PARIS – The start of negotiations for a free-trade agreement between the European Union and the United States – officially called the Transatlantic Trade and Investment Partnership (TTIP) – marks a key turning point for EU and world trade. It also reinforces both sides’ shift away from multilateral trade policy in recent years. That might be the right move for America, but it could spell serious trouble for Europe.
Over the past half-century, the EU, which represents only 7% of the global population, has managed to maintain an exceptionally strong trade position, despite the rise of emerging markets like China. So, while the US and Japan have seen their respective shares of global exports fall, the EU’s share has remained stable, at around 20%.
Indeed, EU trade power contrasts sharply with the perception of a weakened Europe. Most important, Europe was able to achieve it only by investing heavily in a multilateral trade system through the GATT and then the World Trade Organization.
And yet, while the EU owes much to the multilateral trade system, since 2006, it, too, has shifted to bilateralism, scoring its biggest successes with free-trade agreements with Latin America and South Korea. An agreement with Canada is now within reach (though bilateral negotiations with India seem to have stalled, probably because the Indians do not believe that a free-trade agreement would help them much).