BY RACHEL LANDEN
As the Eurozone debt crisis lingers, economists warn that financial shockwaves may soon make their way across the Atlantic.
“For the U.S., the EU is the biggest single trading partner, which is why there is so much attention given to the economic problems of Europe,” said Animesh Ghoshal, professor of economics at DePaul University. “People might wonder why others are so worried about Greek debt and what is happening to the euro, but if their economy tanks… it is definitely going to have an impact on the U.S.”
The U.S. and the EU share the largest bilateral trade relationship in the world, with approximately $4 billion of goods, services and investments flowing
between them every day. European countries purchase more than 20 percent of American exports, so it’s no wonder the financial issues plaguing the Eurozone might make their way to the U.S.
President Obama expressed the same concerns last October, warning, “If Europe is weak, if Europe is not growing, as our largest trading partner, that’s going to have an impact on our businesses and our ability to create jobs here.”
The fear is that a Europe in recession would result in lessened demand for U.S. goods. As some European countries are already implementing austerity measures to deal with their sovereign debt crisis, tighter fiscal policy will inevitably lead to fewer purchases.
However, Ghoshal said “there isn’t a great deal that the U.S. can do” to mitigate the financial fallout. While the European Union will have to search for solutions to this problem on its own, the trading partners can work together to reduce trade restrictions, particularly in the agricultural and aerospace sectors.
The EU currently restricts, and in some cases, excludes, the U.S. from selling certain agricultural products to its member nations. Further, arguments have arisen between the U.S. and the EU over accusations that the U.S. subsidizes Boeing, just as the EU subsidizes Airbus.
These disagreements and interferences with an open and competitive market have constrained trade potential between the two. Resolving these disputes could help soften the blow to the trade relationship that may come as a result of the debt crisis.
But finding common ground and reaching an agreement will more likely come from the Transatlantic Economic Council, a body set up in 2007 between the U.S. and EU to stimulate growth and create jobs, rather than by national leaders meeting as the G8.
If progress isn’t made right away, however, the silver lining may be that the countries most directly involved in the European financial crisis aren’t the United States’ top importers. The United Kingdom and Germany lead the U.S.-European trade, importing nearly $56 billion and $49 billion in goods and services, respectively, last year. Meanwhile, Greece, the poster child for national indebtedness, imported just over $1 billion of goods and services from the U.S. in 2011.