The Goals and Benefits of the Trans-Pacific Partnership & Transatlantic Trade & Investment Partnership

Francisco A. Laguna & Amy Turner

Today, we continue with our series on the Trans-Pacific Partnership (TPP) and Transatlantic Trade & Investment Partnership (TTIP) by discussing the goals of the partnerships and whether the trade agreements will truly benefit US businesses.

The Goals of the TPP and TTIP

Singapore Cargo Terminal © CEphoto, Uwe Aranas / , via Wikimedia Commons

Singapore Cargo Terminal
© CEphoto, Uwe Aranas / , via Wikimedia Commons

The principal goals of the TPP are to promote and grow trade and investment among the partner countries, to stimulate innovation, general economic growth and development, and to encourage job creation and training programs. Although the actual text of the treaty is classified, general outlines and summaries of the agreement have been provided. The United States Trade Representative (USTR) informs that the TPP seeks to address issues that promote: 1) regulatory coherence; 2) competitiveness and business facilitation; 3) Small and Medium-Sized Enterprises (SMEs); and 4) Development.  The TPP seeks to achieve these goals through comprehensive market access by eliminating barriers to goods, services, trade and investment.  Such access would create new opportunities for workers and businesses in the member states and immediately benefit consumers. In addition to tariff elimination, the TPP would adopt common guidelines and standards for intellectual property, enforcement of labor and environmental laws the establishment of an investor-state dispute settlement mechanism.

Port of Hamburg By Franzfoto (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Port of Hamburg
By Franzfoto (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons

The Obama Administration considers the TTIP a companion agreement to the TPP.   According to the USTR, the TTIP is intended to be an ambitious and comprehensive trade agreement that significantly expands trade and investment between the United States and the EU, increases economic growth, jobs, and international competitiveness and addresses global issues of common concern.  The European Commission categorizes the topics under discussion into three broad areas: market access; specific regulations; and broader rules and principles, and modes of co-operation.  The TTIP goal is to liberalize 1/3 of global trade”, which, proponents argue, will create millions of new paid jobs. The true economic gains from the TTIP, however, will depend on how the US and EU contend with their oftentimes duplicative and conflicting rules related trade and other regulatory issues.  TransLegal routinely assists companies comply with regulatory requirements overseas.  Uniform regulations greatly help expand trade among nations simply by making it easier for businesses to understand their obligations.

The Bottom-Line Issue: Will the TPP and TTIP benefit American Businesses?

Wish we could answer that one!  Not surprisingly, and as in all things economic and political, the experts disagree how the TPP and TTIP will affect American businesses.

With regard to the TPP, estimates predict that it would generate $5 billion in economic benefits to the US in 2015, and $14 billion in 2025. Proponents state that if the impact of investment liberalization were taken into consideration, the economic benefits would likely be larger.

Port of Miami, Florida

Port of Miami, Florida
“Port of Miami Florida”. Licensed under Public Domain via Wikimedia Commons

Proponents also argue that small businesses may actually benefit from the trade liberalization because they are less likely than large businesses to establish overseas subsidiaries to overcome existing trade and non-trade barriers.  Critics, however, state that the winners of the TPP agreement would be larger US businesses in the agriculture, insurance, manufacturing, pharmaceutical, technology sectors that can be poised to expand exports as nations ratify the treaty.

The European Commission says that the TTIP has the potential of increasing overall trade between the two parties as much as 50%.  It also claims that the TTIP would contribute €120 billion to the EU economy, €90 billion to the US economy and €100 billion to the economies of other countries.  If the TTIP were only to focus on tariffs, it is estimated that the partnership would result in an annual EU GDP growth of €24 billion by 2027 and annual growth of €9 billion in the United States. If shared equally among the affected people, the Commission notes that the most optimistic GDP growth estimates would translate into additional annual disposable income for a family of four of €545 euros in the EU and €655 euros in the US.

Critics on this side of the pond note that long–standing membership in the World Trade Organization, work by the Transatlantic Economic Council and other trade agreements like U.S. Open Skies Agreement have already resulted in low trade barriers between the US and the EU. Therefore, the deal should focus on non-conventional barriers such as overriding national regulations regarding fracking, GMOs, finance and copyright.  This may prove a challenge especially in those areas of agriculture, food and environmental law where the the parties are particularly far apart.

We will continue this series in mid-Autumn. TransLegal assists US and EU companies understand and comply with regulatory laws and regulations through our network of 51 correspondent offices in 51 countries.  Contact us with your questions concerning regulatory requirements in the country that interests you.

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Trans-Pacific Partnership & Transatlantic Trade & Investment Partnership

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)

Dark Green:  Currently in negotiations    Light Green: Announced interest in joining Light Blue: Potential future members 2013 "TPP enlargement" by en:User:Japinderum, en:User:Phospheros, en:User:Orser67 - en:File:TPP enlargement.png (based on File:World map model.png). Licensed under CC BY-SA 3.0 via Wikimedia Commons

Dark Green: Currently in negotiations
Light Green: Announced interest in joining
Light Blue: Potential future members
2013 “TPP enlargement” by en:User:Japinderum, en:User:Phospheros, en:User:Orser67 – en:File:TPP enlargement.png (based on File:World map model.png). Licensed under CC BY-SA 3.0 via Wikimedia Commons

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.

"Transatlantic Trade and Investment Partnership (8570621071)" by Foreign and Commonwealth Office - Flickr. Licensed under OGL via Wikimedia Commons

“Transatlantic Trade and Investment Partnership (8570621071)” by Foreign and Commonwealth Office – Flickr. Licensed under OGL via Wikimedia Commons

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.

TransLegal has 51 affiliate offices worldwide.  We assist our clients navigate the intricacies of global trade.  Contact us with your questions.