[Chancellor] Merkel ponders Atlantic free trade zone (Europe-U.S.)

The Financial Times ^ | 16. Spetember 2006 | Bertrand Benoit

[1rudeboy]

Published: September 16 2006 03:00 | Last updated: September 16 2006 03:00

Spurred by concern about China's growing economic might, Germany is considering a plan for a free-trade zone between Europe and the US.

A senior aide to Angela Merkel said the chancellor was "interested" in promoting the idea as long as such a zone did not create "a fortress" but rather "a tool" to encourage free trade globally, "which she is persuaded is a condition of Germany's future prosperity".

Separately yesterday, the US, Canada and the European Union complained to the World Trade Organisation about China's tariffs on car parts, raising the prospect of Beijing facing its first WTO dispute. The three said they had lost patience with Beijing's refusal to open the $19bn (€15bn, £10bn) a year market.

News that the free trade zone, last pursued by Sir Leon Brittan, when European trade commissioner in 1998, is being debated in the German chancellery testifies to the rapprochement between Washington and Berlin since Ms Merkel's election last November.

This convergence of views was underlined this week when Wen Jiabao, Chinese premier, was politely chided by Ms Merkel for China's poor human rights record and recent restrictions on foreign news agencies, during an official visit to Berlin.

As German perceptions of China have grown more American, Washington's approach has also shifted. Speaking before his first trip to Beijing, Hank Paulson, US Treasury secretary, this week outlined a more balanced policy mixing traditional US criticism with praise for China's reforms.

Ms Merkel's aide said it was "far too early" to tell whether the project of a transatlantic free-trade zone would be part of Germany's priorities when it assumes the six-month presidency of the European Union and chairs the G8 group of leading industrial nations from January.

"The west needs to pull together," Gabor Steingart said yesterday. His book, World-War for Prosperity, a warning about the dangers of globalisation published this week, is credited with influencing the debate in the German chancellery. "What Nato did for the west under the cold war, Tafta [Trans-atlantic free-trade area] can do in the current battle."

Additional reporting by Andrew Bounds in Brussels

[1rudeboy]

Let me be the first to introduce TAFTA, five letters of the alphabet that are certain to be a source of amusement to some, and to induce hysteria in others.

[1rudeboy]

one-time ping

[bill1952]

Interesting idea. - It is certainly a sign of a shift to something other than pure anti Americanism, and that is always good in any case.

But how one would establish a free trade zone with Socialist countries is a daunting task.

[1rudeboy]

Daunting, indeed. It takes about a decade to sort out the thorniest problems . . . witness the Boeing/Airbus dispute.

[ClaireSolt]

Oh, how nice it would be to have fine craftmanship like Italian leather and silk instead of the cheapest plastic shoes from China.

[EQAndyBuzz]

American companies need to move all manufacturing operations from China to Mexico. Any operations that cannot be moved across the water gets moved to other parts of Asia.

Make that the carrot to Mexico after the stick is applied(close the border)

[hermgem]

They have tons of rules to exclude U.S. goods.
Farming, which is fed with royal subsidies and especially in France is an insurmountable block to free trade.
There are these "monsters" of gene modified grains/foods. Just recently U.S rice was taken off the market as four kernels per thousand were detected to be of modified rice.
Next on their no list are meat/chicken where hormones possibly could affect their future health.
Microsoft which is under relentless Europen attack with multiple millions of fines to reveal their intellectual property of Windows so Europeans can take full advantage by coming up with copies and add ons.
Merkel, while seeing a need for open trade also faces consumer slowdowns when a 3% increase to 19% of her value added tax takes effect on 01/01/2007.
High priced and benefits/jobs protected German or French unionized labor does not like to open up by competing.

[1rudeboy]

If the EU chooses to exclude genetically-modified products, there's not much to stop it from doing so. Now if the EU excluded g-m products from elsewhere in order to favor its own g-m food producers, then it becomes a "free trade-type" problem. Arcane distinction, but necessary.

