- The Washington Times - Wednesday, March 7, 2001


The United States reigns supreme around the world. Yet potential adversaries lurk in the background, including an economically protectionist and politically unified Europe centered in Brussels.
The European Union's (EU) future direction is obviously uncertain. But the French, in particular, have long bridled at American dominance.
The late President Francois Mitterand reportedly said: "We are at war with America." It was, he admitted, "a war without death," but nevertheless was "a permanent war, a vital war." Washington should be prepared to fight such a war. One means to do so is to expand the North American Free Trade Agreement (NAFTA) to European states which prefer American freedom to European statism.
Although the EU has created a continental market, it has not created a free market. A meddlesome and inefficient international bureaucracy independent auditors accuse it of wasting $6.4 billion 1999 the EU increasingly inserts itself in national life. Tens of billions of dollars are tossed down the drain to maintain uncompetitive farmers and promote "economic development."
In February the European Commission, the EU's executive branch, reprimanded Ireland for planning to cut taxes. "Sometimes the teacher has to punish the best pupil," explained Commission President Romano Prodi. Irish Finance Minister Charlie McCreevy responded with some asperity that his nation had achieved economic success in contrast to other EU members.
Tensions within the EU are likely to grow. Disagreements among the existing 15 members were strong at the recent EU summit in Nice, France. The political traditions, security concerns and economic positions of potential new members, ranging from the Czech Republic to Romania, vary even more dramatically from those of current members.
Yet most European governments seem more likely to circle the continental wagons than relax their controls, except Great Britain. Although London is an EU member, it has long resisted Brussels' dictates. Today it, and other Euro skeptics, such as Denmark, which recently voted to reject the Euro, can block major new policies, which require unanimity.
But Mr. Prodi is pushing to make the EU more democratic, and thus more dangerous. London can accept such a change only at great risk. Britain refused in Nice to yield its veto over tax and pension policies, but Mr. Prodi is sure to try again.
Moreover, Britain must soon decide whether to join the European Monetary Union, submerging the pound sterling, at its strongest level in more than a decade, in the anemic Euro.
Yet London's economic ties with America are in some ways stronger than with the EU. Britain is the largest single investor in the United States, while the United States invests twice as much in Britain as do EU countries. Thus, an obvious opportunity beckons: Washington should encourage Britain to shift its economic links from Europe to America. John Hulsman of the Heritage Foundation proposes encouraging Britain to join NAFTA as an associate member, creating a new Free Trade Association (FTA).
London could first try to renegotiate the Treaty of Rome, allowing it to opt out of EU restrictions over sovereignty and join NAFTA. Failing that, Britain could shift from the EU to the European Free Trade Area and European Economic Area (which include Iceland, Liechtenstein and Norway), and then sign up with NAFTA. This, Mr. Hulsman argues, provides "the last real chance for Britain to choose an alternative future path, one that recognizes that its natural economic and political partner remains the United States and not the European Union."
Britain is not the only potential FTA member. In 1992 President George Bush promised Chile membership in NAFTA. Washington should offer to liberalize commerce with Japan, America's most important trading partner after Canada. Danish voters recently rejected economic centralization. Ireland has become an economic tiger, out of place in an increasingly statist Europe. Switzerland has remained relatively aloof from Europe and shares America's commitment to economic liberty and political decentralism.
An FTA would also benefit nations currently lining up to join the EU. To sign up, observes Kevin Hassett, an economist at the American Enterprise Institute, "requires new entrants to buy most of the Western European statist agenda." The FTA would provide a better opportunity for potential EU members such as the Czech Republic and Poland, which are more free economically than their neighbors.
An FTA could include other regional islands of economic freedom: Hong Kong, Singapore and New Zealand, for instance. The prospect of belonging to an FTA should be presented to any nation willing to reform; the only requirement should be a willingness to remove restrictions on investment and trade.
America's first goal should be to expand trade. After all, the American gross domestic product has grown by almost a quarter over the last decade, the period of most intense globalization. Since the approval of NAFTA the United States has generated 14 million jobs and dropped its unemployment rate below 4 percent.
Creating an FTA would promote greater economic liberty elsewhere, by offering an alternative to more statist regional blocs, such as the EU. Indeed, an FTA would force the EU to reconsider its policies, as well as encourage the World Trade Organization to pursue its mission of liberalizing international markets.
Finally, an FTA would discourage creation of a centralized, monolithic Europe arrayed against America. Although some political differences between the United States and Europeans are inevitable, strengthening transatlantic economic ties with individual states would discourage an "us-against-them" mentality.
Although Washington is the world's strongest power, it will not go without challenge for long. Creating a new global association of trading nations would be a solid first step in perpetuating American prosperity and influence.


Doug Bandow is a senior fellow at the Cato Institute.

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