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Originally published February 22, 2013 at 8:00 PM | Page modified February 24, 2013 at 2:16 PM

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Trans-Atlantic trade deal has promise

After all the disappointing and destructive so-called free-trade agreements that have been sold to the American people, here comes one that would actually deliver.

Special to The Seattle Times

Top buyers

America sells three times as much to the EU as it does to China. These countries are our biggest customers.

1. Germany

2. United Kingdom

3. Ireland

4. Netherlands

5. France

6. Luxembourg

7. Poland

8. Spain

9. Sweden

10. Belgium

U.S. Department of Commerce

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After all the disappointing and destructive so-called free-trade agreements that have been sold to the American people, here comes one that would actually deliver.

President Obama wants to complete a deal between the United States and the European Union. This would represent 40 percent of global gross domestic product and about half of world foreign direct investment. As a whole, the EU is the world’s largest economy.

The devil is always in the details, but the promise here is lowering barriers and bringing standards in line between two advanced economies with higher-wage workforces that actually follow the same set of international trade norms.

America sells three times as much to the EU as it does to China. No wonder economists and trade experts estimate the Trans Atlantic Free Trade Agreement (TAFTA) could raise U.S. GDP by 2 to 4 percentage points.

Although Washington earns its trade chops in Asia, Canada and Mexico, Europe is not to be overlooked.

Most of the state’s premier companies have extensive business in Europe already. For example, Paccar owns DAF Trucks, which manufactures its rigs in the Netherlands, Belgium and the United Kingdom.

Washington exports to Germany totaled nearly $1.9 billion in 2012, making it our eighth-largest trading partner. Exports to the United Kingdom were $1.6 billion. Overall state exports reached $75.5 billion last year.

Perhaps counterintuitively, Washington’s big dog in Europe is transportation equipment, almost all airliners and aircraft components. This even though we’re Boeing and they’re Airbus. But we’re actually an alpha world aerospace cluster, whoever is the customer.

Alex Pietsch, director of the Governor’s Office of Aerospace, told me that 39 percent of state aerospace suppliers are doing business with Airbus.

Those suppliers represent 1,250 companies and 131,000 jobs.

Nor is Boeing shut out of Europe. “We ship a lot of airplanes all over the world,” Pietsch said.

Given the depth of aerospace here, TAFTA could mean even more business for this sector from across the pond.

Agriculture has less to gain, at least for now.

The state sends virtually no wheat or grains to Europe, largely because of transportation costs.

As for Washington’s coveted tree fruits, Mark Powers of the Northwest Horticultural Council, called TAFTA “fascinating. There’s some real potential.”

But this wouldn’t be immediately promising. The EU represented about 1 percent of the export volume of apples and pears in the 2011 harvest, a number that has been declining. Europe is a big tree-fruit producer itself and harvests at about the same time of year. About 7 percent of Washington cherries exported went to the EU.

Still, there are niches, such as Pink Lady apples sold to the U.K. And the agreement could eliminate EU tariffs on American fruit, matching our virtually duty-free status toward European produce. It could harmonize rules on organic fruits.

“Every market has value. But in the grand scheme of things, it’s not a Mexico or a China,” he said.

Climate change might alter this calculus, if Europe were to lose harvests to drought. A thawing Arctic Ocean could make the sea route between the Puget Sound and the continent more economical, depending on energy costs. And all this assumes that climate change doesn’t slam us.

Northwest wines have inroads in the EU, especially in Denmark, and a trade deal might lower prices. However, other wine-producing countries, such as Chile, South Africa and Australia, already have free-trade agreements with Europe.

“So, while an FTA may help reduce the price of Northwest wines in Europe if duties are eliminated over a period of time, I am not convinced it will make our wines that much more competitive against other wines in the market, which of course includes European wines distributed within the bloc at no duty,” said Chris Stone of the Washington State Wine Commission.

The state’s advantage would depend on how the final terms of an agreement compare with those of other wine suppliers already doing business in Europe.

Whatever Washington’s stake, agriculture is likely to be one of the most contentious issues to reaching an agreement. Europe has a history of protecting its farmers.

But this might be less of a roadblock than in the past, thanks to the economic crisis in the eurozone. The currency union hasn’t fallen apart, but most member states are facing recessions because of austerity policies.

That’s putting pressure on politicians to encourage growth. Thus, both British Prime Minister David Cameron and German Chancellor Angela Merkel are in favor of TAFTA. A historic breakthrough is possible.

A side benefit of the world’s two largest economies growing closer might be to encourage China to play by the rules, rather than the state capitalism and protectionism that guide Beijing now.

This is the good trade news. The less good is Obama’s pursuit of the Trans Pacific Partnership Free Trade Agreement. This deal would link America with Canada, Mexico, Chile, Peru, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and possibly Japan.

Reagan trade negotiator Clyde Prestowitz warns that the Trans Pacific would undermine NAFTA and a similar agreement with Caribbean nations, costing a million jobs there and 200,000 in the United States as producers switch to Vietnamese textile producers.

He wrote on his blog: “The main part is that the TPP does not at all address the issue of trade-related currency manipulation in which governments actively adopt policies aimed at promoting their exports and reducing their imports by lowering the value of their currencies.”

Washington might be a net winner with D.C. heavily pushing Boeing jets. The United States would not be. So the incoherence of American trade policy will continue.

You may reach Jon Talton at

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About Jon Talton

Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest


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