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DQJS24
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MBA specializing in International Business; traveled eleven countries; novice in four languages
  • The Benefit Of A Free Trade Agreement Between The EU And US 0 comments
    Jan 19, 2013 10:22 PM

    During the next ten years the EU and US seek to boost global economies by placing them on a fast paced growth spurt through establishing Free Trade deals in order to have full growth on the macro and micro levels. The Free Trade deal between the EU and US can address a number of important issues at the forefront while establishing global trade rules for transatlantic growth with partnering countries.

    Consider the Free Trade deal between the EU and US

    The impact of this agreement between the EU and US looks to further establish appealing incentives to attract the Asian markets in hopes of a partnership. In order to gain the possibility for future opportunities, the EU and US can utilize their resources in order to set forth a path out of this Great Recession, in the direction of new capital.

    The US with already weak unemployment conditions, lower public sector wages, slow credit growth, an increase in taxes, and with expectations of sluggish GDP growth for the first half of this year, will gain what from a free trade deal?

    Looking at the Micro viewpoint

    As talks look to begin this spring, in hope to establish a comprehensive transatlantic trade and investment agreement set to go beyond just the tariff talks but to address protection of intellectual property rights, regulations, goods & services, investments, procurement, and the possibility to eliminate barriers for sectors like automotive or electronics to generate an increase in economic output. Thus, making it easier to do

    business overseas and generate growth on a fast scaled pace without having to find other ways to boost the economy, such as using platinum coins, which has already been denied as a possible option, Monetary Policy or QE is often the more popular choice.

    On the Micro level in the US, mentioned in the benefits from this agreement would impact the economy as it aims to boost the transactions in the automotive sector making it easier for the exchanges of car components, pharmaceutical companies in Switzerland would benefit from this deal as drugs that have already passed regulation standards in their country would not have to be processed again for approval when shipped to the US, and of course, the more important noticeable benefit would be the increase of exports to the US as it would looks to create 190,000 to 400,000 jobs. Lower unemployment rates ensure future domestic investments as people start to regain confidence in the economy and circulate demand. Confidence is key, as people face the realities of a fluctuating dollar value, the ROI by COB becomes the trending motivating factor.

    Looking at the Macro viewpoint

    This deal continues to point out that the EU and US aims to continue to gain the world's highest GDP's per capita, seeing an increase of €65 billion euros a year in the EU and a possible $59-82 billion dollars to the US. Just looking at the elimination of tariffs alone gives the possibility of an increase between 7%-18% of exports to the US from the EU. With this increase and not to mention the boost in GDP purchasing power, others mention that this deal would bring a shift in global companies business opportunities for competition, distribution channels, and new market entry options creating more opportunities for better and smoother business transactions. On a smaller scale, take for example how the Panama Canal expansion also benefit from this type of agreement as business is expected to increase once the third channel locks are completed. Although nothing is t be shown for just yet, the stage for great growth has been set and of course with many possibilities ahead, the micro has to begin before the macro in order to keep from falling from within.

    Meanwhile the US manages to keep inflation low, help boost public investments, aim to increase domestic demand by 1.8%, and lower its risk weighted on the external finances of Greece and Italy. If this agreement is successful, then this is just a small ripple effect of what the full potential hopes will be achieved in the coming years and potentially be appealing to other countries for future partnerships.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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