The enthusiasm that greeted the announcement that the United States would begin negotiations with the EU to create a free-trade zone, has now "dropped off", writes Mohamed A. El-Erian, CEO of PIMCO, a US investment management firm, in an opinion piece published in French financial daily Les Echos.

Five weeks after it was first proposed by US President Barak Obama during his State of the Union speech, there are three main obstacles to the project, he says. The first is due to the modest economic potential of the proposal –

Free-trade agreements that promise the greatest benefits are those that link economies characterised by high tariffs, low levels of trade, and little overlap in consumption and production patterns. This is not the case for the EU and the US.

The second reason for a probable failure is due to conditions on the ground both in the EU and in the US.

A seemingly endless stream of short-term political dramas has made it extremely difficult for both Europe and the US to focus for long on any secular and structural initiative. In Europe, broad-based discussion was undermined by the outcome of the Italian election, [...] In the US, the disruption took the form of yet another fiscal mini-drama.

The third obstacle is due to –

the poor state of global policy dialogue, notwithstanding all the happy talk about global challenges and shared responsibilities. Last month’s G-20 meeting ended up as yet another expensive summit lacking sufficient content and follow through. Rather than catalysing constructive policy coordination, it has inadvertently encouraged complacency.