The United States and the European Union are readying themselves
to celebrate the formation of the biggest single market to date
which is expected to ease trade barriers across the Atlantic and
increase the volume of bilateral trade between these two economic
blocks. However not all the pundits share the euphoria expressed by
the proponents of the liberal economics unhindered by any
obstacles. Already there are voices that air the concern that such
a free trade agreement between the United States and the European
Union might turn in to a tool to establish a transatlantic managed
market rather than a free trade one.
The critics usually question the extent of the benefits to be
reaped from the agreement. Even though there are estimates of
reciprocal gains as much as 3.5% of the GDPs, or to put it more
precisely as much as USD$ 1.1 trillion, such estimates take the
removal of all tariffs for granted. However given the political
situation both in the European continent and the United States,
this seems to be a difficult target to reach in the near future.
Moreover what the experts usually express concern about the
prospective free trade agreement between these two economic giants
is the diminishing effect of the shapes of the economies that the
EU and the United States have. Both economies are already very well
globally integrated open economies and hence under such conditions
the impact of a free trade agreement might be limited since those
two economies have already been well fused with the world
Compliance and Harmonization
Especially problematic seems the harmonization of the distinct
laws and regulations of these two economic power blocks which have
taken their current shape not only as the result of diverging legal
traditions but also as a result of differing economic and social
mentalities. For instance, the recent controversial court case of
Hobby Lobby illustrates the difficulty on that front. The American
Supreme Court had few days ago ruled in the favor of Hobby Lobby
Company and granted the company the right to refuse demand for
payment by acknowledging the right of an insurance company not to
cover abortion related costs due to its religious convictions.
Apart from the hole that it creates in Obamacare, the real
implication of such a decision would be the acknowledgement of a
concept as ambiguous as "religious conviction" as an
excuse to impede a commercial transaction. Given European
Union's stringent and often hair splitting insistence of
precision of legal norms and regulations, one inevitably asks how
these two diverging mentalities can be reconciled with one another
to create some sort of a transatlantic compliance and harmonization
Moreover the existing level of tariffs in the EU and the U.S
pose another problem for the TTIP. Since the tariffs on the both
sides of the Atlantic are low already, a possible free trade
agreement between these two economic powers will, most probably,
focus on the removal of non tariff barriers like farm subsidies,
labor and environmental standards and government contracting
regulations. However these are the very practices that have been
deliberately created by the European Union to create a harmony
within its own Europe wide single market. They are the products of
years long hard fought negotiations between the EU member states.
Even though it is remain to be seen, but to expect such practices
to be sidelined for the sake of a possible free trade agreement
with the United States in a relatively disregardful fashion does
not seem very plausible.
There are prospective advantages to be obtained through a free
trade agreement between the United States and the European Union
for the both sides. However, it is important to note that such
gains should not be taken for granted. There still remains some
problematic areas that can act as pitfalls during the process.
Especially the well entrenched nature of the non tariff barriers
such as farm subsidies, labor and environmental standards and
government contracting regulations on the EU side should be taken
in to account. Finally it should also be given due attention to the
problem of differing social and political mentalities and diverging
legal traditions as the recent Hobby Lobby case in the United
States clearly demonstrated.
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