Business
Valentin Katasonov
July 7, 2013
© Photo: Public domain

The Unites States-EU free trade zone, destined to boost economic integration, is in the focus of world media. An eye catching term «economic NATO» is used to describe the project. The issue came up in 2011 for the first time, the last half a year it has been grabbing the radar screen worldwide. This February, US President Barack Obama and José Manuel Durão Barroso, the current President of the European Commission, expressed their readiness to start the talks on the project. The start date – July 8, 2013 – was set at the June G8 summit in Ireland.

Getting rid of customs duties and other restrictions may give a serious impetus to economic development of North America and Europe. True, the duties are already low at present not exceeding the level of 5-7% on average. But the annual sea transported turnover is over half a trillion euros, so the burden on business is measured in billions. For instance, European chemical companies paid 700 million euros to the United States as duty fees in 2010. By and large the same goes for US chemical companies, they paid to Europeans around a billion euros. The transatlantic integration entails contradictory implications for economy. The US and European estimations for GDP, export and employment growth, as well as for cutting trade deficit, do differ. Quite often the references are made to the figures adduced by UK Prime Minister David Cameron, who has said that in a few years the free trade agreement will increase the European Union’s GDP by 100 billion pound sterlings (around 157 billion dollars), the US GDP – by 80 billion pound sterlings and the other world’s GDP by 85 billion pounds. According to the US Commerce Chamber estimates, doing away with transatlantic rates will lead to the trade turnover growth exceeding 120 billion dollars in five years. The head of European Commission José Barroso has said the agreement will spur the European Union’s GDP growth increasing it by half a percent. According to him, it means the income will be measured in many billions of euros and many new working places will be created, perhaps dozens of thousands Europeans will get jobs.

Of course, it’s not just the economy. The free trade agreement in general will improve the plight of Western civilization downgrading under the pressure of the countries outside of the «gold billion» zone led by China, BRICS and some other developing states. Europeans care less about it, but it’s the issue of paramount importance for the United States. Many a time Barack Obama has repeated that the agreement between the United States and Europe would not only ensure unlimited access to European market for US companies, spur exports, boost employment and produce favorable effects on budget deficit, but also change the strategic relationship between the United States of America and Asia. At that, Washington tries to hush up the real purposes of transatlantic trade integration.

US-Europe free trade zone: pro and contra

Here is the summary of the views expressed by politicians, businessmen and experts.

First, there are skeptics on the both sides of the Atlantic. They don’t say there will be no positive result for the Unites States and European economy, but insist that the estimations of trade turnover, GDP and employment growth are exaggerated. Even if the estimations adduced are exact and beyond doubt, the expected growth is clearly not sufficient to get the «gold billion» economy from the dire straits of dragging crisis.

Second, there are Europeans who fear the free trade agreement coming into force will make the «big brother» stronger. After the Second World War Washington used the instruments of NATO to take military policy and the armed forces of the Western Europe under its control. The transatlantic free trade agreement is viewed as an «economic» version of NATO that will ultimately destitute Europe of its sovereignty. Many European politicians think the time is wrong for the talks with the Unites States. The European Union is going through crisis (debt, budget, economic) what makes it easier for Washington to achieve unilateral concessions at the round table.

Many media outlets oversimplify the issue saying the parties will only have to agree on the elimination of all duties providing for free circulation of commodities and services in the transatlantic economic space. But there are other numerous instruments besides duties which protect markets and exporters, take, for instance, ecological standards, budget subsidies, taxes (benefits and the ones substituting import duties), the conditions stipulating access to loans etc.

The positions of some world market actors are defined by the capabilities of their printing presses, or the central banks acting as the centers of emission. In the case of «economic NATO» Washington will take the lead thanks to the advantage provided by the Federal Reserve System. Whatever its weak and strong points may be, it is stronger than the European Central Bank. The old world media often mentions the prospect of European cinema industry ultimately swallowed by Hollywood. The consumers’ rights defenders and ecologists are skeptical too. Yannick Jadot, a European Parliament member, Group of the Greens/European Free Alliance, warns about the US-made goods invading Europe, saying it does not want genetically modified foodstuffs, hormone grown beef and chlorinated meat on it market. There is a wide gap between the European and US safety standards using different criteria.

Third, the countries to be left outside of the planned transatlantic free trade zone express grave concern. In case the project is implemented, the zone will account for 50 percent of world GDP (Mexico and Canada will also join along with the Unites States being members of NAFTA (North American Free Trade Agreement). There is a high chance Australia and New Zealand will also join the integration alliance. Then the «gold billion» will consolidate its trade and economy, something to inevitably hinder the economic progress of outside countries, like China, BRICS and Japan.

