US, EU Move Forward On Trade Pact, Financial Regulations
US, European Union Near Historic Trade Pact
In Obama’s first term, trade was not high on the priority list. In fact, the majority of trade deals completed were actually negotiated during the Bush administration. However, in his second term, President Obama has the opportunity to move forward on several large-scale deals, including a trade alliance between the US and EU.
Last year a high-level working group was established to recommend the launch of formal free-trade talks and it has already garnered the public support of officials on both sides of the Atlantic.
In 2010, the US had $1.9 trillion of foreign direct investment in the EU, and the EU had $1.5 trillion of foreign direct investment in the U.S. Fifty percent of U.S. overseas direct investment goes to the EU and 75 percent of EU overseas direct investment goes to the U.S.
The deal would certainly deepen US ties between the European economies and, more importantly, act as a united front against the dominance of China.
The deal, however, is not without its challenges. As the Financial Times has highlighted, “the rising power of the European Parliament means that treaties with regulatory implications can no longer be pushed through quietly by the commission and member states.” And there is the reality that trade and regulation of trade is overseen by a multitude of agencies in the EU and US.
Some Basel III Rules Delayed
Global central bankers granted a reprieve of sorts to lenders in the form of a four-year delay so they could meet international liquidity requirements. The move was designed as an attempt to prevent another credit crunch.
As the New York Times notes, it is an important action because “increasing bank capital and liquidity requirements — think of it as the size of a bank’s rainy day fund — is arguably more significant than all of the new laws in the Dodd-Frank Wall Street Reform and Consumer Protection Act.”
Criticized by some as being too lenient, the Times makes the point that absent the delay the rules “most likely would have created their own drag on the economy because bank lending would most likely have been curtailed.”
Americans Give A Mixed Response To Fiscal Cliff Deal
According to Gallup Polls, the fiscal cliff agreement inked last week is receiving a mixed response from Americans as neither side gained a majority of American opinion. Of the respondents, a mere 43% say they approve and and an equally marginal 45% say they disapprove.
The line is more clearly drawn in terms of political affiliation with two-thirds of Democrats approve of the agreement, and almost as many Republicans disapproving.