[ClaireSolt]

apparently that was the NAFTA plan, but the Mexicans blew it. Probably too many Frito Banditos.

[ClaireSolt]

They still think like mercantilists and try to keep positive balances of trade. They jump on every chance to get into our market, though. Everyone wants to sell to 300m rich Americans, but they are very reluctant to buy from us. Also, their own EU free market is not wildly popular success.

[bill1952]

Here is some fine Italian craftsmanship for you.

[ClaireSolt]

Do you deliver?

[bill1952]

GM is a red herring, simply put forth to exclude our farm products.

Their communist unions will never permit fair trade, let alone free trade, unless they are forced to. - Fat chance.

As other posters have pointed out, the EU has issues on literally everything - even fish.

Even Kyoto. - Some EU ministers wanted to place punitive tariffs on everything from America after we dumped Kyoto, claiming that we would have an unfair advantage.

The EU has no clue as to what "free trade" really means, and that is one reason China is cleaning their clocks.

Merkel is right to be concerned about the Dragon.

[bill1952]

Do you deliver?

But of course. :)

[1rudeboy]

GM is a red herring, simply put forth to exclude our farm products.

I agree. But it is not a per se trade violation, as long as the ban is consistently applied.

[wolf78]

The EU has no clue as to what "free trade" really means, and that is one reason China is cleaning their clocks.

Sorry, but that is bullsh*t. Just like there's a ban on genetically modified crops in the EU, the US doesn't allow cabotage for European airlines, and there are ownership restrictions with regard to American carriers as well. Free trade - my *ss.
Yes, the EU has tariffs on certain US products, just like the US slapped tariffs on European steel to protect American companies from (at that time) superior competitors.

While you are completely right with regard to farm subsidies, the rest of your statement again proves the worth of anecdotal evidence: none at all.

[dfwgator]

And the car is nice too.

[DoughtyOne]

Too bad we can't have one of those fine vehicles in the U.S. Some day maybe we can if TAFTA or whatever the transatlantic free trade zone comes into being.

LOL

[Atlantic Bridge]

EU free market is not wildly popular success.

It is. As a European I live it every day. Do not mix the political wishes of some anti-EU politicians with European reality. Our economies work much much better since the "common market" and everybody (and I mean everybody) in Europe knows that. If you can show me a country where a large majority wants to leave the European Union I owe you a bottle of good whine. It is indeed true that the EU has to be transformed into something more capitalistic, but the basic idea is good.

Everyone wants to sell to 300m rich Americans, but they are very reluctant to buy from us.

I have to say that beside all the whining about European import restrictions many American goods have the problem that they do not meet the needs of European consumers. I.e. still most US-cars simply need much too much fuel and have a too big cylinder capacity (this is the basis of taxation in Europe) to be interesting on any European markets with our high gas prices. There are many other examples why American goods -although of good quality- are slowsellers in Europe since they were designed for completely different needs. Interestingly, Japan managed to get a strong position in our markets due to their wider range of products while America is not a really important import partner here in western Europe.

The large US foreign trade deficit is alarming since it could end in a big mess for all of us. We are speaking of 58.3 billion $ due to the US census bureau. Therefore -believe it or not- we Europeans have also fundamental interest that America gets a more "balanced" balance of trade and covers its imports through exports to Europe and elsewhere.

The American part of German exports is at 8.8% and falling in the moment due to the fact, that the Asian markets are growing in importance to us Europeans. This must not be fixed forever. Therefore: Such a free trade zone could help to boost our economies and to prevent trade deficits.

[ClaireSolt]

With all due respect, take a look at your explanation and see how the policies manipulate the market. "US-cars simply need much too much fuel and have a too big cylinder capacity (this is the basis of taxation in Europe) to be interesting on any European markets with our high gas prices." They are antiquated imperialistic policies of mercantilism, as if your concern about trade balance. Trade will balance when economies grow and incomes improve.