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Creation of EU free trade zone could benefit Colorado Springs area

May 7, 2013

The Obama administration wants to create a free trade zone with the European Union, a move that could add billions to local industry revenues, increase manufacturing and reduce unemployment, experts say.

A U.S.-European free trade zone, much like NAFTA that was created under the Clinton administration, would remove most tariffs and trade barriers when shipping goods between the two continents. Elimination of nearly all trade barriers with the EU could pump trillions of dollars into the nation's economy annually and would give a boost to the Pikes Peak region, which exports aerospace, computer, graphic software and other technologies, said Phoenix Cai, University of Denver associate professor of international business law.

'Colorado has a lot to gain from that type of agreement, ' Cai said, 'particularly in the aerospace and technology arena. '

Creating a free trade zone with the EU's 13 member nations could mean hundreds of millions to Colorado Springs-based Neumann Systems alone, said Todd Tiahrt, chief executive officer. The company creates emission control systems for coal-fired power plants. While the U.S. is moving away from coal-fired plants, Europe is expected to build at least seven new plants in France, Germany and Poland, Tiahrt said.

'A contract with just one of those power plants could mean as much as a half-billion dollars to us, ' Tiahrt said, 'and add up to 500 new employees. '

The European Union's top trade official said recently that negotiations with the U.S. on what would become the world's largest free trade agreement should be concluded before the end of next year, The Associated Press reported. Trade between the U.S. and Europe already amounts to about 40 percent of worldwide trade.

'Eliminating tariffs alone would boost U.S.-EU trade by more than $120 billion within five years, ' U.S. Chamber of Commerce President Thomas J. Donohue wrote in a February newsletter.

In 2012, Colorado exports to all countries increased by 11 percent to a record $8.1 billion. The state's largest trading partner was Canada. Its largest export category was computer and electronic parts. The state's largest growth in exports last year was to Brazil.

Cai said the reason Colorado would see exponential export growth from an EU trade deal is the basic economic theory of 'comparative advantage. '

'If we provide airplane parts more efficiently, and we can sell there, ' she said, 'and they produce car parts more efficiently and can trade without trade barriers, more will be sold. '

The North Atlantic Free Trade Agreement, or NAFTA, helped Merrick & Co., which is based in the Denver area and has an office in the Springs, expand into Latin America. A trade-free zone with Europe could similarly help the company, said Bob Berglund, senior vice president for international programs. About 90 percent of the company's business is professional services, such as engineering planning, design, and construction administration. The company has advised and supported companies in 50 countries.

'Anything that can make business, tax finance and regulatory finance easier in the EU, ' Berglund said, 'would make it easier for us to do business there. '

Governments, though, must overcome several obstacles before a deal is reached, Cai said. Eliminating different local protections, such as farm subsidies, in 13 countries and the U.S. could prove difficult, she said. It was farm subsidies that destroyed talks for a trade-free zone with Europe in July 2006 during the Bush administration.

There are also social issues, Cai said, such as the fear of lost jobs, intellectual property issues and the problem with a lack of European acceptance of genetically modified foods.


Contact Ned Hunter: 636-0275.

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