Current Trends & Prospects
The Transatlantic Economy: Current Trends & Prospects
It is clear that the strength of the economic relationship between the EU and the US has the potential to outweigh most transatlantic tensions. This is because the combined economies of the EU and US account for almost 40% of global trade, and represents the two largest economies in the world.
The EU and the US are both among the leaders in global trade. In 2009, the total trade volume for the EU was $3.1 trillion dollars, while the US accounted for $2.6 trillion dollars. These two countries represent the two largest traders and account for the largest bilateral trade relationship in the world. The EU and the US both account for nearly one-fifth of each other's bilateral trade (which includes trade of goods and services), or what amounts to over $1 billion per day. In 2009, exports of EU goods to the US amounted to $276.9 billion (18.7% of total EU exports), while imports from the US amounted to $216 billion (13.3% of total EU imports).
The investment links are even more substantial. In 2008, total foreign direct investment (FDI) stocks held in each other's country totaled $2.8 billion. Flow of FDI from the EU to the US was $168 billion, while investment from the US to the EU was $146.8 billion. The share of EU investment in the US amounted to more than 36.8% of outward FDI stocks, while US investment in the EU was more than 25.4% of EU FDI inflows. Indeed, over 60% of global foreign direct investment is between the EU and the US.
Hamilton and Quinlan, “The Transatlantic Economy 2010: Annual Survey of Jobs, Trade, and Investment between the United States and Europe”
Potential and Benefits of Additional Transatlantic Integration
The economies on both sides of the Atlantic are working together in an effective fashion that is generating further trade, increasing jobs, and encouraging economic growth. Nevertheless, transatlantic economic integration still has enormous additional potential.
Trade liberalization of services, often called the sleeping giant of US-EU economic relations, is a way to increase employment levels and economic growth. However, liberalization is often associated with legal and political problems as services are heavily regulated, especially in the EU; because of this, little has been done in this area. A pointed expansion of the transatlantic trade of services is unlikely in the near future because this process will face similar problems as the WTO, who also struggled to liberalize the trade of services.
Nevertheless, efforts for transatlantic cooperation continue. In April 2007, European Commission President Barroso, German Chancellor Merkel and US President Bush signed the "Framework for Advancing Transatlantic Economic Integration between the USA and the EU." The signing of this framework signaled the need for transatlantic harmony, better goods, and less regulatory burden. This framework established the Transatlantic Economic Council (TEC), which oversees and promotes the implementation of work designed to closer integrate the EU and US economies. The TEC brings together those who hold the political responsibility to foster closer economic ties.
The above information strongly suggests that the EU and US economies are interdependent to a very high degree; trade and investment flow between the EU and the US amounts to supports approximately 14 million jobs on both sides of the Atlantic Ocean.
During the recent economic downturn, however, both sides have struggled to efficiently develop stronger economic ties. Yet, the transatlantic economies can wield more clout, which will result in greater trade volume, larger investment, increased job creation, and ultimately, high economic growth rates, if these economies are increasingly unified and integrated. The work of the TEC and other organizations targets the unified transatlantic approach, but more must be done. Improving the economic relationship should come in three major areas: 1) harmonizing regulations and eliminating barriers to entry and other procedures; 2) encouraging economic integration by fostering interconnectedness on essential non-financial issues including climate change, economic growth, and security; 3) addressing domestic economic issues to rectify any questions regarding consumer confidence.
Once these measures are taken, actors that participate in the transatlantic economy will enjoy the benefits from a stronger and better connected partnership with the other. For more information, click here.