All-Party Parliamentary Group on EU-US Trade & Investment
The Transatlantic Trade and Investment Partnership
The formal launch of landmark negotiations on a Transatlantic Trade and Partnership (TTIP) between the EU and the US was announced this week (17th June) by David Cameron, with US President Obama and EU Presidents Van Rompuy and Barroso at his side.
The first round of negotiations will take place in Washington DC starting 8th July.
Bilateral US-EU trade accounts for some 30 per cent of global trade. The Transatlantic commercial relationship is the largest in the world, encompassing around $ 1 trillion in bilateral trade in goods and services and around $ 3.5 trillion in two-way investments. Strengthening this relationship through a bilateral trade and investment agreement could provide a significant boost to growth and jobs on both sides of the Atlantic and improve competitiveness of US and EU business. A recent study by the Centre for Economic Policy Research in London concludes that EU exports to the US could increase by as much as 28 per cent, and US exports to the EU as much as 36 per cent; with an annual potential net GDP gain of between 0.5 and 1.0 per cent.
President Obama and Presidents Van Rompuy and Barroso announced on February 13th that they had agreed to pursue negotiations on a Transatlantic Trade and Investment Partnership (TTIP). Formal notification was sent to Congress on March 20th.
EU Member States have also voiced strong support for a TTIP, and the European Commission formally proposed a mandate for the negotiations on the March 12th. This was agreed on June 14th by the Foreign Affairs Council of the EU (Member states).
The launching of TTIP negotiations will be a milestone event. Not only will it signal that the US and EU are committed to liberalizing their trade and continuing to develop rules that facilitate trade and investment, it is also expected to generate an impetus to renewed multilateral negotiations.
What will the TTIP cover?
The TTIP will be the most ambitious and comprehensive bilateral trade agreement ever negotiated by both the EU and US, and envisions contributing to the development of global rules that can strengthen the multilateral trading system.
It will seek to eliminate all tariffs and other duties on trade in goods. The current average is around 3-4 per cent, but tariff peaks are maintained for a number of products (particularly processed agricultural products, textiles and clothing, leather and footwear).
- It will seek to eliminate or reduce non-tariff barriers, and establish a mechanism for regulatory cooperation going forward establishing a “living agreement”. Current behind the border measures have been estimated to be comparable to tariffs of 10-20 per cent. Reducing regulatory burdens are seen as particularly beneficial to SMEs which often lack the infrastructure to deal with divergent regulatory regimes.
- It will seek to improve market access in trade in services at least as much as has been agreed in other trade agreements.
- It will seek to facilitate the use of electronic commerce.
- It will seek to secure investment access and protection at least at a level. that both sides have agreed within other agreements to date.
- It will seek to expand government procurement access.
- It will seek to expand high levels of IPR protection and enforcement
- It will seek to develop common rules in relation to state owned enterprises, competition, raw materials, and energy.
Impact on the UK
Recent press reports suggest that the UK will be the European country to gain the most from an ambitious TTIP.
A CEPR study in March 2013 estimated that the UK could gain a GDP increase of 0.35% from the agreement in addition to significant job growth particularly in the motor vehicle sector.
There are concerns – for instance over employment, consumer and environmental standards – but a very broad range of organisations beyond the business world have given the EU-US TTIP backing in principle. And political support for a fair and comprehensive agreement in the EU and US is broad.
Sceptics suggest the deal will be too complex and vested interests too entrenched for agreement to be reached but the negotiations have been extremely well prepared by the US-EU High Level Working Group for Jobs and Growth (HLWG) established in November 2011 and which submitted its final recommendations the 13th of February 2013. Both sides have recognized that launching negotiations without a palpable chance of success would do more harm to the bilateral relationship than not pursuing the initiative.
A recent study by the Peterson Institute of International Economics demonstrates the do-ability of the TTIP taking the EU South Korea Agreement and the US South Korea Agreement as points of departure.