US, EU to Have Free Trade? What About The PIIGS Factor?

​On the verge of a full blown trade war sparked by the Trump Administration’s steel and aluminium tariffs, as well as the US President’s controversial style of diplomatic confrontation, the US and the EU have agreed to resolve their trade grieves, focus on the mutual treat that is China, and reform the World Trade Organization.  Hyped and dramatized by Donald Trump’s impulsive need to lob insults and threats at anyone he hopes to pressure into some sort of a “deal” or relationship, the largely counter-productive and unnecessary tensions between the long-time allies appear to be abating.  The real diplomacy can begin.  It is shaping up to be a major win for the trans-international corporate beneficiaries of globalization and free trade that need access to more consumers with greater wealth and disposal income.  Given the economic parities that exist between the US and many of the European economies, domestic workers may well also see meaningful benefits, but negotiators on both sides would be wise to reflect on the influence of the PIIGS economies. 

If Donald Trump and his European contemporaries truly hope to achieve free trade between the US and the many countries of the EU, he would be wise to recognize the woes created by the near economic collapses of Portugal, Italy, Ireland, Greece, and Spain.  While absolute free trade between the US and EU would not be equivalent to the Eurozone, which shares a common currency, the undermining influence on the EU of the PIIGS economies would still be in play.  In comparison to Germany and France, the PIIGS countries are poor and underdeveloped.  To function in an open trade relationship, poorer countries must fuel economic bubbles with debt and wealthier countries must guarantee those liabilities, which is what the Eurozone forced members to do.  Alternatively, the populations of wealthier countries must be willing to disadvantage themselves and sacrifice their jobs/ higher incomes in order to buy more goods from their poorer trade partners while the Peoples of “poorer” countries as the cheaper option must severely limit their income growth and  suppress their living standards to remain competitive, which is the relationship that exists between the US and China as well as the US and Mexico.

Free trade certainly offers benefits for the Peoples of free trade partner nations in terms of greater access to goods, which can be made cheaper by reducing the tariff premium, and increased economic opportunities.  When economies are near economic parity, free trade relationships are mutually beneficial to the governments and Peoples of the partner nations.  The bulk of the benefits from globalized free trade, however, go to trans-international corporations that seek to use a global marketplace to minimize their labor costs, expand their customer bases to a geographically-diverse global “middle class,” and undercut smaller domestic competitors.  China is a problem, because its industries are state-owned monopolies, thus free trade with China would force globalized corporations to compete against China as a massive umbrella company.  Despite the fact Donald Trump campaigned as an “anti-globalist” and has continually touted his “America First” policy platform, his now clarified embrace of a fair, free trade agenda, which seeks to transform a global trade war he initialized into a global trade war against China, threatens the very workers he pledged to champion to the benefit of those special interests he rallied against.
 
There is, however, still a chance for Donald Trump and the leaders of Europe, which has also experienced a populous rejection of free trade as exemplified by the Brexit, to foster the kind of global trade the Peoples, governments, and industries of the world need.  Instead of seeking to simply lower tariffs, which deprives governments of dollars they need to reduce tax burdens on their own Peoples, US and EU leaders need to mirror Trump’s approach to steel and aluminium by agreeing to raise tariff rates across the board then seeking mutually beneficial tariff reductions and exemptions.  They need to implement a bilateral system that will allow the US and its EU partners to maximize benefits in terms of increased access to niche and lower-priced goods while minimizing costs in terms of job loses.  Sometimes, this will mean neutralizing the competitive advantage economic disparities and trade barriers create between global competitors.  This is, of course, were the tough negotiators will take place.  Other times, it will simply mean unilaterally dropping tariffs that limit consumer access to foreign goods they cannot get at home.
 
For its part, the US does have a very useful tool, if it is reformed and tariffs are broadly applied, to achieve its trade interests.  It is called the Miscellaneous Tariff Bill Act.  Although the previous versions of the legislation have not been approved since 2012, the Miscellaneous Tariff Bill Act of 2018 aims to suspense or reduce duties on over 1,500 goods that American producers cannot source inside the United States for a three year period .  National economies must be built on industries that serve the local needs of a people with locally plentiful resources that are as local as possible with excess production being used to participate in the global economy.  Trade is most beneficial when it affords greater access to goods that cannot be sourced locally.  In theory, the Miscellaneous Tariff Bill Act can, therefore, help bolster US manufactures and their workers.  In practice, the legislation exempts fully manufactured products thanks to the undue influence of foreign competitors and a lack of representation for smaller American manufacturing.
 
Reforming how the the International Trade Commission and the US Commerce Department decide what products are included for tariff reductions and exemptions would help US manufacturer and consumers access cheaper goods while securing US industries and jobs.  By embracing a similar approach on a country by country bases, the EU could also better represent and reflect the interests of its partner nations.  Where the US and EU host business competitors, they can, in turn, work toward fair, free trade that allows export businesses to sell their wears and compete on quality and efficiency.  Narrowly tailored trade agreement, which must be periodically recalibrated, are needed to ensure the ever-shifting interests of trade partners are addressed as industries change.  The US and its trade partners in Europe, as well as around the world, can create a global economic environment that better serves the economics interests of debt-heavy governments, consumers, workers, and businesses of all kinds.  They can also work together to address threats that undermine their mutual interests by embracing smarter trade relationships. 
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