The Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union. A discussion of its pros, cons and implications
Essay 2015 9 Pages
This paper introduces the Transatlantic Trade and Investment Partnership, called the TTIP. The TTIP is a trade agreement between the United States and the European Union, which is currently being negotiated. The aim of this convention is to open up the markets on both sides. This includes eliminating tariffs and other trade barriers between the two unions, the United States and the European Union. Furthermore, restrictions for commercial services shall also be reduced, security of investment and the competitive equality shall be improved, and not least the access to public contracts shall be simplified at all levels of government. Therefore, the TTIP is a unique joint project which can obtain considerable growth and em- ployment effects (Bundesministerium für Wirtschaft und Umwelt 2015). However, there is a lot of criticism and concerns regarding foreign trade between the European Union and the United States, but there are a lot of advantages for both countries as well. Some of the top- ics are highly controversial mainly due to differing standards and norms of both partners (Beck & Ohr 2014).
The primary purpose of this essay therefore, is to address the pros and cons of this theoret- ical issue, mainly related to the German point of view. Afterwards, some implications and problems of the TTIP are presented. Finally, the paper concludes the most important points of this agreement and involves future prospective for the TTIP between the European Union and the United States. By reading this paper, the reader has the opportunity to form their own opinion on the TTIP based on the comprehensive assets and drawbacks which are submitted.
At first glance, it is not extraordinary that the European Union and the United States want to enter into a contract covering the TTIP between both nations because nowadays the world- wide trend towards free trade agreements is rising (Hermann 2014). Since January 2013 the European Union and the United States have officially negotiated about the removal of tariffs and about other trade obstacles like safety standards, technical norms or rules of competition.
On the one hand many advantages are expected of this free trade agreement. By imple- menting the TTIP, custom and trade barriers would primarily be a thing of the past between the European Union and the United States (Bundesministerium für Wirtschaft und Umwelt 2015). The agreement could result in the economies of both unions being increased, as well as global effects. The import tariffs, which are currently 3 per cent, would be reduced and higher tax rates adjusted, reduced or removed. For example, tariffs of 2.5 per cent are cur- rently require to be paid for automobiles on the border of the United States. On the basis of high imports, European enterprises, above all German car manufacturers, could even achieve savings of up to 650 million euros per annum. By the fact that many German car manufacturers on both sides of the Atlantic Ocean produce and sell their own products, the positive effect of lower tariffs also increases. On the other hand, the Americans raise very high duties in some areas in which German companies are also active, for example trucks have a tariff of 25 per cent or in the agricultural area there is a 19 per cent tariff on milk products. It is at this point that the greatest savings will be expected (Europäische Komis- sion n.d.).
Thereby higher profits would occur and in turn more investments and therefore more em- ployment would be created (Die Bundesregierung 2015). The sum of all trade transactions of the European Union and the United States corresponds to approximately 47 per cent of the global gross national product. The daily amount of the trade volume between the Euro- pean Union and the United States is nearly 2 billion euro, with a rising tendency. It is there- fore obvious that the economies would be immense due to the TTIP (Auswärtiges Amt 2013). Besides a higher level of investment, companies could reduce product prices which would also have implications on consumers’ cost of living standards. As a result the con- sumers would have lower costs of living. At the same time the comparability of goods would increase because of the adjustment of the particular safety and production standards. Due to common rules restrictions, which are presently applied to agricultural products, technical products and drugs, would also be eliminated (Die Bundesregierung 2015). Hence, eco- nomic forecasts predict a growth impulse for the United States of 3.1 per cent and for the European Union of 1.5 percentages for the year 2015 (IMF 2015; European Commission 2014). According to one of the federal Ministry of Economics’ commissioned studies, it can be assumed that 400,000 new jobs will be created in Europe by the TTIP, at least 100,000 in Germany (Weingartner 2015). Beside the creation of new employment, consequently real wages would increase and a significant reduction of the unemployment rate, as well as longer term oriented impulses for economy areas of concentration in the particular econo- mies would arise (Felbermayr, Heid & Lehwald 2013).
