Merits of Transatlantic Free Trade Area Questionable

The current global economic crisis challenges not only the international financial architecture but also the multilateral trading system. With the Doha Round stalling, new regional and bilateral trade agreements are in the making, and the EU is among those actors playing the card of bilateralism and regionalism again. The EU has begun negotiating a free trade agreement with Canada, and as the EU already has an agreement with Mexico, the U.S. would be the only one among the North American Free Trade Agreement (NAFTA) members that would be left out. This could revive past debates on whether it might be wise for the EU and U.S. to conclude a free trade agreement called the “Transatlantic Free Trade Area” (TAFTA), for instance, in order to guarantee many unilateral steps that have taken already towards facilitating transatlantic trade in goods and services and liberalizing transatlantic capital flows.

In an article that is forthcoming in the Berkeley online journal Business & Politics, Rolf J. Langhammer argues against such an agreement. It would be partly redundant, and where it would have trade effects, it would discriminate against the more dynamic trading partners outside TAFTA. Thus, it could provoke Asian trading partners to take trade defense measures. Furthermore, it is very likely that special interest groups would lobby for exemptions for agricultural products and manufacturing industries, and thus it would violate WTO prerequisites for a regional agreement that comprises virtually all trade. Above all, it would seriously undermine multilateral trade negotiations.

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