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Transatlantic Trade and Investment Partnership

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Proposed agreement between the European Union and the United States of America

The Transatlantic Trade and Investment Partnership (TTIP; also known as the Transatlantic Free Trade Area, abbreviated as TAFTA) is a proposed free-trade agreement between the European Union and the United States. The deal is estimated to boost the EU's economy by €120 billion, the US economy by €90 billion and the rest of the world by €100 billion [citation needed]. Talks began in July 2013 and reached the third round of negotiations by the end of that year.[1] This free trade agreement may be finalized by the end of 2014.[2][3]

A previous proposed treaty was Multilateral Agreement on Investment.

Economies

The two together represent 60% of global GDP, 33% of world trade in goods and 42% of world trade in services. The growth of the EU's economic power has led to a number of trade conflicts between the two powers; although both are dependent upon the other's economic market and disputes affect only 2% of trade. A free trade area between the two would represent potentially the largest regional free-trade agreement in history, covering 46% of world GDP.[4] See below for details of trade flows;[5]

Direction of trade Goods Services Investment Total
EU to US €260 billion €139.0 billion €112.6 billion €511.6 billion
US to EU €127.9 billion €180 billion €144.5 billion €452.4 billion

US investment in the EU is 3 times greater than US investment in the whole of Asia and EU investment in the US is eight times that of EU investment in India and China combined. Infra-company transfers are estimated to constitute a third of all transatlantic trade. The US and EU are the largest trading partners of most other countries in the world and account for a third of world trade flows. Given the already low tariff barriers (under 3%), to make the deal a success the aim is to remove non-tariff barriers.[6]

Background

Economic barriers between the EU and the US are relatively low, not just due to long-standing membership in the World Trade Organisation but recent agreements such as the EU–US Open Skies Agreement and work by the Transatlantic Economic Council. The European Commission claims that passage of a trans-Atlantic trade pact could boost overall trade between the respective blocs by as much as 50%.[7] However, economic relations are tense and there are frequent trade disputes between the two economies, many of which end up before the World Trade Organization. Economic gains of TTIP were predicted in the joint report issued by the White House and the European Commission.[8]

Some form of Transatlantic Free Trade Area had been proposed in the 1990s and later in 2006 by German Chancellor Angela Merkel in reaction to the collapse of the Doha world trade talks. However, protectionism on both sides may be a barrier to any future agreement.[9][10] On February 12, 2013, President Barack Obama called in his annual State of the Union address for such an agreement.[11] The following day, EU Commission President Jose Manuel Barroso announced that talks would take place to negotiate the agreement.[12][13]

Status

The TTIP is divided into 15 specific working groups, each covering different areas. The scope of TTIP is vast, the most prominent points being:

  • elimination of all trade tariffs and the reduction of all tariff barriers
  • more closely tied cooperation among the EU and US regulatory bodies
  • IP protection
  • restriction of subsidies to state-owned enterprises

The most important points of dispute are the EU's policy to limit the imports of genetically modified food, as well as EU's relatively more loose regulation of the financial sector, as opposed to more stringent domestic laws applying to US banks.

Proposed benefits

If realized, the TTIP aims to liberalize one-third of global trade and generate millions of new jobs.[14] "With tariffs between the United States and the EU already low, the United Kingdom's Centre for Economic Policy Research estimates that 80 percent of the potential economic gains from the TTIP agreement depend on reducing the conflicts of duplication between EU and US rules on those and other regulatory issues, ranging from food safety to automobile parts."[14] A successful strategy, according to Thomas Bollyky at the Council on Foreign Relations and Anu Bradford of Columbia Law School, will focus on sectors where transatlantic goals of trade and regulation overlap: pharmaceuticals, agricultural products, and financial services.[14] This will ensure that the United States and Europe remain "standard makers, rather than standard takers," in the global economy, subsequently ensuring that producers worldwide continue to gravitate toward joint US-EU standards.[14]

An economic assessment prepared by the Centre for Economic Policy Research in March 2013, estimates that a comprehensive agreement will result in annual GDP growth in the EU of 68-119 billion euros by 2027 and annual GDP growth of 50-95 billion euros in the US. The same report estimates that a limited agreement, focused only on tariffs, will result in annual GDP growth in the EU of 24 billion euros by 2027 and annual growth of 9 billion euros in the US. The maximum GDP growth estimates would translate into additional annual disposable income of 545 euros for a family of four in the EU and 655 euros for a family of four in the US.[15]

The CEO of Siemens, which has 70% of its workforce in Europe and the US, has indicated that the TTIP would strengthen the global competitiveness of the US and EU by reducing trade barriers, improving intellectual property protections, and setting international "rules of the road".[16]

Criticism

Economic growth

In a The Guardian article of 15 July 2013, Dean Baker of the Center for Economic and Policy Research in the US observed that with conventional trade barriers between the US and the EU already low, the deal would focus on non-conventional barriers such as freeing up regulations regarding fracking, GMOs and finance and tightening laws on copyright, he goes on to assert that with less ambitious projections the economic benefits per household are mediocre "If we apply the projected income gain of 0.21% to the projected median personal income in 2027, it comes to a bit more than $50 a year. That's a little less than 15 cents a day. Don't spend it all in one place."[17]

National Sovereignty and Investor State Dispute Settlements (ISDS)

