To Deal or Not to Deal?
Francisco A. Laguna & Amy Turner
Among the many points of disagreement between the political parties are the benefits of trade agreements. Currently, the two possible deals discussed most often are the Trans-Pacific Partnership (TTP) and the Transatlantic Trade and Investment Partnership (TTIP). In very basic terms, the TPP is a trade agreement with Asia, while the TTIP is a trade agreement with European Union. These agreements will have enormous impact on the United States. Furthermore, timing will make it more interesting: finalization of each is expected in 2016, during an election cycle.
Trans-Pacific Partnership (TTP)
The TPP began as the Trans-Pacific Strategic Economic Partnership Agreement. TPP negotiations have been ongoing since 2005, and the US joined the negotiations in March 2008. Twelve countries are currently participating: Australia; Brunei; Canada; Chile; Japan; Malaysia; Mexico; New Zealand; Peru; Singapore; US; and Vietnam. The combined total GDP of these 12 nations is 40 % of global GDP and represents 1/3 of world trade – ~ US$27.7 trillion. The global benefits of the TTP have been placed at as much as US$295 billion annually.
Transatlantic Trade and Investment Partnership (TTIP)
Since the 1990s, there has been a Transatlantic Free Trade Area. By that time, the Cold War had ended, and the world was no longer divided into conflicting blocs. The European Community (12 countries) and the US decided to sign a “Transatlantic Declaration”. The Declaration outlined yearly summits, biennial meetings among state ministers and more frequent meetings of political figures and senior officials.
One of the early initiatives was the 1995 creation of the Transatlantic Business Dialogue (TABD), a pressure group of business people on both sides of the Atlantic. Since 1998, a series of advisory committees have been established: the Transatlantic Economic Partnership (1998); the Transatlantic Economic Council (2007); and a group of high level experts created in 2011.
The experts ultimately recommended that talks should begin for a wide-ranging free-trade agreement. In 2012, President Obama used his annual State of the Union address to call for finalization of that agreement.
Together, the United States and European Union represent 60 % of global GDP (33 % of world trade in goods and 42 % of world trade in services). TTIP would cover 46 % of world GDP, giving it the potential to be the largest regional free-trade agreement in history. The European Commission claims that passage of TTIP could boost trade between the US and EU by up to 50 %.
Next time, we will discuss what the agreements include, how they will affect US businesses. Whether we should deal or not deal.
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