Spying row

As soon as the start date of free trade zone talks between the European Union and the United States was set on July 8, the scandal was sparked by the Edward Snowden revelations devoted to special services spying activities coming into the open. The European Union happened to be the prime target. At first Washington asserted the eavesdropping and Internet messages monitoring activities were related only to rank and file foreigners and the only purpose was to prevent terrorist acts. Then the information surfaced the European Union and its member states high ranking officials were also subject to «anti-terrorist checks».

38 foreign embassies and missions have been snooped on, described by the US special services as targets, including the Brussels-based European Union’s headquarters. France and Germany are the objects of special interest: about two million French and 15 million German phone calls were tapped daily. Berlin and Paris have already demanded explanations from Washington. European Parliament President Martin Schulz has said there will be serious damage to the US-EU bilateral relations in case the information is confirmed. EU Commissioner for Justice Viviane Reding has said the free trade agreement is threatened. As she has noted, «partners do not spy on each other».

Spying on allies as a routine matter

Nothing new under the moon. The ongoing spy scandal is just an illustration of what has long become a routine matter in the «civilized world». It’s enough to recall the ECHELON signals intelligence (SIGINT) collection and analysis network system. It was deployed as a result of secret pact concluded between the intelligence services of the United States, Great Britain, Australia, Canada and New Zealand. ECHELON was capable of interception and content inspection of telephone calls, fax, e-mail and other data traffic globally tapping communication bearers including satellite transmission, public switched telephone networks (which once carried most Internet traffic) and microwave links. It was capable of intercepting up to 100 million messages a month. The idea of achieving the pact with other countries and the deployment of the system was initiated by the United States National Security Agency (NSA). The elements of the network are dispersed throughout the whole world – the United States military facilities in Germany, the sites in the United Kingdom, in the Pacific and Hong Kong. The processing is based on using code words. Advanced voice recognition and optical character recognition (OCR) programs are used to look for code words or phrases (known as the ECHELON «Dictionary») that will prompt the computers to flag the message for recording and transcribing for future analysis. If you insert the word «microprocessor», for instance, then it starts to search for it across all the intercepted phone calls, faxes and electronic messages. The only thing left is to see who and why used the word and who the interlocutor was. According to independent Western experts, over 80 percent of intercepts are used for industrial espionage. Echelon is a global spying system. It doesn’t exactly serves the interests of «gold billion», but rather Anglo-Saxon community, which views all Europeans, except the British, as rivals and the targets for watching. Let me set just one example. In 1995 there was a media leak saying the National Security Agency used ECHELON for interception of all faxes and phone calls between European Airbus consortium and Saudi national air carrier. As a result the information surfaced that Airbus offered large bribes to Saudis for conclusion of 6-billion deal. The National Security Agency shared the information with the United States government, which managed to convince the Saudis to sign the contract with Boing and McDonnell Douglas instead. Kai Hirschmann, a German intelligence expert, in his book «Geheimdienste» (Secret Services), 2004, points out the key things.

First, After the Cold War the economic intelligence became paramount making pale the fight against terrorism in significance and scale. For instance, back in the 1990s former CIA director Robert Gates said the issues related to economy dominated the list of missions assigned to the Agency. Around half of assignments the CIA was tasked with were of economic nature.

Second, in the West economic intelligence adds to the industrial espionage of private corporations. There is kind of «division of labor» between corporate and state intelligence agencies. State agencies put under surveillance ministries, agencies, international organizations, embassies and trade missions to get information on economic, financial, commercial and industrial policies of states, as well as the positions the state delegations are to take at international talks, the existing contradictions between the states, which are members of economic organizations and alliances, secret accords etc. Of course, states are involved in industrial espionage, but it mainly boils down to military technologies. State intelligence agencies carry out requests placed by large corporations, especially when they bid for foreign tenders or compete for large orders from other countries.

Third, many Western special services spy on allies. In other words, the «gold billion» countries snoop on each other. It’s inevitable in the conditions of competition.

Fourth, today a large portion of data is acquired by technical means without human intelligence. The methods used are eavesdropping, bugs installed in offices, cars, faxes, taps on cables, stealing information from computers and servers, processing massive Internet information flows, getting access to electronic messages through Skype connections etc.

