Trade is new Holy Grail in EU chase of growth, jobs

As people around the world celebrate the Chinese New Year, the European Union and the U.S. have become “brothers-in-arms” against Beijing, said one ambassador from a major member state who spoke privately this week.

They no longer see each other as rivals but instead are together doing “global battle” with China to increase their share of global economic activity.

Europe is shrinking in historic and relative terms compared with India, Brazil, Indonesia and a host of other countries taking huge strides in capitalizing on rapid population and economic growth.

Today's EU makes up just one-twelfth of the world population, where as recently as World War II it accounted for a much bigger proportion.

To that end, with public spending slashed by national governments and the EU alike — as anticipated in Thursday's summit talks on the bloc's spending plans for the rest of the decade — the question is how to spur growth.

The conclusions reached by EU leaders, especially given the failure of attempts for more than a decade to open up global trading norms through the World Trade Organization, are that bilateral Free Trade Agreements (FTA) will be the best way ahead.

According to a draft of a summit statement due for release on Friday, leaders will say that “an ambitious trade agenda can lead in the medium-term to an overall increase of 2 percent in growth and the creation of over two million jobs.”

EU Commission head Jose Manuel Barroso says 30 million EU jobs already depend on the export market, and he talked on Wednesday of “directly” discussing a U.S. FTA with President Barack Obama.

Hopes that an announcement on a deal with Washington could be made in time for the next EU summit in March are widely considered optimistic, although the EU ambassador maintained that there was “no going back” and that the U.S. talks had “moved much faster than anyone believed possible.”

The French however are against pinning trade to targets for economic growth and job creation across the EU, though Britain especially and others such as the Netherlands say this is the only way ahead.

With an FTA with South Korea up and running, and seen as the template for negotiations with Singapore, Canada, India, Japan and the main prize of the U.S., the agenda in terms of EU foreign and economic policy is clear.

It stretches all the way down to negotiations with neighbors such as Moldova, with a key focus on Europe's Arab North African neighborhood and a “renewed partnership” with African, Caribbean and Pacific states, many of which were former European colonies.

High Representative for Foreign Affairs Catherine Ashton was a former EU trade commissioner, and worked on the Korea deal — although she maintained she would “leave the percentages to others.”

She met India's External Affairs Minister Salman Khurshid in Brussels last week, and while progress is slow, given what the latter summed up as “stresses in the world economy,” both maintained of FTA negotiations that “we want it, and we want it now.”

For France, the resumption of currency wars is a renewed worry, now the euro appears out of the debt-crisis woods, but is also rising, on the back of a big jump in exports, to exchange-rate levels making Paris uncomfortable.

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