ISDS means an investor can bring a case directly against the country hosting its investment, without the intervention of the government of the investor’s country of origin.[18] In December 2013, a coalition of over 200 environmentalists, labor unions and consumer advocacy organizations on both sides of the Atlantic sent a letter to the USTR and European Commission demanding the investor-state dispute settlement be dropped from the trade talks and stating: "Investor-state dispute settlement is a one-way street by which corporations can challenge government policies, but neither governments nor individuals are granted any comparable rights to hold corporations accountable."[19][20]</ref> In December 2014, Britain's The Guardian newspaper claimed that ISDS is a "mechanism [that] could threaten almost any means by which governments might seek to defend their citizens or protect the natural world" [21]

Transparency

Member of European Parliament Yannick Jadot described the negotiations as happening "in an absolutely undemocratic way". Despite being appointed to oversee the trade negotiations as a parliamentary rapporteur, he said he felt "excluded", going on to say "even when we have one document, we are forbidden to release this document to the public, so citizens are totally excluded from the negotiations which deal with health issues, environmental issues, social rights and public services".[22]

Karel De Gucht responded to criticism in a Guardian article in December 2013, saying "The commission has regularly consulted a broad range of civil society organisations in writing and in person, and our most recent meeting had 350 participants from trade unions, NGOs and business".[23]

Effect on third countries

Proposed TAFTA :
US and EU in dark blue and the other possible members in light blue (NAFTA and EFTA)

Some proposals for a transatlantic free trade area include on the American side, the other members of North American Free Trade Area (Canada and Mexico) and on the European side, the members of the European Free Trade Association (Iceland, Norway, Switzerland and Liechtenstein). Mexico already has a free trade agreement with EFTA and the EU while Canada has one with EFTA and is negotiating one with the EU. These agreements may need to be harmonised with the EU-US agreement and could potentially form a wider free trade area.

Canadian media observers have speculated that the launch of US-EU talks puts pressure on Canada to conclude its own three-year long FTA negotiations with the EU by the close of 2013.[24] Countries with customs agreements with the EU, such as Turkey, could face the prospect of opening their markets to American goods, without access for their own goods without a separate agreement with the USA.[25]

See also

References

  1. ^ "Transatlantic Trade and Investment Partnership (TTIP) - Trade - European Commission". Ec.europa.eu. Retrieved 2014-02-21.
  2. ^ Emmott, Robin (2013-02-27). "EU trade chief hopes to clinch U.S. trade deal by late 2014 | Reuters". Uk.reuters.com. Retrieved 2014-02-21.
  3. ^ "BBC News - EU 'growth boost from US free-trade deal'". Bbc.co.uk. 2013-03-03. Retrieved 2014-02-21.
  4. ^ "Nominal 2012 GDP for the world and the European Union (EU)". World Economic Outlook Database, October 2013. International Monetary Fund. Retrieved 2013-10-08. {{cite web}}: External link in |work= (help)
  5. ^ "European Commission". Ec.europa.eu. Retrieved July 25, 2012.
  6. ^ "United States - Trade - European Commission". Ec.europa.eu. Retrieved 2014-02-21.
  7. ^ "Hope and no change, After Barack Obama's re-election, it is time to push for transatlantic free trade". Economist.com. Retrieved 18 March 2013.
  8. ^ "Final Report High Level Working Group on Jobs and Growth" (PDF). European Commission. Retrieved 18 March 2013.
  9. ^ "Trans-Atlantic Free Trade?: Merkel for EU Agreement with US - SPIEGEL ONLINE". Spiegel.de. 2006-10-02. Retrieved 2014-02-21.
  10. ^ [1][dead link‍]
  11. ^ "A Running Start for a U.S.-Europe Trade Pact". The New York Times. Retrieved 2014-02-21.
  12. ^ Andrew Walker (2013-02-13). "BBC News - EU and US free-trade talks launched". Bbc.co.uk. Retrieved 2014-02-21.
  13. ^ Blenkinsop, Philip. "EU, U.S. to start free trade talks". Reuters. Retrieved 2014-02-21.
  14. ^ a b c d Bollyky, Thomas J. and Anu Bradford (10 July 2013). "Getting to Yes on Transatlantic Trade". Foreign Affairs. Retrieved 22 July 2013.
  15. ^ ""Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment"" (PDF). Trade.ec.europa.eu. Retrieved 2 February 2014.
  16. ^ Kaeser, Joe (February 2, 2014). "Why a US-European trade deal is a win-win". The Wall Street Journal.
  17. ^ The Guardian (15 July 2013). The US-EU trade deal: Don't buy the hype Retrieved 24 August 2013.
  18. ^ European Commission (3 October 2013). "Factsheet on Investor-State Dispute Settlement" (PDF). Retrieved 2014-02-21.
  19. ^ Stangler, Cole (2013-12-30). "The Next Corporate-Friendly Trade Pact". In These Times. Retrieved 2014-02-21.
  20. ^ "Letter" (PDF). Action.sierraclub.org. Retrieved 2014-02-21.
  21. ^ "The lies behind this transatlantic trade deal | George Monbiot | Comment is free". The Guardian. Retrieved 2014-02-21.
  22. ^ "Covert Operation TTIP | Geheimoperation transatlantisches Freihandelsabkommen | Report München". YouTube. 2014-01-30. Retrieved 2014-02-21.
  23. ^ The Guardian (18 December 2013) You're wrong, George Monbiot – there is nothing secret about this EU trade deal Retrieved 2 February 2014.
  24. ^ Barrie Mckenna And Bertrand Marotte (2013-02-13). "Potential U.S.-EU free-trade union 'puts the squeeze' on Canada". The Globe and Mail. Retrieved 2014-02-21.
  25. ^ "Transatlantic alliance to cost Turkey '$20 billion' - ECONOMICS". Hurriyetdailynews.com. 2011-09-13. Retrieved 2014-02-21.
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