Kai Hirschmann says since a long time all states resort to industrial espionage to achieve economic advantages. The West is no different from its former «friends» from the East. According to US estimates, 23 countries routinely spy on the United States of America, including big European powers. At that, the USA is the world leader…Speaking at the Center for Strategic and International Studies, former CIA director James Woolsey said in July 1994 that he always smiled when companies said they needed no aid from intelligence community. The CIA had already helped them to secure large contracts. Rings true if one has a close look at the matter. Once governments assign their intelligence community with the tasks of economic spying, it’s natural to suggest that they are spied on themselves on their own soil by special services of friendly and unfriendly states.

Free trade prospects against the backdrop of spy scandal

The scandal raised by the revelations confirming the fact that the US special services snooped on European allies has not made surface anything new. It’s just that all controversies of this kind had taken place behind closed doors before. Now the quarrel in the family has come out into the open. Despite all the angry statements made publicly by EU officials and European politicians, no drastic changes of the US-Europe relationship should be expected. There is a slim chance the free trade zone start talks scheduled on July 8 will be cancelled. At best the beginning of negotiation process could be delayed for a week or two to make Europeans «chill out». That what the French top officials have proposed (they take the most tough stance on the issue). Germany is especially humiliated by Anglo-Saxons, it has happened to be the prime target of the National Security Agency’s snooping efforts. On the one hand, it shows that Germany is considered to be the country posing the biggest economic threat. On the other hand, it testifies to the fact that Germany is perceived by the United States not as an ally, but rather as a satellite nation. Angela Merkel does not seem to be bothered much: she has let know there is no intent to come out of talks or even postpone the date. Some media outlets have dropped a hint the Snowden revelations about American snooping were part of deliberate effort on the part of «economic NATO» opponents pursuing the goal of preventing the creation of free trade economic zone, or, at least, slowing the process down…

It should be noted that the whole story has made Europeans get real aces allowing to gain time and to cement, to some extent at least, the otherwise weak position before the talks. There is a wide range of issues on the agenda. Nobody expects the agreement to be concluded even in a year. It will take no less than two years. There will be many other events taking place during this period of time. For instance, the second wave of financial and economic crisis to change the correlation of forces among the negotiators. I suggest we make no guesses on how it could affect the outcome of US-EU talks.
 

The views of individual contributors do not necessarily represent those of the Strategic Culture Foundation.
Spying Scandal and Prospects for «Economic NATO»

The Unites States-EU free trade zone, destined to boost economic integration, is in the focus of world media. An eye catching term «economic NATO» is used to describe the project. The issue came up in 2011 for the first time, the last half a year it has been grabbing the radar screen worldwide. This February, US President Barack Obama and José Manuel Durão Barroso, the current President of the European Commission, expressed their readiness to start the talks on the project. The start date – July 8, 2013 – was set at the June G8 summit in Ireland.

Getting rid of customs duties and other restrictions may give a serious impetus to economic development of North America and Europe. True, the duties are already low at present not exceeding the level of 5-7% on average. But the annual sea transported turnover is over half a trillion euros, so the burden on business is measured in billions. For instance, European chemical companies paid 700 million euros to the United States as duty fees in 2010. By and large the same goes for US chemical companies, they paid to Europeans around a billion euros. The transatlantic integration entails contradictory implications for economy. The US and European estimations for GDP, export and employment growth, as well as for cutting trade deficit, do differ. Quite often the references are made to the figures adduced by UK Prime Minister David Cameron, who has said that in a few years the free trade agreement will increase the European Union’s GDP by 100 billion pound sterlings (around 157 billion dollars), the US GDP – by 80 billion pound sterlings and the other world’s GDP by 85 billion pounds. According to the US Commerce Chamber estimates, doing away with transatlantic rates will lead to the trade turnover growth exceeding 120 billion dollars in five years. The head of European Commission José Barroso has said the agreement will spur the European Union’s GDP growth increasing it by half a percent. According to him, it means the income will be measured in many billions of euros and many new working places will be created, perhaps dozens of thousands Europeans will get jobs.

Of course, it’s not just the economy. The free trade agreement in general will improve the plight of Western civilization downgrading under the pressure of the countries outside of the «gold billion» zone led by China, BRICS and some other developing states. Europeans care less about it, but it’s the issue of paramount importance for the United States. Many a time Barack Obama has repeated that the agreement between the United States and Europe would not only ensure unlimited access to European market for US companies, spur exports, boost employment and produce favorable effects on budget deficit, but also change the strategic relationship between the United States of America and Asia. At that, Washington tries to hush up the real purposes of transatlantic trade integration.