Currently valid regulations, norms and approval procedures often constitute big hurdles for companies who want to become active on other markets. In the end, precisely these kinds of bureaucratic obstacles are the reasons why trade is needlessly blocked or why trade be- comes more and more expensive. Through TTIP these barriers would be simplified. Thus, for example German companies could submit competitive offers to public regional advertising in the United States more easily and vice versa. Legitimate regulations such as environmental or social standards would not be affected. Such regulations protect people from health and safety risks, as well as the risks at the workplace, additionally they protect people against risk of environmental reasons and financial situations. At the end these regulations are the result of democratic political decisions.
Though the European Union and the United States both implement sophisticated systems to guarantee of security and consumer protection, however, they often choose different ap- proaches to achieve the same aim. Therefore, these provisions should be compatible where it is appropriate. The purpose is to make the corresponding standards of the European Un- ion and United States easier and cheaper for European and American businesses. For this the standard basics of both countries should be fulfilled at the same time (Europäische Komission n.d.). As an example the automobile indicators in the European Union are or- ange and in the United States they are red. If both parties would accept the norms of the other union as well, the automobile manufacturers would no longer have to produce two different variations (Die Bundesregierung 2015). With regard to the warranty of security and consumer protection, both unions have a sophisticated system. Nevertheless, various ap- proaches are often chosen to achieve a certain aim. Hence these regulations should be de- signed compatibly, where it is appropriate. Thereby regulations should be simplified for Eu- ropean and American companies to correspond to the pertinent European Union and United States standards. Additionally, this would positively affect costs. Of particular interest for some industrial branches, as for example to the mechanical engineering, would also be the adjustment to international norms and standards. However, other economic sectors could also benefit. For example, presently the import of agricultural goods is still forbidden by the current valid American plant conservation law and the American food safety acts. Neverthe- less, by the adjustment new sales markets could arise due to an expanded market. To de- velop new standards together for the future, the aim for both parties is that the European and American regulation authorities work together more closely (Europäische Komission n.d.). Consequently, the TTIP can contribute to the political arrangement of the economic globalisation (Bundesministerium für Wirtschaft und Umwelt 2015). Even though the TTIP will create many positive effects, negative influences, which will also be impacted by the TTIP, are foreseeable. However, despite the positive effects which are expected due to the planned free trade agreement, the TTIP opponents are strongly represented.
Against the positive representation, experiences with other trade and investment agreements refer to a number of critical aspects and risks. Initially the expected growth and income profits have to be qualified (Baker 2013). The liberalisation between the European Union and the United States is already extensively advanced and ambitious adaptations and harmonisations in the regulative area are less likely. Differences do not only exist between the European Union and the United States, but also between single European countries or federal states (Beck & Ohr 2014).
On the basis of the TTIP, critics worry about negative effects of the involved countries to- wards global trading partners. As a result the economic performance would be limited. Par- ticularly against the backdrop that raw materials and trade goods can still be imported signif- icantly cheaper from other countries. Moreover, exports from China or Mexico to the new trade zone would get considerably more expensive and exports to these countries on the part of the European Union and the United States would get cheaper. In regard to the cur- rent high trade volume between these countries, such as the EU and China, the situation would be barely sustainable for China in the long term. Trade needs to be run to make prof- its, not loss (Unmüßig & Falk 2014). Generally, many further scenarios would still be con- ceivable but the major issue of the trade agreement by far is still the missing transparency (Nürnberger Nachrichten 2015). However, this is not the major problem rather it is more about the fear that the European laws might be softened or avoided. These include regula- tions which deal with issues about energy, environment or industrial matters and which have often been established with difficulty over the course of many years (Greive 2015). As well there are regulations in the agricultural area, environmental safety and consumer protection are of major concerns to critics (Bundesministerium für Wirtschaft und Umwelt 2015).
Regarding adjustment of the rules and quality standards it is very improbable that the regu- lations in the United States will be raised to the higher specifications of the European Union, because it would be necessary for rapid change to the current practiced form of the agricul- ture. That would mean a radical adjustment in the forms. It is much more likely that the standards of the European Union are adapted the level of the United States; consequently some more controversial developments would be also permitted in the European Union.