On 12 February 2013, in his State of the Union address, US President Barack Obama announced that a major priority of his administration would be to restore and revitalise trade links between North America and Europe. He officially announced that he planned to notify Congress of his administration’s intent to launch negotiations on a Transatlantic Trade and Investment Partnership (TTIP) with the European Union. These sentiments were echoed on the same day by his European counterparts, European Council President Herman Van Rompuy, and European Commission President José Manuel Barroso, who initiated negotiations on the partnership.
What is TTIP?
The Transatlantic Trade and Investment Partnership (TTIP) is a partnership between the EU and the US aimed at increasing trade and investment flows between the two regions, while also contributing to the development of global rules and regulations that can strengthen the multilateral trading system. The agreement will include changes in EU-US economic relations, such as reduced tariff barriers and a more uniform intellectual property policy. As previously mentioned, US President Barack Obama, European Council President Herman Van Rompuy and European Commission Jose Manuel Barroso have all indicated their commitment towards achieving a successful TTIP deal. TTIP was one of Ireland’s priorities when we assumed the Presidency of the Council of the EU in January 2013.
How did it begin?
At the annual EU-US Summit meeting of 28 November 2011, both EU and US officials directed the Transatlantic Economic Council (a body set up between the EU and the US to direct economic cooperation between the two economies) to establish a High Level Working Group on Jobs and Growth (HLWG). The group’s main focus was to identify policies and measures to increase EU-US trade and investment in order to support mutually beneficial job creation, economic growth and international competitiveness between the two areas. The group was also tasked with working closely with members and organisations from the public and private sectors in order to better inform the process and was led by US Trade Representative Ron Kirk and EU Trade Commissioner Karel De Gucht.
By June 2012, the HLWG had issued their interim report, which concluded that the best way to support jobs and promote growth and competitiveness across the Atlantic would be to establish a bilateral trading agreement between the EU and the US. In February of 2013 the HLWG released its final report. This reinforced the suggestions made previously in the interim report, and stated that a comprehensive agreement addressing a broad range of bilateral trade and investment issues, including regulatory issues, and contributing to the development of global rules would provide the most significant mutual benefit for both the EU and the US. The report also recommended that leaders from both the EU and the US initiate the domestic procedures necessary to launch the TTIP negotiations.
What are the facts?
- Combined, the EU and US economies have consistently been, and continue to be, the largest commercial entity in the world, representing over 50% of global GDP.
- In 2011 the EU-US trade relationship accounted for 30% of global GDP, and it generates on average close to €3.8 trillion in total commercial sales a year.
- European companies employed close to 3.5 million workers in the US in 2011, while US firms in Europe employed over 4.1 million.
- TTIP could benefit the EU’s economy could by €119 billion a year – equivalent to an extra €545 for an average household in the EU.
- The US economy could gain an extra €95 billion a year or €655 per American family.
Benefits of TTIP
A study entitled Reducing Transatlantic Barriers to Trade and Investment: an Economic Assessment, undertaken by the Centre for Economic Policy Research in London, has outlined some of the major benefits that this partnership could have for both economies involved. It is projected that EU exports to the US could increase by 28%, or €187 billion, as a result of the partnership. It is also expected that the agreement could increase global trade and produce a 6% growth in exports for the EU, meaning that the benefit of TTIP to the EU could be well over €100 billion per year. Other benefits of the partnership include the breakdown of cross-border regulations and of uncompetitive tariffs on industrial goods, the removal of many regulatory barriers, and improvement in the fluidity of trading between the two regions. Although tariffs between the EU and US are already low (on average 4%), the combined size of the EU and US economies and the trade between them means that dismantling tariffs will be good for jobs and growth.
One way in which these negotiations could result in real savings for business, job creation and better value for consumers is if unnecessary rules and regulations, also known as Non-Tariff Barriers or NTBs, are removed. NTBs are the result of differences in regulations and standards between the EU and US. However, the complications involved in removing NTBs means that it could be an extremely costly procedure in terms of both time and money.
It is not just trade between the EU and the US which is expected to expand because of TTIP; as a result of increased demand for raw materials, components and other inputs, EU exports to other countries are also forecast to grow. Exports of metal products to the rest of the world are predicted to increase by 12%, exports of processed foods by 9%, chemicals exports by 9%, and exports of other manufactured goods and transport equipment by 6%. It is also projected that TTIP will benefit small and medium sized firms, either through exporting directly or as suppliers to bigger companies.