US-Europe free trade zone: pro and contra

Here is the summary of the views expressed by politicians, businessmen and experts.

First, there are skeptics on the both sides of the Atlantic. They don’t say there will be no positive result for the Unites States and European economy, but insist that the estimations of trade turnover, GDP and employment growth are exaggerated. Even if the estimations adduced are exact and beyond doubt, the expected growth is clearly not sufficient to get the «gold billion» economy from the dire straits of dragging crisis.

Second, there are Europeans who fear the free trade agreement coming into force will make the «big brother» stronger. After the Second World War Washington used the instruments of NATO to take military policy and the armed forces of the Western Europe under its control. The transatlantic free trade agreement is viewed as an «economic» version of NATO that will ultimately destitute Europe of its sovereignty. Many European politicians think the time is wrong for the talks with the Unites States. The European Union is going through crisis (debt, budget, economic) what makes it easier for Washington to achieve unilateral concessions at the round table.

Many media outlets oversimplify the issue saying the parties will only have to agree on the elimination of all duties providing for free circulation of commodities and services in the transatlantic economic space. But there are other numerous instruments besides duties which protect markets and exporters, take, for instance, ecological standards, budget subsidies, taxes (benefits and the ones substituting import duties), the conditions stipulating access to loans etc.

The positions of some world market actors are defined by the capabilities of their printing presses, or the central banks acting as the centers of emission. In the case of «economic NATO» Washington will take the lead thanks to the advantage provided by the Federal Reserve System. Whatever its weak and strong points may be, it is stronger than the European Central Bank. The old world media often mentions the prospect of European cinema industry ultimately swallowed by Hollywood. The consumers’ rights defenders and ecologists are skeptical too. Yannick Jadot, a European Parliament member, Group of the Greens/European Free Alliance, warns about the US-made goods invading Europe, saying it does not want genetically modified foodstuffs, hormone grown beef and chlorinated meat on it market. There is a wide gap between the European and US safety standards using different criteria.

Third, the countries to be left outside of the planned transatlantic free trade zone express grave concern. In case the project is implemented, the zone will account for 50 percent of world GDP (Mexico and Canada will also join along with the Unites States being members of NAFTA (North American Free Trade Agreement). There is a high chance Australia and New Zealand will also join the integration alliance. Then the «gold billion» will consolidate its trade and economy, something to inevitably hinder the economic progress of outside countries, like China, BRICS and Japan.

Spying row

As soon as the start date of free trade zone talks between the European Union and the United States was set on July 8, the scandal was sparked by the Edward Snowden revelations devoted to special services spying activities coming into the open. The European Union happened to be the prime target. At first Washington asserted the eavesdropping and Internet messages monitoring activities were related only to rank and file foreigners and the only purpose was to prevent terrorist acts. Then the information surfaced the European Union and its member states high ranking officials were also subject to «anti-terrorist checks».

38 foreign embassies and missions have been snooped on, described by the US special services as targets, including the Brussels-based European Union’s headquarters. France and Germany are the objects of special interest: about two million French and 15 million German phone calls were tapped daily. Berlin and Paris have already demanded explanations from Washington. European Parliament President Martin Schulz has said there will be serious damage to the US-EU bilateral relations in case the information is confirmed. EU Commissioner for Justice Viviane Reding has said the free trade agreement is threatened. As she has noted, «partners do not spy on each other».

Spying on allies as a routine matter

Nothing new under the moon. The ongoing spy scandal is just an illustration of what has long become a routine matter in the «civilized world». It’s enough to recall the ECHELON signals intelligence (SIGINT) collection and analysis network system. It was deployed as a result of secret pact concluded between the intelligence services of the United States, Great Britain, Australia, Canada and New Zealand. ECHELON was capable of interception and content inspection of telephone calls, fax, e-mail and other data traffic globally tapping communication bearers including satellite transmission, public switched telephone networks (which once carried most Internet traffic) and microwave links. It was capable of intercepting up to 100 million messages a month. The idea of achieving the pact with other countries and the deployment of the system was initiated by the United States National Security Agency (NSA). The elements of the network are dispersed throughout the whole world – the United States military facilities in Germany, the sites in the United Kingdom, in the Pacific and Hong Kong. The processing is based on using code words. Advanced voice recognition and optical character recognition (OCR) programs are used to look for code words or phrases (known as the ECHELON «Dictionary») that will prompt the computers to flag the message for recording and transcribing for future analysis. If you insert the word «microprocessor», for instance, then it starts to search for it across all the intercepted phone calls, faxes and electronic messages. The only thing left is to see who and why used the word and who the interlocutor was. According to independent Western experts, over 80 percent of intercepts are used for industrial espionage. Echelon is a global spying system. It doesn’t exactly serves the interests of «gold billion», but rather Anglo-Saxon community, which views all Europeans, except the British, as rivals and the targets for watching. Let me set just one example. In 1995 there was a media leak saying the National Security Agency used ECHELON for interception of all faxes and phone calls between European Airbus consortium and Saudi national air carrier. As a result the information surfaced that Airbus offered large bribes to Saudis for conclusion of 6-billion deal. The National Security Agency shared the information with the United States government, which managed to convince the Saudis to sign the contract with Boing and McDonnell Douglas instead. Kai Hirschmann, a German intelligence expert, in his book «Geheimdienste» (Secret Services), 2004, points out the key things.

