A U.S.-EU free trade agreement, with negotiations to begin later this year, will improve U.S. competitiveness in technology-intensive manufacturing industry, which accounts for 80 percent of U.S.-EU merchandise trade, as well as in related business services, which account for half of services trade. The talks for the agricultural and energy sectors will involve trade liberalization related to far-reaching technological change. Thus, the negotiations will focus on non-tariff barriers and regulatory policies that restrict trade and investment in such technology-oriented sectors.
In this report, Ernie Preeg explains how this agreement can serve as a template for a broader, plurilateral free trade agreement within the World Trade Organization. He further recommends that the agreement be linked to a policy commitment to act jointly to restore market-based exchange rates so as to avoid the adverse trade impact from currency manipulation by others. It will be a difficult agreement to achieve, and will require high-level, forward-looking leadership on both sides of the Atlantic.