Merkel ponders Atlantic free trade zone (FT)

Spurred by concern about China's growing economic might, Germany is considering a plan for a free-trade zone between Europe and the US.

A senior aide to Angela Merkel said the chancellor was "interested" in promoting the idea as long as such a zone did not create "a fortress" but rather "a tool" to encourage free trade globally, "which she is persuaded is a condition of Germany's future prosperity".

Separately yesterday, the US, Canada and the European Union complained to the World Trade Organisation about China's tariffs on car parts, raising the prospect of Beijing facing its first WTO dispute. The three said they had lost patience with Beijing's refusal to open the $19bn (€15bn, £10bn) a year market.

News that the free trade zone, last pursued by Sir Leon Brittan, when European trade commissioner in 1998, is being debated in the German chancellery testifies to the rapprochement between Washington and Berlin since Ms Merkel's election last November.

This convergence of views was underlined this week when Wen Jiabao, Chinese premier, was politely chided by Ms Merkel for China's poor human rights record and recent restrictions on foreign news agencies, during an official visit to Berlin.

As German perceptions of China have grown more American, Washington's approach has also shifted. Speaking before his first trip to Beijing, Hank Paulson, US Treasury secretary, this week outlined a more balanced policy mixing traditional US criticism with praise for China's reforms.

Ms Merkel's aide said it was "far too early" to tell whether the project of a transatlantic free-trade zone would be part of Germany's priorities when it assumes the six-month presidency of the European Union and chairs the G8 group of leading industrial nations from January.

"The west needs to pull together," Gabor Steingart said yesterday. His book, World-War for Prosperity, a warning about the dangers of globalisation published this week, is credited with influencing the debate in the German chancellery. "What Nato did for the west under the cold war, Tafta [Trans-atlantic free-trade area] can do in the current battle."

Additional reporting by Andrew Bounds in Brussels
Copyright The Financial Times Limited 2006