Setting the terms for global trade: the Transatlantic Trade and Investment Partnership
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Ambassador Martin Harris' speech at the 'Globalisation and the New Economies' conference hosted by the Babes-Bolyai University
Mankind has traded since the beginning of time out of need and for the prosperity it has brought. As means of transport have evolved and people became able to move goods over longer distances, trade became global and a driving force for the rise and fall of ancient empires. For example, trade on the Silk Road had a significant role in the development of civilisation in China, India, Persia, Arabia and Europe.
During this economic crisis, most countries sought to export their way out of recession. There was only one sure source of growth and jobs and that was trade. Germany has weathered the crisis better than most European countries by exporting its cars and engineering goods overseas. China is a similar example. Exports were the main source of growth for Romania too. More Dacia cars are currently sold in Germany, France and the UK than in Romania.
Trade creates competition and lower prices. As EU citizens we already benefit from the advantages of being able to buy products from 27 member states at competitive prices. Moreover, the EU has recently concluded a Free Trade Agreement (FTA) with South Korea and Singapore (negotiations just concluded but text still to be agreed by Council and the European Parliament), so we are able to buy cheaper goods from these places. The Commission is currently negotiating an FTA with important markets like Japan and India.
But negotiations for the most important free trade agreement started in June this year. The Transatlantic Trade and Investment Partnership or TTIP would be a bilateral trade agreement between the US and the EU, the two biggest economies and markets in the world, aiming to remove trade barriers such as tariffs, unnecessary regulations and non tariff barriers in a wide range of economic sectors. This would be the biggest economic bilateral trade agreement in history and it would affect all of us. We are all consuming American products from movies to mobile phones. It is impossible to wander the streets of Cluj today without seeing an IPhone or an IPad.
This idea is not new as it was discussed in academic, government and business circles for years but now we are faced with the prospects of making this ambitious project a reality. Some may ask why now and not earlier if it was such a good idea? The answer to this is quite simple and it concerns the economic crisis that requires long lasting solutions such as this treaty. Simply put, we cannot afford anymore to let, for instance, different regulations regarding automobiles to prevent the sale of a car from Europe to the US, and this is just one example.
An independent study by the Centre for Economic Policy Research (CEPR) has shown that the expected revenue generated by TTIP could be up to € 119bn for the EU and € 95bn for the US. This would mean an extra € 545 per average for every European household and $ 650 for an American one. The same study also concluded that the elimination of non-tariff barriers and unnecessary regulations are more important than the reduction of tariffs which are already rather low in many cases. Their elimination could result in a 10 to 20% fall in prices for all products. A successful agreement could create 500,000 high paying jobs and bilateral trade would increase by $ 250bn over in five years.
How will Romania benefit from an ambitious TTIP? In general, export oriented countries would benefit more and Romania has increased its exports constantly over the past few years. A recent study (by Bertelsmann) showed that Romania’s income per capita could increase by 4.6% as exports to the US exceeded 1bn euro per year.
An ambitious agreement would enable us to show leadership on trade liberalisation and to shape global economic governance in line with our values. By creating standards that would apply to half of the world’s economy, it’s likely that many other countries would adopt them too, creating 21st century rules in intellectual property rights. If we conclude this successfully, we would create a model for a future deal on global trade.
If agreed quickly, then this agreement would demonstrate that we are focused on creating prosperity for the our citizens. We want to make Europe more competitive and flexible for the future.
A successful deal would reinvigorate ties between Europe and the US, putting that relationship on a more modern footing, to the benefit of all.
We should not be worried that TTIP will lower food standards or environment protection. The EU is not ready to compromise on its consumers’ protection just in order to sign the deal. The negotiations are not about lowering standards: they are about getting rid of tariffs and useless red-tape while keeping high standards in place.
What is important in this case is that a fair and equitable solution to be found considering that as much as 80% of the treaty will consist of getting rid of unnecessary regulations.
This project is an ambitious undertaking by both sides and nobody is pretending that the negotiations will be easy. Agriculture, data protection, copyright issues, intellectual property rights, public procurement, financial services will be areas of intense negotiations. But we will need to focus on the big picture and avoid the temptation to temper our ambition. We must not forget that we are still struggling with an economic crisis and the West’s share of global trade is shrinking. We have to expand our reach wherever possible and make the best of existing trade relations.
TTIP will test politicians’ commitment to take concrete measures to generate economic growth. NATO is currently the main area of formal cooperation between the US and the EU. TTIP might not sound as attractive as NATO but it is equally important as it will place the transatlantic alliance on a sustainable basis.