It is hoped that TTIP will help to increase new opportunities for growing businesses on both sides of the Atlantic, benefitting the citizens of the EU and the US equally, without costing either region too much in public expenditure.
Although TTIP is being heralded as a win-win situation for both the EU and US economies, many global stakeholders have criticised certain aspects of the agreement. Some have pointed to the contentious history of past transatlantic trade policies, referring specifically to the areas of global agriculture, intellectual property, genetically modified food and information technology as problematic. Another issue that has come to the forefront in recent weeks is the rule of cultural exception, which involves the exclusion of audiovisual goods and services from some trade disciplines on the grounds that culture should be treated differently to other commercial products. This exclusion would give room for some subsidies, quotas, and other measures to support domestic cultural products. France has been at the centre of this argument, arguing that TTIP would undermine its cultural uniqueness in favour of its commercial aspects. However, both US and EU stakeholders have been reluctant to support the cultural exception rule, saying that ‘carve outs’ in the agreement would be detrimental to the overall success of the negotiations.
Considering that the benefits are so apparent, many people have questioned why it has taken this long to establish such an arrangement between the EU and US. There are a number of reasons why TTIP has come to the fore now, and not earlier:
- The decision to start negotiations now is in large part due to the continuing global economic crisis and the need for both parties to reinvigorate their economies and boost job creation.
- The stalling of the multilateral trade negotiations in the World Trade Organisation (WTO) has also been a contributing factor to the timing of the TTIP. The Doha Development Agenda (the current trade-negotiation round of the WTO) commenced in November 2001. Its objective was to lower trade barriers around the world, which will help facilitate the increase of global trade. However, as of 2008, talks have stalled over a divide on major issues, including agriculture, industrial tariffs and non-tariff barriers and services. The stalling in the negotiations may have led the EU and US to take matters into their own hands with regard to establishing international trade negotiations. However, both parties have repeatedly stated that their launching of bilateral negotiations does not mean that they are no longer committed to the Doha Development Agenda and a multilateral approach.
- In addition to all of this, the reform of the EU’s Common Agricultural Policy and high commodity prices means that both sides are now ready to discuss agriculture and negotiate opening their markets.
Ireland and TTIP
TTIP has been a key priority in the context of the Irish Presidency agenda of Jobs, Stability and Growth. In mid-April, Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, chaired an informal meeting of the EU’s Trade Council, which focused on international trade matters including TTIP. The meeting was attended by Mike Froman, US Deputy National Security Advisor for International Economic Affairs and member of the US National Security Council. Trade Ministers from all EU Member States were also in attendance, as was the EU’s Commissioner for Trade, Karel De Gucht. The decision to host an informal Trade Council reflects the priority accorded by the Irish Presidency to international trade issues and in particular to TTIP. More recently, on 31 May 2013, the Irish Presidency played host to a dialogue between government officials from both sides of the Atlantic. This EU-US forum, entitled the Transatlantic Legislators’ Dialogue, facilitated discussion on trade matters and the exchange of views and experience on issues of common concern. The main topic on the agenda was TTIP, with legislators from both the EU and US speaking of the enormous benefits it would bring to producers and consumers on both sides of the Atlantic.
Ireland has always had a special relationship with the US and this has helped us to prioritise TTIP and progress negotiations during the Irish Presidency. TTIP has the potential to be very beneficial to Ireland, in particular because of the strong economic ties the country already has with the US. For instance, the US is Ireland’s biggest trading partner and Ireland’s biggest export market for goods produced in Ireland. Exports of Irish goods and services to the US in 2011 were worth €27.4 billion. Goods and services imported from the US into Ireland in 2011, meanwhile, were worth €58.2 billion.
TTIP is crucial to Ireland’s economic recovery. According to projections, if Ireland benefited in proportion to the size of our economy, a comprehensive trade and investment partnership could, over time, provide gains to Ireland in the order of €800 million per annum in increased GDP, and add 4000 new jobs to the economy.
The European Commission presented its negotiating plans to the European Council in March 2013. Before official negotiations on the trade agreement could commence, the European Council of Ministers needed to sign off on the negotiation plans. This took place on 23 May, with the European Parliament overwhelmingly in support of plans to begin trade talks with Washington; 460 lawmakers voted in favour of the trade talks, 105 against, and 28 abstained. The US, meanwhile, is completing its own domestic procedures, specifically a 90-day consultation period with Congress.
The first round of TTIP negotiations will take place the week of July 8 in Washington, D.C., under the leadership of the Office of the US Trade Representative.
For more information, don’t hesitate to contact the EM Ireland office.
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