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US, EU considering world's biggest free trade pact

Published on NewsOK Modified: December 11, 2012 at 2:32 am •  Published: December 11, 2012
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Labor unions have opposed previous U.S. free trade deals with developing countries, arguing that American workers would be at a competitive disadvantage because inferior environmental and labor standards in those countries allow for lower wages. But the giant U.S. labor umbrella organization, the AFL-CIO, says it wouldn't have those concerns in a deal with the EU, arguing that European social welfare and environmental standards exceed those in the U.S.

"The AFL-CIO believes that increasing trade ties with the EU could be beneficial for both American and European workers," the union said in a statement about the working group studying a potential deal.

Less surprisingly, the idea has the backing of the U.S. Chamber of Commerce, which says a deal could have sizeable economic benefits for both sides.

Tariffs between the EU and the U.S. are already relatively low, averaging 5 percent to 7 percent. But because of the sheer size of the markets, even marginal reductions could have a big economic impact. A study by the European Center for International Political Economy estimated that eliminating tariffs could boost U.S. exports to the EU by up to 17 percent and EU exports in the other direction by 18 percent. The chamber says a deal could add $180 billion to the U.S. and EU economies over five years, with the U.S. seeing larger gains than the EU. A potential deal could also ease trade by streamlining regulations and expanding the mutual recognition of product standards that the two sides use.

"The opportunity is there. It is golden. We should take it," said Peter Chase, the chamber's vice president for Europe. Chase said it's very likely the two sides will launch talks next year, but he sees challenges for negotiators.

He said both sides have previously negotiated deals, but with much smaller economies, and have therefore become used to negotiating from the strong position. In this case, they will be roughly equals.

But Jeffrey Schott, a fellow at the Peterson Institute for International Economics, sees a potential roadmap in trade deals already in place with South Korea. He said the EU used the U.S. deal with Seoul as a guide for its own deal, which is quite similar.

"What is notable is that each side has been able to make these commitments to Korea, but not to each other," Schott said.

If they follow the Korean agreements, Schott believes the U.S. and the EU could have a deal.

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Follow Desmond Butler on Twitter at http://twitter.com/desmondbutler