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Why a US-EU trade pact would be historic

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For starters, the State Department will make recommendations soon on how to deal with a resurgence of state-run capitalism in other countries. In a recent speech, Secretary of State Hillary Rodham Clinton spoke of the diplomatic challenges that arise “when states abuse their economic advantage to bully their neighbors or box out competitors.”

Obama has also begun talks with 10 other nations from Chile to Singapore to open up more trade through a grouping called the Trans-Pacific Partnership. The talks are a direct challenge to China, which is behind talks involving Asia-only countries called the Regional Comprehensive Economic Partnership. The two sets of negotiations represent a cold war-style contest between clashing values for the world economy.

Also possible in Obama’s second term is the start of talks on a free-trade pact with the 27-member European Union. The idea has been kicked around for decades, but the Great Recession and Europe’s debt woes have pushed both sides to now see an expansion of exports as a way around the political problems of budget austerity and more stimulus.

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