The Largest Free Trade Agreement Ever Created: The EU in the Americas

President Obama in his State of the Union address announced that the United States and the European Union would seek out a Free Trade Agreement in order to boost the economy of both regions and help curb the ongoing bouts of recessions. This proposed agreement will be the largest agreement ever formed and comes out of years of lessons in trade negotiations via the formation of the EU Common Market and NAFTA. With competition coming from the BRICS, Western countries will likely take back some of the momentum of the mega-economies like China and India in formally opening both the U.S. and EU markets. Years of expanding trade deficits the Americans and Europeans have had with countries like China has lead to an ever increasing dependence on Chinese manufactured goods at the loss of parts of both the U.S. and European manufacturing sectors. As for the neighbors of the U.S., there are costs and benefits to this new agreement. In reality, many of America’s neighbors had the idea of expanding trade with Europe years ago. In almost all cases, the idea of expanding trade towards Europe was one that died in the first generation of trade agreements. Expanding complete U.S. trade to the Americas died in the generation of agreements that followed. Concerns in having the main competition to the U.S. enter its market through its NAFTA partners was once seen as a method of entering the U.S. through the back door, but in recent years the EU has already concluded an FTA with Mexico in 2000 and is currently trying to conclude one with Canada.

In the past, countries like Mexico sought to link itself not to the U.S., but to the EU. Dependence on the U.S. economically for Mexico was frowned upon before NAFTA, but with European interests and funds being focused on Eastern Europe in the early ’90s, Mexico accepted it would have to make an agreement with the U.S. and Canada for NAFTA. The rest of Latin America sought a comprehensive trade agreement with the United States under the Free Trade Agreement of the Americas that effectively died after 2001 when the U.S. turned its focus to the Middle East after the 9/11 attacks. The result of these bouts of trade agreements were that NAFTA partners sought out many bi-lateral trade agreements with the rest of Latin America and Asia, and now with Europe. The EU-Canada agreement currently being negotiated is an outcome of years of stalled collectively ambitious trade agreements since FTAA in the Americas, and is the best example highlighting some of the issues that might come about in a EU-U.S. agreement.

Since 2009, Canada has been negotiating a FTA with the EU. With the economic collapse of many economies in Europe and worldwide, the concerns of past agreements between competing developed economies becoming a method to undermine the US economy were no longer a main concern. As a result, Canada took the opportunity to expand its own bi-lateral trade relationship with the EU. As always, agriculture issues are a barrier to all FTAs, and this is no exception between the Canadians and the EU. Agreements like the FTAA made the agro sectors in the U.S. and Canada nervous to the prospect of South American agricultural products overwhelming their own, reflecting concerns from the French agro industries during EU expansion that thought that the large Polish agro sector would effectively eliminate France’s unique agro industry. The result was that Poland had to give up some of its power as a EU member state to gain some approval from France during the admission process. As for the, FTAA, it never came to fruition.

One of the sticking points between the Europeans and Canadians, as well as a recognized point of interest for the Americans in dealing with the EU, are the agricultural trade boards on both sides that predetermine the level of production in some agro industries. Competing with foreign agro products that might also have a predetermined level of production will cause serious legal complications related to fair market practices. Calculated market value will likely cause many clashes and will establish many lawyer’s careers. Please see the 28.00 min in the video in the link here.

A major issue related to agricultural products between the Canadians and Europeans is one that might hold up a U.S.-EU agreement as well. Genetically modified products in the EU, whether it be fruits or beef, are restricted to some degree and are labelled as modified products if it is allowed in the EU. In North America, there are no concrete regulations to label genetically modified products (called GMOs), and under EU regulations, those products would not be able to be sold in the EU without consumers in Europe knowing what has been done to their food. While agricultural companies will protest this regulation for years under the agreements between the U.S. and Canada and the EU, speaking as someone who has lived in all the aforementioned regions and considering the rights of consumers in a legal perspective, I believe that GMO labels should be standard in the EU as well as everywhere else. There is some evidence that GMO foods might be a cause of some long term illnesses, and with the EU label on GMO products consumers would have a legal right to know what has been done to their food. This trade issue may become one that expands past the negotiators, as agro consumers will likely give little support for the companies that promote GMO in their food.

Brazil and the rest of Latin America were always focused on trade with both the U.S. and EU. South American trade flows are not reflective of those of Mexico, with the U.S. and EU trade taking similarly large portions of the region’s trade percentage. Chinese trade has been gaining ground to the detriment of the U.S. via the purchase of agricultural products from South America. A unique trade situation that has impeded trade between the EU and South America has been the fact that the EU was reticent to South American agro products blighting out similar products in France. In addition, the countries in Mercosur wished to move beyond being a sole commodities producer and benefit from R+D and increased manufacturing production in South America. Agreements for trade often seek to promote increased manufacturing industries in Latin America, with agro products being sold at high demand linked to the market value. While bi-lateral agreements with the US and Canada and has made some progress for countries like Chile and Colombia, the agro issues between emerging markets and Western nations are a massive barrier, ones that cannot be handled as simply as the GMO issues between similarly developed economies. Unlike China, Brazil will likely not be treated as a threat to either the US or EU manufacturing base because of the destiny it holds as an agro exporter that may allow Brazil to enter into a comprehensive, yet bilateral treaty with the EU and the U.S. With the new EU-U.S. Agreement, the floodgates to bi-lateral trade in the Americas with Europe will be a likely future outcome.