Three Major Impacts of the Transatlantic Trade & Investment Partnership

Rob Dutkiewicz

The Transatlantic Trade & Investment Partnership, commonly referred to as TTIP, is a proposed trade agreement between the United States and the European Union. The idea of creating a trade agreement between the two largest economies in the world is not new and has been discussed for several decades. However, over the last five years, the idea has gained steam and many predict it will become a reality in the near future. The goal of TTIP is to strengthen both the US and European economies by increasing trade and investment, as well as employment.

What will TTIP do?

Cut tariffs and remove non-tariff barriers

The basic goal on industrial products is to eliminate virtually all duties and tariffs over a scheduled timeframe, with sensitive items phased out over longer periods of time and possible trade rate quotas.

Facilitate investment for both economies

The US and EU are the largest economies in the world, comprising more than 50% of the global gross domestic product (“GDP”) and about a third of the global trade. This trade alone is estimated to be responsible for 15 million jobs on both sides of the Atlantic and the US/EU relationship comprises the greatest source of foreign direct investment for each economy. Analysts have predicted another 750,000 jobs, in the US alone, will be created under TTIP.

The US Chamber of Commerce predicts TTIP would add a combined $300 billion to the transatlantic economy per year. Almost every sector is anticipated to see gains, with the automotive, chemical, machinery, pharmaceutical, and processed food industries experiencing the greatest gains.

Address standards and technical regulations

Both the US and the EU have strict health, safety, and environmental standards; however, both sides acknowledge many of these standards are outdated. Furthermore, there are often, for example, regulations on door locks, braking, steering, etc., geared toward meeting safety requirements. While the two approaches are different, TTIP would establish one uniform set of standards and technical regulations.

Two Major Issues

The formal negotiations began in July 2013, and the plan is for the negotiations to continue in 2015. These negotiations will need to consider two major issues: duplicative regulatory requirements and intellectual property rights. Once the negotiations are concluded, the US congress and European parliament and its 28 member states need to approve the agreement.

Duplicative regulatory requirements

Some of the sticking points evolve around details. Although both current standards and regulations accomplish the individual country’s desired goals, the approaches are different. The EU uses more of a precautionary approach, whereas the US’s approach is seen to be geared more toward using litigation. These differences often result in duplicative regulatory requirements companies must abide by.

Intellectual Property Rights

Another area to address is Intellectual Property (“IP”) rights. Harmonizing the two country’s regulations is not the goal, but rather, identifying and addressing the areas of divergence. Both economies are incredibly efficient in accomplishing their goal.

Under TTIP, the goal would be to merge the US and EU standards into one uniform set. This way both can work together and share information to make the standards safer and better for people and the environment. Resolving these differences will promote trade growth because more companies will be able to enter into the global market. The difficulty lies in how to emerge with a uniform set of standards that resolves differing standards without losing the high standards both value.

How will it benefit SME and Michigan companies?

Small- and mid-sized entities (“SMEs”) stand to benefit the most from TTIP. Trade barriers can often act as brick walls for SMEs wanting to enter into the European market. The costs associated with entering and selling in the EU are expensive and set at a fixed price, which has a disproportional effect for the SMEs because they have much of the same costs as the larger companies but with limited resources. Through TTIP, and the elimination of trade barriers, SMEs will have more opportunities to invest, export abroad, and participate in the global supply chain.

Since 2006, Michigan’s motor vehicle exports to the EU have increased by nearly 400%. By enacting TTIP, it has been estimated these exports will increase by more than 300%. Also, it has been estimated that Michigan exports to the EU will increase by 95% and employment will be boosted by more than 18,000 jobs.