Transatlantic Trade and Investment Partnership: What’s in it for the EU?

written by Polona Gul

It would be hard to find another trade agreement that has ever been under such media spotlight than Transatlantic Trade and Investment Partnership (TTIP) is at the moment. But that is understandable as TTIP is much more than just another preferential trade agreement project: it aims to link the world’s two biggest economic entities. TTIP, for which negotiations between the European Union and the United States began in 2013, is presented as an ambitious and comprehensive partnership.

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Source: euintheus.org

The initiative for starting talks on the TTIP seems motivated by the rising trend of regional trade agreements worldwide, and the willingness of the two partners to retain their leading positions in world trade, or at least to limit their loss of influence. Moreover, the two economies are, mutually, each other’s most important investment partners which represent additional argument in favor of deeper economic integration.

But one has to be careful when it comes to assessment of the potential macroeconomic effects of TTIP on EU as potential effects strongly depend on elimination or at least limitation of non-tariff barriers or NTBs (often in the form of domestic regulations). The fact is that average tariff levels are relatively low already and given the limited average level of the import tariffs these duties in most cases are not the most important stake. Much more significant at the macroeconomic level are negotiations on NTBs as various NTBs on both sides of the Atlantic constitute important impediments to deepening transatlantic trade and investment linkages.

Since the begging of the negotiations several analysis estimating potential macroeconomic effects of TTIP emerged. These analysis differ according to the type of effects considered and the optimism with respect to the achieved liberalization. In general they are fairly modest but positive for both the EU and the USA. One of the most influential analysis was made by Centre for Economic Policy Research (CEPR) based in London. CEPR’s results indicate positive and significant gains for both economies. Under the most ambitious comprehensive agreement, GDP is estimated to increase by 119 billion euros per year for the EU and by 95 billion euros per year for the US. Moreover, predictions show that total exports would increase by 6% in the EU and by 8% in the US. CEPR’s analysis also suggests that the increased level of economic activity and productivity gains created by the agreement will benefit the EU and US labour markets, both in terms of overall wages and new job opportunities for high and low skilled workers. But on the other hand there are also analysis that contradict results stated above and predict that any gains in Trans-Atlantic trade would happen at the expense of intra-EU trade.

There are also other aspects of TTIP that are gathering media attention. For instance, general public is worried especially about existing EU standards and laws (for example laws on Genetically Modified Organisms – GMOs), even though European negotiators clearly stated that basic laws, like those relating to GMOs will not be part of the negotiations. Furthermore, European public is concerned also about ”Investor – State Dispute Settlement” or ISDS. ISDS is an instrument of public international law that grants an investor the right to use dispute settlement proceedings against a foreign government. The inclusion of ISDS in TTIP has raised concerns that the agreement will undermine the power of national governments to act in the interest of their citizens. Therefore, EU is aiming to have better rules when it comes to ISDS, e.g. on government control of arbitrators. There is also a lot of media attention on lack of transparency in TTIP negotiations. However, it is hard to accuse European negotiators of conducting negotiations without transparency when EU negotiating texts are published and explained, so everyone can read what TTIP is all about.

The TTIP will surely not become the remedy able to restart fast growth and reduce EU unemployment drastically. But it will definitely create the biggest free trade area in the world and therefore offer new opportunities for ambitious companies.

About the author:
Polona Gul is a MA student at the Faculty of Economics of the Univesity of Ljubljana (Slovenia), focusing her research on Transatlantic economic relations. She has worked at the Ministry of Foreign Affairs of the Republic of Slovenia and in the European Parliament.

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