Free trade versus single market

EU US trade deal

The European Union and the United States are currently the largest trade and investment partners in the world, accounting for almost half of the global gross domestic product and almost a third of the volume of all world trade. If they do manage to work out an ambitious free trade agreement), commercial activities in all the EU’s member countries that deal with the US will see a sharp increase in business. Some traditional business ties within the EU, will, however, be almost sure to weaken. As a result, some states will become economically less dependent on the EU’s internal market, which will be one of the greatest achievements and most important benefits of European integration.

The EU’s single market, built on four basic building blocks – the free movement of people, services, goods and capital – is the largest economic zone in the world. Its creation eliminated scores of administrative and technical barriers between the markets taking part. Removing regulatory barriers to mutual trade with the US brings a certain risk of the diversification of trade links that would be caused by the loss of some of the current benefits that come from preferential treatment within the internal market.

If the agreement is signed, trade between Germany and the US could almost double. Similarly, total turnover in international trade between the US and Italy, Greece and Portugal is also predicted to increase. However, trading among the EU’s states themselves would suffer significant declines. Mutual trade between Germany and France, according to the estimates, would drop by up to 23 per cent, and between Germany and the United Kingdom by up to 40 per cent. Economic ties among the European states nevertheless play an important role, and to a large extent they are reflected in policy decisions taken in the context of European integration. It is the internal market’s benefits that can often be thought of as the glue that holds the community together. Naturally, the question of whether the drop-off in economic cooperation will have an effect on the unity of the union as a whole arises.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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