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
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.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.
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.