Euro crisis causing a pivot back to Europe?
By Brian Beary in Washington | Friday 20 July 2012
As the EU’s economic struggles continue to reverberate across the Atlantic, an emerging silver lining is the renewed focus in Washington on the US’ economic relationship with Europe. Momentum is building for launching talks on a free trade agreement (FTA) that would lead to a major deepening of transatlantic economic integration. The next US administration, be it an Obama or a Romney one, “needs to hit the reset button with Europe,” a former senior economic advisor to President George W Bush told the American Enterprise Institute, a conservative think tank, on 19 July, at a conference entitled ‘Europe on the brink: How should the US engage?’ Timothy Adams, the former President Bush’s treasury undersecretary, noted that the Obama administration, having “ignored Europe” for most of its term, had stepped up engagement in recent months through increased exchanges with Europe’s political leaders. Kristen Silverberg, Bush’s ambassador to the EU in 2008, pointed out that this increase in US engagement was being done “behind the scenes,” whereas she urged the Obama administration to be more transparent about it and do a better job explaining to the American public why the fate of Europe’s economy mattered. Former Treasury Undersecretary Adams urged Mitt Romney, the presumptive Republican presidential nominee, to do the same. Romney is reported to be planning an imminent visit to Europe that will take in Germany, the United Kingdom and Poland.
FREE TRADE PACT TOUTED
Beyond offering advice and support to EU leaders to get through the immediate crisis, the most concrete thing Washington can do to help Europe long term is take a lead in promoting an EU-US FTA, several speakers suggested. Frank Lavin, the Commerce Department’s undersecretary for international trade under Bush, predicted that such a pact would boost growth in both economies by 1-2% of GDP a year. Lavin argued that it should be an inclusive agreement, which other countries could accede to at a later date. Former Ambassador Silverberg added that even a tariffs-only pact would be beneficial. She noted that an open architecture arrangement suggested by Lavin could fit in well with the ‘Reagan economic zone’ idea, which candidate Romney has been touting for countries that share the same values. Chief Economist at the Bank of America, Mickey Levy, speculating on what might happen should the eurozone “have its own Lehman moment” and there is a sudden meltdown, noted that banks in the US today were much less exposed to EU banks than they were back in 2008. Levy also noted that US banks and government agencies had already started contingency planning for dealing with the potential scenario of a euro breakup and reversion to national currencies. But Levy’s own prediction, as with most other pundits around Washington, was that the EU would “somehow muddle through” because the political will to keep the euro together was so strong in Europe.