Does a Super Power Need Friends? How the U.S.-France Friendship Could Lead to the Largest Trading Bloc in History

Stuart W. Holliday (Ambassador for Special Political Affairs at the United Nations, 2003-2005)

Cross-posted from Ambassador Holliday’s July 12, 2013 post to The Diplomatic Courier.

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The United States and France have historically shared a deep friendship. This friendship is built on three major pillars: a shared belief in individual liberty, a defense and security alliance, and bilateral trade and investment.

Both nations have come to each other’s aid when faced with serious threats such as war and terrorism; and like most great friends who share a lot in common, the threats to their well-being have evolved. Now, both countries face the pain of transitioning economies, demographic shifts, and a citizenry which demands high quality of life standards. The question today is how can these two nations work together now that the threats they both face are more economic in nature?

The answer lies in the strong foundation of economic activity between our two countries, and the strengthening of our economic relationship through changes in our domestic and global economic policies.

The U.S. has recently been the leading destination for foreign direct investment from France, and each country ranks in the top ten as destinations for each other’s export markets. There are over 2,800 French companies operating in the U.S., and the U.S. is France’s largest trading partner, except the EU itself.

The U.S. relationship with France today is, of course, also a function of the U.S. relationship with Europe. As one of Europe’s leading economic and political powers with a keen sense of its unique place in the world, France can play a key role in shaping the future of Transatlantic trade.

A key test for the U.S. and France will be how the two nations support the effort to create the proposed Transatlantic Trade and Investment Partnership (TTIP) that would form the world’s largest trading bloc. Together, the U.S. and the EU account for nearly 50 percent of global output of goods and services, although this number is declining in relative terms. While the notion of a U.S.-EU free trade area has long been a subject of discussion among the wonkiest in Washington and Paris, it appears that the economic crisis, as well as the rise of other economic powers such as China and India, makes the timing good and the prospects favorable.

Leaders in both countries have a laser focus on job creation. President Obama, now in his second term, has a bit more breathing room than President Hollande, who is entering his second year facing a host of domestic challenges. For Mr. Obama, there is the priority of securing a major piece of his legacy with a sweeping trade deal with Europe, while Mr. Hollande is looking to stimulate an economy that would be poised to reap rewards as a center of innovation.

As negotiations get underway it will be essential for both sides to recognize that not all sectors will win under the new arrangement, but a majority of citizens and businesses will see expanded investment opportunities and wider choices of goods and services.

Recently, Meridian International Center convened a gathering to address this very question. Under the umbrella of its U.S.-France Leadership Dialogue, we gathered policy-makers, experts, and journalists to focus on the prospects for TTIP and the dynamic of our dialogue with EU partners including the French.

While this discussion was “off the record”, several major trends emerged. First, there was general agreement that the Transatlantic Trade and Investment Partnership was actually transitioning from rhetoric to reality with both sides serious about moving it forward. All sides recognize the difficulty of handling sensitive special interest groups who see a loss of influence or revenue through such open competition. In the case of France and the U.S., agriculture looms large as a tough issue. It was also agreed that the TTIP—while still a trade treaty dealing with traditional issues such as tariff barriers—would also provide a framework for addressing longstanding regulatory and standardization gaps that lead to duplication and a high cost of doing business. This includes divergent paths on financial regulation which arguably exacerbated the most recent financial crisis.

In addition to the TTIP, another major area to reinforce between the U.S. and France is our shared commitment to innovation. This includes strengthening the cooperation of research and development and university exchanges. Again there is a solid foundation on which to build. In certain sectors, there has been active cooperation to advance innovation. One example is space and telecommunications, where Northrup Grumman and the French Aerospace company Arianespace are cooperating on the launch of the next generation NASA telescope, the James Webb (along with ESA, CSA, and others). Recently, the U.S. Ambassador to France launched a prize for a French company that is an innovation leader and working to strengthen cooperation that could lead to breakthroughs on both sides of the Atlantic. There is also the example of the two physicists—one French, the other American—who shared the Nobel Prize in Physics last year, and who have been good friends for decades but approached the question of quantum reality from opposite sides. It was this spirit of sharing and exchanging views, while maintaining a unique and distinctive approach which ultimately served the cause of science.

The United States and France, working closely with the EU, can continue to be one of the most successful relationships in history if both sides commit fully to strengthening economic and scientific cooperation as underpinned by a strong historic bond forged at Yorktown, Pointe du Hoc, and beyond.

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