It is time for the US and the European Union to give priority to strengthening commercial ties across the Atlantic. An open and integrated transatlantic market would contribute to jobs and growth when we need them the most.
The potential economic effects of a free-trade agreement between the EU and the US are quantified in a new report by the Swedish foreign ministry and the Swedish National Board of Trade – and the results demonstrate that liberalising transatlantic trade would substantially spur trade and boost national income.
Specifically, the study concludes that a free-trade agreement could increase trade by up to 20% in both directions, presuming full tariff elimination and cutting non-tariff barriers by 25%. US aggregate exports would increase by approximately $52 billion (€39bn), and by $31bn (€23bn) for the EU. It would also increase total world trade by half a percentage point, corresponding to around $90bn (€67bn). In the current fragile state of the global economy, this would constitute a well-needed boost to jobs and growth worldwide.
Liberalising trade is associated with positive income effects. The US economy would expand by approximately $77bn (€58bn). Similarly, the EU economy would expand by around $36bn (€27bn). The new estimates also indicate that there is important complementarity in trade between the EU and the US, since reducing trade barriers would spur intra-industry trade. The automotive industry on both sides of the Atlantic would benefit, leading to more US cars being exported to the EU, and vice versa. The same goes for electronic equipment, agricultural products and many types of services.
These new results clearly stress the importance of the key recommendations recently presented by the Transatlantic Task-Force on Trade and Investment. The Task-Force has advocated that the EU and the US put special emphasis on reducing regulatory and other non-tariff barriers through a bottom-up approach that actively involves the private sector.
It also argues that the EU and the US should explore possibilities for plurilateral trade initiatives in the World Trade Organization in key sectors, for example, the digital economy. Such an effort would also strengthen the multilateral trading system.
By slashing remaining tariffs and reducing non-tariff barriers, we can promote the sectors of our economy that hold the key to growth and development. At the same time, this would support new, substantial liberalisation efforts in favour of open, transparent and predictable markets.
Governments on both sides of the Atlantic face an urgent need to boost economic growth and jobs in order to succeed in promoting long-term competitiveness, and to stabilise budgets. More trade and investment can help meet these needs without having to raise taxes or print money.
Discussion in the EU-US High-Level Working Group on Jobs and Growth has been evolving in a constructive manner. It is essential that this momentum is continued, so that its final report can serve as the basis for serious talks on how to move forward with comprehensive trade and investment liberalisation. Sweden will act to support the creation of a truly open transatlantic market.
Ewa Björling is Sweden's minister for trade.
