Free Trade Agreement Between Germany and USA: What You Need to Know

The United States and Germany have a long history of trade, with both countries being each other`s fourth largest trade partners. It only made sense to negotiate a free trade agreement (FTA) to strengthen bilateral economic ties. However, it wasn`t until the previous US administration under President Trump that negotiations for an FTA began.

What is a Free Trade Agreement?

A free trade agreement is a pact between two or more countries that eliminates or reduces tariffs, trade barriers, and other restrictions on goods and services traded between them. It is a tool for promoting economic growth and facilitating international trade. FTAs also create a level playing field for businesses, help protect intellectual property rights, and ensure fair labor practices.

Why a Free Trade Agreement Between Germany and the USA is Important?

The proposed FTA between Germany and the USA is significant because the US is Germany`s most important trading partner outside of the European Union (EU). In 2019, the total trade volume between the two countries reached $250 billion. Germany is also the fourth largest investor in the US, with over 4,700 German companies operating in the country, providing jobs to more than 750,000 Americans.

The FTA would further strengthen the economic relationship between the two countries and open up new opportunities for businesses to trade in goods and services, including intellectual property. The FTA would not only benefit large corporations but also SMEs.

How Will the FTA Affect Other Countries?

The proposed free trade agreement between the US and Germany would have a significant impact on other countries, particularly those in the EU. As Germany is the EU`s largest economy, the FTA could mean that the US would have preferential access to the entire European market.

At the same time, the EU has been negotiating its own FTA with the US, known as the Transatlantic Trade and Investment Partnership (TTIP). The TTIP negotiations have been on hold since 2016 when President Trump took office, but the Biden administration has signaled its intention to revive them.

What are the Challenges in Negotiating the FTA?

Negotiating a free trade agreement between Germany and the USA is not without its challenges. The EU has strict standards when it comes to food safety, animal welfare, and environmental protection. These standards could clash with the US`s more liberal regulations, particularly in the agriculture sector.

Another challenge is ensuring that the FTA is fair and beneficial to both parties. Negotiators must find a middle ground that benefits US and German businesses, while also ensuring that consumers on both sides are protected.

Conclusion

The proposed free trade agreement between Germany and the USA could have a significant impact on the global economy. It would strengthen the economic ties between the two countries, benefitting businesses of all sizes. However, negotiators must navigate the challenges posed by differing regulations and standards to create a fair and balanced agreement.