Saturday, April 20, 2024

Europe-US trade pact watch


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In an era of increasing globalization and at a time when economies around the world are struggling to keep economic fundamentals intact, bilateral trade agreements will take on meticulous significance as part of an overall strategy aimed at growing and developing local economies.
Hence, the public declaration of intention to move forward rapidly with a trade pact between the European Union (EU) and the United States should come as no surprise to us here in the Caribbean.
Formally known as the Transatlantic Trade and Investment Partnership, this trade pact between the EU and United States is projecting to “add about US$159 billion annually to the EU economy, and US$127 billion for the United States” as well as stimulate flows of goods, services and investment.
Given existing interconnectedness among countries globally, any major trade agreement, particularly among some of the more powerful and resourceful countries in the world, is bound to have some implications for smaller, more vulnerable, and less ingenious economies like those in our parts of the world.  
Hence, having documented the fundamental goal of the EU-United States transatlantic trade pact, the logical question that follows is: What, if any, are possible implications of this new, potential trade agreement for Caribbean countries? Generally, the answer to that question has to do with the static and dynamic effects often associated with trade agreements of the form we are addressing.
You see, Caribbean countries have had a long history of economic and financial relationships with both the EU and the United States. Most of our economies depend, for instance, heavily on visitor arrivals from both Europe and the North America.  
Coupled with the vast amount of trade that exists among these advanced economies and our Caribbean countries, there is no doubt that the flow of goods, services and financial assets among all of these countries represents a vital pillar of our continued economic survival. It is within that context that we have to begin to address the possible implications of the EU-United States trade pact for the Caribbean.
Indeed, two of the static effects of bilateral trade agreements are what’s described in the economics literature as trade creation and trade diversion. To put it simply, trade creation refers to new exchanges of goods, services and financial assets that arise among the EU and United States as a result of the new trade deal.  
Trade diversion captures the reduction in trade between the EU or United States and other countries as the direct result of the fact that goods, services and financial assets can now move more freely between the EU and United States.
Logically, therefore, the extent to which trade between the Caribbean and the EU or United States can or will be diverted from our economies represents the greatest potential fallout for regional economies from the EU-United States trade pact.
Since there really isn’t anything that we in the region can do to prevent such happenings, the sensible reaction is to continue to monitor developments pertaining to this new trade deal and put extenuating measures in place to cushion the predicted, negative impacts. The sooner we adopt that stance, the better for all and sundry!


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