Question

What are some of the concerns if the european union decides to sign a free trade agreement with the United states? Explain in detail.

Answer 1

There is a proposed trade agreeement between EU and U.S which will encompass the two largest economies of the world, this would increase the chances of higher monopolistic competition as firms will be able to scale up and expand their reach, impacting the marginal players across the two regions, which would reduce the competitiveness and reduce the decision power making of the small players as they will be forced to tide along with the market players in the economy.

It would weaken the democrative authority of several nations in the EU as some are already bombarded by deficits and shortfall in revenues. It would severly impact EU as it will have to reduce its cost of production because of the already prevalent trade agreements between US, Mexico, and Canada in order to make their products competitive.

Because of the rising concerns due to the pandemic, countries are increasingly turning protectionist as global economy is severely impacted, with protectionist measures, local countries are better able to control local demand and supply, without relying on overseas players.

As both the players constitute more than half the economy, there is a serious threat of them dominating the entire world trade if the partnership fructifies as it could lead to discriminatory practices in terms of higher custom duties for other countries and decline in other countries GDP growth rate because of the imbalance between global growth.