EU and U.S. trade agreement - Good for Euro funds

May 9 , 2007

The EU and U.S. took another step towards a free trade zone last week at the EU-U.S. Summit in Washington. President Bush, EU President Angela Merkel and José Manuel Barroso, President of the European Commission signed a trans-Atlantic economic agreement that will include:

• Visa-free travel for all EU and U.S. citizens,
• Reduced regulatory burdens in the areas of intellectual property rights, secure trade, investment, financial markets, and innovation,
• Continued negotiation on the WTO Doha trade talks,
• Signing of the EU-U.S. Open Skies Agreement,
• Adopted a joint statement on energy security and climate change.

What the EU-U.S. agreement means:

EU President Merkel is the champion of this agreement as a way to protect the economies of the Western world from the "divide and conquer" strategy of the Asian countries. Although the EU and U.S. combined currently produce 60% of world GDP (with 12% of its population), that will decline to less than half in 20 years, with only 10% global population. According to Merkel, the best way to counteract this is for the West to join forces.

Merkel has the political clout thanks to a strong German, and European, economy. Germany’s unemployment has fallen below the critically sensitive point of 4 million, the lowest since 2002. European unemployment is also the lowest its been since 1993 - among countries using the euro, the rate was only 7.2% in March.

German GDP is forecast to be 2.3% for 2007 (compared to U.S. GDP of 1.9% in Q1 2007). Exports increased 11% in February, despite an increase of the Euro of 12% since January 2006. Furthermore, Germany now has a trade surplus of 13.8 billion Euros.

Action steps:

This agreement will benefit companies that export to Europe, airlines and finance. It will also lower costs to travel to Europe as well as reducing inflation through lower tariffs. Investment opportunities could include U.S. large-cap funds and European mutual funds.

Source: White House, 2007 U.S.-EU Summit

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