US and EU Free Trade Zone

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Theoden
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US and EU Free Trade Zone

Postby Theoden » Mon Mar 24, 2014 5:01 pm

http://edition.cnn.com/2014/03/24/busin ... ?hpt=hp_c4

What do you guys think? I'm not really an expert on global trade.

I think it would be europeans that would mostly complain about any trade deal, mostly about our over-hormoned agriculture and GM foods, overpriced pharmaceuticals and other things.

Will there be any complications with the US Dollar and the Fed, and the ECB and the Euro? Will there be restrictions in monetary policy against the Fed? I know the ECB loves to hold back inflation at all costs, and the Fed at the moment just wants to promote growth.

Free trade zones with two major types of currency? I mean, with NAFTA, there are many currencies, but the US is the dominant economy and has the dominant currency in that type of relationship.

However... I also know that there's going to need to be some power-balancing against China in the future, if this graph is correct. And what better way to solidify NATO's military cooperation than a base of economic cooperation tying all the countries together?

Image
Please note the GDP forecast for China, US and EU.

Also, this article if you have the time. It's three years old though. Nothing new. Your basic 'rise of Asia' stuff.

http://www.bbc.co.uk/news/business-14368324

With hispanics going to comprise 25% of the US population by 2050, I can foresee the US trying to convince the other countries to let Mexico in as well. So basically we are seeing a merge of NAFTA and the EU open market, without the free movement of peoples. In the coming decades of course, not immediately.

Also note that by 2050, the destructive effects of China's One Child policy will be seen in terms of demographics. 36 years later, you will see a lot of old people being supported by young people. I'm not sure if political stability can be achieved under the Communist Party with this gargantuan strain.

Anyway, as for the Trans-atlantic Free Trade Zone: What do you think? Good idea? Bad idea? Will it actually go through? What about my prediction that if it does go through, Mexico will join as well as Canada, and NAFTA and EU would basically be merging?

Will this create a stronger West?




Edit: grammar and image link
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Glaucon
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Re: US and EU Free Trade Zone

Postby Glaucon » Mon Mar 24, 2014 9:19 pm

The idea of these trade-zones is to foster international competition rather than fight it (protectionism, mercantilism etc.), so that that competition will lead to more efficiency, overall, in the long run, which, according to the 'lesson' of Adam Smith, will boost 'the wealth of nations'.

So, if the USA won't allow German companies to sell, say, birth control on the US market, even when it is cheaper and better (because the USA big pharma companies and their impressive profit margins need to be 'protected' by their friends in politics), which hurts growth overall (because it means that the US companies that aren't doing things as well and efficiently as the Germans will keep on doing what they were doing, which, ultimately, hurts US consumers and economic development in both countries, as well as helping to keep health care in the USA expensive), then it would make sense to stop doing that. Same thing the other way around. If you are going to be capitalist and trust in the free market, you might as well... trust in the free market.

Obviously, the USA's many protectionist measures are rather hypocritical, since they have been beating the drums of international free trade since a very long time. Europe has protectionist measures as well (quite a few, with the French being the staunchest in insisting on those). When it comes to trade between those area's, this benefits neither, though it does help/hurt to keep many countries in the third world poorer than would otherwise be the case.

These protectionist measures are sometimes defended as a kind of left-wing anti-capitalist thing, something meant to protect ordinary people from the dangers of globalism. Of course, for the most part, they don't really do any of that. They just 'protect' vested interests of large local corporations, mostly and the apparent interests of some segments of the population. Farmers, especially. US subsidies 'help' farmers in the USA. EU subsidies those in the EU. Both prevent them trading farm products with each other. And both make it harder for farm products from elsewhere to enter the markets, there. They still do, of course, because many of those are cheap, but then the governments take a nice cut in extra import fees.

Protectionists measures are also defended as simple 'national best/self interest arguments'. But of course, that purpose is defeated if everyone has protectionism. So, doing away with them through an agreement makes sense... a simple form of collective action. Of course. a trade zone like this would only do away with SOME of these protectionist measures, because... well, vested interests, and the usual collective action problems between nations.

As far as I can tell, most of the protectionism of the USA and Europe is really just basic vested interests and power politics stuff. The French want all those agriculture subsidies, because they have a lot of agriculture, and their politicians don't want their farmers to get mad (those have tractors and you don't want a parade of tractors blocking the highways or driving into Paris and such). Same thing with the senators etc. from many States in the USA. If you zoom in on many individual protectionist measures (which often date back a while), you generally do not really find much by way of justification 'for the greater good'. You find industrialists and other corporations and lobbies asking/for suggesting this or that. There are exceptions, naturally, but for the most part, most of this is the result of back-scratching.

So, this sort of 'free trade zone' talk is a positive thing, overall, I think.

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