Admittedly, the pope’s characterization was alarmingly accurate in some respects. But, despite its seeming lassitude, Europe retains significant strengths. It is a hub of high-level thought and innovation; it is home to some of the world’s most competitive regions and industries; and, perhaps most impressive, it has built a community and market encompassing a half-billion people.
But the world is changing: the Asia-Pacific region is increasingly influencing global developments, economic and otherwise. The Trans-Pacific Partnership – by which the United States and 11 other countries would create a mega-regional free-trade zone – would most likely accelerate this shift (all the more so if China eventually joins). Though the TPP faces no shortage of hurdles to clear before an agreement is finalized, its potential to augment Asia’s economic power cannot be underestimated.
Europe must work to secure its position in the new world order – beginning by enhancing its own trade and investment ties with the US. The problem is that, as the TPP negotiations progress, talks on the EU-US Transatlantic Trade and Investment Partnership (TTIP) have become so deeply mired in domestic controversies that the entire project may well be scuttled.
Business leaders on both sides of the Atlantic are convinced that a successful TTIP agreement would bring substantial economic benefits – a perception that many studies reinforce. Yet trivial issues – for example, the use of chlorinated chicken and settlements of investor disputes – continue to dominate the debate.
The TTIP’s goal is to unleash the power of the transatlantic economy, which remains by far the world’s largest and wealthiest market, accounting for three-quarters of global financial activity and more than half of world trade. (If the TTIP was opened to other economies – such as Turkey, Mexico, and Canada – the benefits would be even greater.)
Even more compelling than the benefits of achieving an agreement, though, are the potentially catastrophic consequences of failure. For starters, a breakdown of TTIP talks would give considerable ammunition to those in the United Kingdom who advocate withdrawal from the EU; conversely, if the TTIP were implemented, the UK would be unwise – and thus unlikely – to leave.
Moreover, the perception that the EU’s internal squabbles had led it to squander a strategic opportunity would probably drive the US to accelerate its disengagement from the continent. And Russian President Vladimir Putin would invariably regard the EU’s failure as a major opportunity to exert more influence over parts of Europe.
All of this contributes to a starkly fundamental strategic risk: If the TTIP stalls or collapses, while the TPP moves forward and succeeds, the global balance will tip strongly in Asia’s favor – and Europe will have few options, if any, for regaining its economic and geopolitical influence.
When the TTIP was first proposed, Europe seemed to recognize its value. Indeed, it was the EU that pushed the US, which initially doubted Europe’s commitment, to launch the negotiation process in June 2013.
The ambition was to complete the negotiations on “one tank of gas.” No one wanted to endure protracted talks – or the associated political pain.
But EU leaders essentially abandoned the project, seemingly confirming American fears. Trade negotiators struggled to make headway, while anti-globalization groups seized control of the public discourse, presenting the TTIP as a threat to everything from Europe’s democracy to its health.
This is dangerously inaccurate talk, and EU leaders must prevent it from gaining any more traction by making the strategic case for the agreement. And they must revive their commitment to conclude the talks successfully in 2015.
This is not to say that resolving the remaining issues in the TTIP negotiations will be simple. But establishing a trade agreement, especially one that entails so many regulatory issues, is always difficult, as it must account for the complexity and changeability of modern economies. The fact is that the challenges inherent in completing the TTIP are no more intractable than those that EU leaders have faced in the last few years of crisis.
When the TTIP negotiations resume next month, EU leaders must push for genuine progress, with the goal of completing a deal by the end of the year. The good news is that the recent midterm elections in the US might have improved their chances. President Barack Obama now might get so-called fast-track negotiating authority from Congress. If he does, Congress would simply approve or reject any negotiated agreement, rather than picking it apart.
The US presidential election season is starting, and other issues in the new year could easily take over the EU agenda. That is why Europe’s leaders have no time to waste. They must seize economic opportunity – and avert strategic disaster.
Copyright: Project Syndicate, 2015.
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