First, After the Cold War the economic intelligence became paramount making pale the fight against terrorism in significance and scale. For instance, back in the 1990s former CIA director Robert Gates said the issues related to economy dominated the list of missions assigned to the Agency. Around half of assignments the CIA was tasked with were of economic nature.

Second, in the West economic intelligence adds to the industrial espionage of private corporations. There is kind of «division of labor» between corporate and state intelligence agencies. State agencies put under surveillance ministries, agencies, international organizations, embassies and trade missions to get information on economic, financial, commercial and industrial policies of states, as well as the positions the state delegations are to take at international talks, the existing contradictions between the states, which are members of economic organizations and alliances, secret accords etc. Of course, states are involved in industrial espionage, but it mainly boils down to military technologies. State intelligence agencies carry out requests placed by large corporations, especially when they bid for foreign tenders or compete for large orders from other countries.

Third, many Western special services spy on allies. In other words, the «gold billion» countries snoop on each other. It’s inevitable in the conditions of competition.

Fourth, today a large portion of data is acquired by technical means without human intelligence. The methods used are eavesdropping, bugs installed in offices, cars, faxes, taps on cables, stealing information from computers and servers, processing massive Internet information flows, getting access to electronic messages through Skype connections etc.

Kai Hirschmann says since a long time all states resort to industrial espionage to achieve economic advantages. The West is no different from its former «friends» from the East. According to US estimates, 23 countries routinely spy on the United States of America, including big European powers. At that, the USA is the world leader…Speaking at the Center for Strategic and International Studies, former CIA director James Woolsey said in July 1994 that he always smiled when companies said they needed no aid from intelligence community. The CIA had already helped them to secure large contracts. Rings true if one has a close look at the matter. Once governments assign their intelligence community with the tasks of economic spying, it’s natural to suggest that they are spied on themselves on their own soil by special services of friendly and unfriendly states.

Free trade prospects against the backdrop of spy scandal

The scandal raised by the revelations confirming the fact that the US special services snooped on European allies has not made surface anything new. It’s just that all controversies of this kind had taken place behind closed doors before. Now the quarrel in the family has come out into the open. Despite all the angry statements made publicly by EU officials and European politicians, no drastic changes of the US-Europe relationship should be expected. There is a slim chance the free trade zone start talks scheduled on July 8 will be cancelled. At best the beginning of negotiation process could be delayed for a week or two to make Europeans «chill out». That what the French top officials have proposed (they take the most tough stance on the issue). Germany is especially humiliated by Anglo-Saxons, it has happened to be the prime target of the National Security Agency’s snooping efforts. On the one hand, it shows that Germany is considered to be the country posing the biggest economic threat. On the other hand, it testifies to the fact that Germany is perceived by the United States not as an ally, but rather as a satellite nation. Angela Merkel does not seem to be bothered much: she has let know there is no intent to come out of talks or even postpone the date. Some media outlets have dropped a hint the Snowden revelations about American snooping were part of deliberate effort on the part of «economic NATO» opponents pursuing the goal of preventing the creation of free trade economic zone, or, at least, slowing the process down…

It should be noted that the whole story has made Europeans get real aces allowing to gain time and to cement, to some extent at least, the otherwise weak position before the talks. There is a wide range of issues on the agenda. Nobody expects the agreement to be concluded even in a year. It will take no less than two years. There will be many other events taking place during this period of time. For instance, the second wave of financial and economic crisis to change the correlation of forces among the negotiators. I suggest we make no guesses on how it could affect the outcome of US-EU talks.