The United States National Intelligence Council has released a sobering report entitled Global Trends 2030: Alternative Worlds. Most important, according to the authors, if current trends continue, Asia could soon surpass North America and Europe in global power. It will have a higher GDP, larger population, higher military spending, and more technological investment. In this geopolitical context, Europe and the US need each other more than ever, making greater transatlantic cooperation crucial.

Asia could soon surpass North America and Europe in global power- Javier Solana

This seems to be the approach that inspired outgoing US Secretary of State Hillary Clinton’s recent speech at the Brookings Institution on US-European relations. Given the shift in global power and the prospect of US energy self-sufficiency as domestic hydrocarbon output booms, America is trying to adapt its foreign policy to the new multi-polar international order.

And, although Asia is now America’s strategic priority, Europe is still the partner with which Americans have the most in common. “I want to be clear,” Clinton noted. “Our reorientation toward Asia is not a withdrawal from Europe.”

The US, according to Clinton, hopes that Europe will follow suit, so that Asia is seen not only as a market, but also as a focus of common strategic action. But, beyond that, as the US and Europe seek to ensure their global roles, cooperation between them is more important than ever.

So now is the time for a bold initiative: the launch of a US-EU free-trade agreement.

Clinton has already hinted at America’s readiness for this, mentioning the possibility of negotiating a complete agreement that would increase trade and stimulate growth on both sides of the Atlantic. The journalist David Ignatius even dared to give it a name in a recent article in The Washington Post: TAFTA (Transatlantic Free-Trade Agreement). Edward Luce, writing in the Financial Times, preferred ‘Transatlantic Partnership’.

The US and the EU (taken as a whole) are not only the world’s two largest economies and typically the largest commercial partners for other major economies; they also maintain the world’s largest bilateral trade relationship.

American investment in Europe is three times higher than it is in Asia. European investment in the US is eight times larger than its investments in China and India combined.

So transatlantic trade is crucial for both economies, particularly for job creation. Indeed, it is estimated that one-third of all bilateral US-EU trade consists of internal transfers by companies that operate in both markets.

Although US and EU tariffs on each other’s marketed manufactured goods are already low (below three per cent, on average), a free-trade agreement would be enormously beneficial in promoting further investment, thereby boosting economic growth and creating more jobs.

Such an agreement could include trade in goods, services, financial instruments, and agriculture, and would necessitate greater compatibility of European and American regulations and legal norms, implying substantial savings.

Moreover, the effects of such an agreement would be felt far beyond the US and Europe. For example, both have already signed free-trade treaties with various Latin American countries, implying the creation of a geographically enormous free-trade area, which should boost economic resilience in the face of global crisis.

Indeed, regional free-trade agreements are gaining momentum worldwide. The Trans-Pacific Partnership, a free-trade agreement spearheaded by the US, is set to be a game-changer in the Asia-Pacific region, with decisive advances this year putting it on course to be concluded in 2015.

Potential signatories include the US, Australia, Malaysia, Vietnam, Singapore, New Zealand, Chile, Peru, Brunei, Canada, Mexico, and perhaps Japan and South Korea. The result will be trade liberalisation in an area that produces 40 per cent of global GDP.

Isn’t it time to consider something similar for Europe and the US? The EU, now confronting a wave of populism and euro scepticism, could revive its sense of purpose by committing itself to closer transatlantic cooperation and coordination on trade, to be carried out by the European Commission. Such a project has worked before in bringing Europe together; it can do so again. The most precious asset today is confidence, and the mere fact of launching negotiations would generate it in abundance.

Protectionism is no solution to the crisis, whereas a transatlantic free-trade agreement would favour multilateralism and openness. In this sense, it is important to stress the work of the World Trade Organisation, the best multilateral forum that the world has for resolving trade disputes. Signing a transatlantic trade treaty would be irrefutable proof that the political case for open trade can be made – and won.

The only way to achieve this is through the clear commitment of political leaders on both sides of the Atlantic, together with private-sector involvement, which is fundamental to sustaining urgently needed economic growth.

But let’s not wait: faced with predictions of the West’s relative decline, the US and the EU must commit themselves to more union, more cooperation, and more prosperity. Today, that means a transatlantic free-trade agreement.

Project Syndicate, 2012, www.project-syndicate.org.

Javier Solana, former secretary general of Nato and EU foreign policy chief, is distinguished senior fellow in foreign policy at the Brookings Institution and president of the ESADE Centre for Global Economy and Geopolitics.