Q&A: Atlantic free trade zone

Gordon Brown has proposed setting up a transatlantic free trade zone. BBC News Online examines the benefits and costs of creating the world's biggest free-trade area.

What has Gordon Brown proposed?

The Chancellor wants to create the world's biggest free trade zone, uniting the economies of Europe and the United States, which together make up more than half of the world's total economic output.

He says that the move could boost transatlantic trade by as much as £150bn ($250bn).

He thinks that the plan could serve as a model for other countries who want to strengthen free trade.

And he argues that strategically it would help build bridges between Europe and the US at a time when other political tensions are surfacing.

How would a free trade zone work?

In a free trade zone, all goods traded between EU countries and the US would be free of tariffs and custom duties.

As the US is also in a free trade zone with Mexico and Canada, there would also been free access for their goods.

It is not clear whether any deal would include trade in services like accountancy and telecoms as well as manufactured goods.

And it is also unclear whether it would consider non-tariff barriers, for example the huge subsidies paid to EU farmers for growing crops.

What would be the advantages for Britain?

The advantage would be that trade between Britain and the US would be enormously strengthened.

The UK is already the largest investor in the US economy, and the US is the largest single investor in Britain.

Under a free trade zone, investment and trade ties would be boosted, with a positive impact on economic growth and jobs.

It would also partly counteract the difficulties currently faced by British manufacturers due to the over-valued pound, which makes their goods more expensive.

Who might object to such a scheme?

Developing countries, and other major industrial countries like Japan and Australia, might be worried by the creation of a huge free trade zone across the Atlantic.

The new grouping would have the power to exclude their agricultural products and manufactured goods, and its sheer size would give it enormous clout in any trade dispute.

Developing countries would have even more to fear, as it would mean they would have little say in shaping world trade policy if it went ahead.

How does it fit into the worldwide push for free trade?

The plan could seriously upset the delicate negotiations that are taking place on the agenda for world trade talks.

The World Trade Organisation, and many governments, want a new round of trade liberalisation negotiations to begin in Doha, Qatar, in November.

But there are serious disagreements between the EU and the US over the agenda for the talks, with the EU wanted to include many non-trade areas - partly to divert attention from any push to force the EU to abandon its heavy subsidies to agriculture.

If the EU and the US began talks on a separate free trade zone now, it would effectively signal to the rest of the world that plans for a new trade round were unlikely to come to fruition.

Is an Atlantic free trade zone likely to happen?

Not very soon, anyway.

The US Congress looks increasingly unlikely to agree the extension of the Nafta free trade zone to the rest of the Americas, much less include Europe.

The Bush administration is pushing for a regional free trade in the Americas, too.

The proposal was first made by the former EU trade commissioner, Sir Leon Brittan.

His successor - Pascal Lamy - is noticeably less keen on the idea, partly because it would undermine the possibility of a global trade round.

And trade policy is definitely the responsibility of the EU, whatever the Chancellor might say.