US-EU trade deal to boost trans-Atlantic trade, investment

By Jared Angle

Americans import thousands of European products, including famous brands like Fiat, Ikea and Heineken that have become ubiquitous in daily American life. However, the trade of industrial goods, which makes up a large market share in the United States and European Union, can benefit from free trade under an upcoming agreement known as the Transatlantic Trade and Investment Partnership, also known as TTIP.

TTIP is a proposed U.S.-EU free trade agreement intended to bolster investment and increase movement of goods and services between the two regions, and is projected to generate additional income for the U.S. and the EU, according to Silvia Kofler, head of press and public diplomacy at the European Union Delegation to the United States.

“The main objective is to remove, to eliminate all the obstacles to trade and investment,” Kofler said. “So we’re talking here about tariffs, but we are also talking about so-called ‘behind the border’ issues, such as regulatory issues,”

The most significant trade items include machinery, transport equipment, chemicals and pharmaceuticals, according to Kofler.

“It would add to our [gross domestic product], both to the U.S. and the EU, around half a percent per year, and that would translate into approximately €120 billion or $160 billion for the EU, and slightly less for the U.S. per year if the agreement would be wholly implemented,” Kofler said.

In the EU, roughly ten percent of additional income from TTIP would benefit the United Kingdom, according to Thomas Whitehead, a senior trade policy advisor at the British Embassy in Washington.

“We estimate that about £10 billion could be added to the UK economy annually because of TTIP, £100 billion added to the EU economy annually… so the dynamic effects from trade would be huge over time,” Whitehead said.

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That figure translates into about €12 billion or $16.7 billion.

Certain sectors of the British economy already involved in significant amounts of trade would experience growth, according to Whitehead.

“For example, in automotives, we could see export growth of about four to six percent, then other big sectors that it would benefit would be finance, where the UK has a competitive advantage, insurance, and chemicals and pharmaceuticals,” Whitehead said.

A joint study conducted in 2013 by the Bertelsmann Foundation, a German non-profit think tank, along with the Atlantic Council and the British Embassy in Washington, produced an in-depth report examining the potential effects that TTIP would have on each U.S. state.

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According to the report, the agreement would create nearly 750,000 new jobs across the U.S., with more than 40 states seeing a rise in exports of at least 20 percent, and as many as 138 percent in Alabama and 187 percent in South Carolina.

Large states such California would generate some 75,000 new jobs, while smaller states such as Nebraska would create nearly 5,000 new jobs, according to employment estimates in the report.

The report includes individual economic profiles on each state, including export data and industrial sectors that would benefit the most from the agreement. North Carolina would export an additional $1.2 billion in chemical products, while Utah would see a $7.1 billion gain in its metal products sector, according to the report.

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A similar study conducted by the European Commission, the EU’s executive body, found that roughly 1.2 million jobs would be created in Europe as a result of the agreement, according to Garrett Workman, associate director for the Atlantic Council’s Global Business and Economics Program.

While the Bertelsmann study predicts significant economic gains for individual US states, current assumptions about TTIP economic policies might not be reflected in a fully implemented version of the agreement, according to Kim Tuminaro, a senior trade officer at the U.S. State Department.

The Bertelsmann study assumptions for TTIP include elimination of tariffs, a 25 percent reduction of non-tariff barriers, according to Workman.

Those assumptions also include a 50 percent reduction of barriers for public procurement, which refer to government contracts that are bid out to private companies, according to Workman.

The U.S. government’s goal is to cut tariffs and lower non-tariff barriers, Tuminaro said, but TTIP studies “don’t parse out” what those barriers are.

There is also apprehension about promising specific numbers of added jobs, according to Tuminaro.

“We don’t want to prejudge the outcome,” Tuminaro said.

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Despite the increased trade that TTIP is expected to generate, many people don’t know what the agreement is or how it will affect them, according to Whitehead.

“Trade policy is one of those interesting things that everybody sort of recognizes impacts their lives in some respects, but maybe they don’t understand the details of it, and the politics can be quite interesting and dynamic and confusing at times,” Whitehead said.

According to Whitehead, British citizens widely acknowledge TTIP’s potential benefits, but the British foreign ministry is “still trying to raise public awareness of the issue.”

“We’re an open country, we’re on of the most free-trading nations in the world,” Whitehead said. “We have a history of trade, and we have a history of being open to international commerce, and we’re intrinsically outward-looking, so as a whole I think the public in the UK would react very positively to something like this.”

While agreeing to a trade deal that will add billions of dollars to both economies may seem like an easy choice, the specifics of trade policy have proved to be complicated for negotiators on both sides.

“In the beginning you just get to know each other. There are about seventy [or] eighty trade negotiators on each side, they just talk to each other, they try to understand what the objectives are of the other side, they try to understand what the legislation is on the other side,” Kofler said. “Once that understanding on the other’s legislation is complete, then you start to think about what you could ask for, and then you prepare offers.”

During the first three rounds of negotiations, both sides only exchanged offers on agricultural issues, according to Kofler.

U.S. and EU trade negotiators recently finished a fourth round of talks on TTIP, according to a press release from the United States Trade Representative’s office.

Even when both sides come to an understanding on trade issues, negotiations do not always progress as planned due to a variety of regulatory and political issues, according to Tuminaro.

Although TTIP is a unique undertaking for the United States, its formation depends on precedents set by U.S. trade policies implemented in other parts of the world, Tuminaro said.

The Trans-Pacific Partnership (TTP), a similar agreement between the United States and several East Asian nations, has completed almost 20 rounds of negotiations so far, according to Tuminaro.

U.S. involvement in TTP negotiations dates back to 2009, according to the Trade Representative’s website.

TTIP negotiations, on the other hand, began in 2013, according to Tuminaro.

“There’s been pressure to get moving [on the pace of TPP and TTIP],” Tuminaro said.

Because certain elements of TTIP depend on the success of TPP, a fully implemented U.S.-EU trade deal will have to wait until the Pacific agreement is complete, according to Tuminaro.

“What happens there could be a basis for what we do in Europe,” Tuminaro said.

Volatile politics on both sides of the Atlantic have ensnared diplomatic efforts as well, prolonging the already-lengthy trade negotiation process.

Following the controversial June 2013 leak of secret intelligence documents by former National Security Agency contractor Edward Snowden, there has been an element of distrust in the EU, according to Tuminaro.

Immediately after the NSA allegations, many European politicians called for TTIP negotiations to shut down, but those concerns have died down since then and have not affected the pace of TTIP negotiations, Tuminaro said.

Legislative processes in the U.S. and EU have proved to be a greater headache than the intelligence leak.

The two-week-long 2013 federal government shutdown “put a kink” in the negotiation process, throwing the trade deal off schedule, according to Tuminaro.

Beginning in the second half of May 2014, EU residents will be electing representatives for the European Parliament, the EU’s 765-member legislative body, according to the Parliament’s website.

Parliamentary campaigning and elections may slow down negotiations slightly, but should not affect them significantly, according to Tuminaro.

“I don’t think we’ll be too hampered by the European election cycle,” Tuminaro said.

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About Jared Angle

I am an international relations professional based in the Washington, DC metropolitan region, specializing in European politics, international economics, and political risk analysis. I hold an MA in International Relations from the School of International Service at American University in Washington, DC, and currently work in the field of international trade policy.

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