financial, political, and transfer union — that would facilitate better-off states (those with trade surpluses) helping lesser-off states (those with trade deficits), producing a “rising tide that floats all boats.” Solidarity in Europe is much greater within states (toward each state’s domestic population) than between states (which is the opposite of the US).

So what would this US-EU trade deal do for that situation? I suppose something, if it really led to more trade for those lesser-off states. But I would project that, absent more inter-state solidarity, it is more likely to help Germany and other European states that are better geared for exports.