GOOLSBEE WHO?:

Zero Tariffs Across the Atlantic: A new study suggests a U.S.-EU free trade initiative would increase combined GDP by $180 billion within five years. (PETER S. RASHISH , 8/19/11, WSJ)

According to a report by the Brussels-based European Center for International Political Economy, a trans-Atlantic zero-tariffs initiative would increase combined U.S.-EU gross domestic product by $180 billion within five years. That's more added growth than either would receive from the completion of the Doha Round of multilateral trade talks. And while Doha is facing serious obstacles to its completion, a "Trans-Atlantic Zero" deal could be signed quickly. The issues that have held up bilateral trade pacts in the past--social, labor and environmental standards--should not matter between the U.S. and EU, which share roughly similar ways of organizing their societies.

Since one-third of trans-Atlantic trade occurs between branches of the same firm, eliminating tariffs on that trade would cut costs for both American and European companies and make them more competitive in global markets. That could help trans-Atlantic firms respond to the rise of Chinese, Indian, Brazilian and other emerging-market firms without resorting to protectionist measures.

Whatever other policies emerge from Brussels and Washington, trade liberalization can only add to the economic potential of America and Europe. So why have we heard so little about it in the debates on either side of the Atlantic, even from leaders who have championed freer trade in the past?

One reason could be a fear that if these two economic behemoths move forward on dismantling trade barriers, they could divert attention from the sagging Doha Round. But with countries on both sides of the Atlantic urgently in need of economic growth, we do not have the luxury to wait for a Doha success, however desirable that would be. And just as the North American Free Trade Agreement helped spur the conclusion of earlier global trade talks--for instance the 1990s Uruguay Round--a trans-Atlantic zero-tariffs initiative may galvanize action on other trade deals.

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