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Trading Ourselves Out of Recession? A Critical Reflection on the Proposed EU-US Free Trade Agreement

Gabriel Siles Brugge, Ferdi de Ville

Following a high profile EU-US summit in November 2011 momentum for an EU-US Free Trade Agreement (FTA) has been growing, with negotiations already underway. The prospect of such an agreement between the world's two largest economies has been greeted with great fanfare within the EU by commentators and policymakers alike. It is seen as providing an unprecedented opportunity for the EU to (at least partially) 'trade itself out of recession' and for both economies to counterbalance the growing economic power of emerging powers (especially China). This paper critically interrogates such claims by examining the political economy of the agreement, focusing on its potential distributional effects. Ultimately we find that the gains for EU and US producers are likely to be exaggerated. Not only is trade already conducted on a largely liberalised basis between both partners, but the remaining sticking points are areas of domestic regulation (such as the Common Agricultural Policy in the EU) which are unlikely to be overcome in the negotiations. This leads us to conclude that, contrary to widespread expectation, free trade policies are not an unproblematic silver bullet for the EU's economic woes.

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