While President Obama attends the G8 summit in Northern Ireland and travels to Berlin for a state visit, the official launch of the Transatlantic Trade and Investment Partnership (TTIP) negotiations are a vital part of the agenda. In Brussels, European Union trade ministers are working feverishly to assuage the fears of certain member-states and secure a wide negotiating mandate for a comprehensive transatlantic deal.
Why is that important? A deep and more integrated relationship between the world’s two largest economies—the European Union and United States—offers considerable potential benefits to consumers and companies alike. Goods will be cheaper and firms will be able to more effectively mobilize and invest their capital across the US and Europe once we remove the remaining tariffs and clear the way for additional investment. Many hundreds of thousands of jobs will be created in export sectors and that means more work and jobs in the logistics companies needed to effectively transport these traded materials. It’s an important step forward in these volatile economic times.
A reinvigorated transatlantic economy will vastly improve the international competitiveness of both regions. And together they could set combined standards for the world to aspire to in environmental policy, product safety, pharmaceuticals, and any number of other industries. Exporters hoping to sell goods in either market will have just one set of rules to play by. An integrated transatlantic market would be a powerful trend-setter indeed. It would represent 50% of global GDP.
According to a recent Atlantic Council-Bertelsmann Foundation study of trade experts and policymakers from the United States and Europe that I co-authored, there is widespread optimism that that the US and EU will be able to successfully negotiate a trade and investment deal.
The benefits are fairly evident
This is perhaps the West’s last best opportunity to set global rules as the emerging markets continue to gain ground. Indeed, a failure to launch comprehensive negotiations—whether due to French insistence on precluding negotiations on cultural goods or a US refusal to consider convergence in financial regulation—would have significant consequences. If the transatlantic partners cannot agree among themselves, the emerging markets will have little confidence in our ability to work well globally.
While the benefits are fairly evident, we have to clear some significant hurdles. Traditional disputes over genetically-modified food and government procurement practices are as patent as ever. Additionally, both US and European regulators will be hard-pressed to give up the powers they’ve acquired in order to develop a more predictable and transparent transatlantic rulemaking process. Thus, strong leadership from President Obama and his counterparts in Brussels, Berlin, London, and elsewhere across Europe will be vital. Given the many economic benefits at stake and the depressed economic situations facing their countries, the leaders should certainly be motivated.
As headlines from France and elsewhere in the last week have made abundantly clear, we have several challenges to trade liberalization to overcome. Chief among these is convincing all parties involved that the benefits of TTIP far outweigh the drawbacks. It is also important to understand that a willingness to put everything on the negotiating table—including quotas and state support to the television, music, and movie industries—does not necessarily mean that these quotas will be removed. Negotiators have rightly pushed for as few exemptions as possible, as red lines and exempted sectors will limit the effectiveness of the eventual deal.
The United States and Europe have discussed a transatlantic free trade area in various guises for decades. However, as negotiations for TTIP begin, this time truly seems different. Both sides recognize the need to stimulate their stagnant economies in the aftermath of the financial and Eurozone crises. Moreover, in an age of austerity, a deepened trade relationship marks a path forward that does not add to national debt levels. Lastly, with the rise of the emerging markets—particularly China—which often subscribe to an economic model focused on state-owned enterprises and government directed investment decisions, this is a historic moment and a great opportunity for the transatlantic community.
Standing at the precipice of negotiations, trade experts have indicated a strong backing and optimism for the initiative based on our data. The challenge will be to mobilize this sentiment into action.
Business interests, consumer groups, and civil society leaders promoting transatlantic values all have important roles to play. Politicians should keep their eyes on the bigger picture and the economic imperative to restart sustainable economic growth. A focus on the narrow differences (that make up just 2% of transatlantic trade by value according to the European Commission: http://ec.europa.eu/trade/policy/countries-and-regions/countries/united-states/) could halt progress before negotiations even get underway. That would truly be a missed opportunity neither the United States nor Europe can afford.