The Biggest Trade Deal Ever/ By Liza Ziborova

EU, US sign largest trade deal in history, a move that will have significant impact on their future economies

The United States-European Union High Level Working Group on Jobs and Growth recommended this year the start of negotiations on TTIP – The Transatlantic Trade and Investment Partnership – which had been considered already in the 1990s and again in 2007.

If successfully concluded, this would be the most significant bilateral Free Trade Agreement (FTA) to date, covering approximately 50% of global output, almost 30% of world merchandise trade (including intra-EU trade, but excluding services trade), and 20% of global foreign direct investment.

 

G8 Summit meeting on TTIP in Northern Ireland on 17 June 2013. Photo credit: Peta Souza, White House

G8 Summit meeting on TTIP in Northern Ireland on 17 June 2013. Photo credit: Peta Souza, White House

The United States and the European Union announced their intention to launch the TTIP negotiations in February 2013. The stated goal is to expand bilateral trade and investment between the two governing bodies, creating an economic stimulus from the resulting structural reform and boosting job growth.

The main priorities in the negotiation include removing remaining tariffs, lowering barriers to investment, liberalizing public procurement markets, and aligning rules and technical product standards.

According to the statistic the United States receives 23% of total EU exports and provides 21% of EU imports on a value added basis, while the European Union accounts for 29% of US exports and 27% of US imports. In other words, the United States is by far the most important destination of EU value-added and the largest supplier of value-added in EU imports.

The TTIP promises to create the largest free trade area on Earth; it will encompass the entirety of the EU and the United States, and will dwarf similar agreements like NAFTA. The scope of the agreement has vast implications for labor, trade, and standards among its members, and it will have profound effects on the practices of capitalism on a global level.

Brian Wingfield – reporter for Bloomberg News said “The TTIP  will affect 30% of global commerce, eliminate $10.5 billion in tariffs and boost trade by an estimated $280 billion per year. European Union and U.S. industries are sending wish lists to the negotiators, who want a pact by the end of 2014.”

Discussions will likely take years, and the treaty must be ratified by legislatures on both sides of the Atlantic. The United States’ last major trade deal was with Korea. It began in 2006 and did not conclude until 2011.

The terms of the agreement include the following stipulations:

  • The EU limits imports of genetically modified foods, rules that U.S. farm groups are pushing to scrap.
  • The EU wants regulations of financial institutions to be part of the treaty.
  • The EU is weighing a rule to expend digital privacy rights, including a provision giving people more control over the data they share online.
  • The 1920 Jones Act requires that only vessels built, owned and staffed by Americans carry cargo between U.S. ports. That prevents, say, a Dutch freighter leaving Baltimore from stopping in New York to drop off goods on its way back to Rotterdam. Lobbyists for European shippers want exceptions so they can carry cargo between U.S. ports.
  • The Sierra Club, which is considered to be one of the oldest and most influential grassroots environmental organizations,  is fighting the American Chemistry Council’s push to bring the EU’s strict rules for chemical sales more in line with laxer U.S. policies.
  • U.S. law bars foreign companies from controlling more than 25 percent of a U.S.  airline.  The EU is seeking to end that.

The potential benefits of the treaty are numerous. It can practically remove tariffs on agricultural and industrial goods. It will also exceed existing treaties in terms of investments and services, expanding into the transportation sector and addressing sub-federal governmental levels.

On government procurement, the goal is to achieve further market opening at all levels of government.

There is a high level of ambition to reduce non-tariff barriers by removing measures that create unnecessary costs and delays for trade, for example by introducing mutual recognition of standards and procedures. The negotiations are expected to address regulatory compatibility in sectors such as chemicals, automotive, pharmaceuticals, health and medical appliances.

The negotiations are expected to address divergences in intellectual property rights regimes.

In agriculture there is potential for very real gains, for the FTA parties and for others, if current forms of protection were to be lowered or removed.

Social and environmental aspects of trade will also be addressed based on what is already developed in existing trade agreements of the two parties.

This treaty, if successful, can have immense impacts on modern economic and governmental systems.

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