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Transatlantic trade talks: what is the problem?

Posted by Nick Prag at 20 November 2014, 16:50 CET |
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This week, Europe's Trade Commissioner Cecilia Malmstroem attempted to breath new life into the Transatlantic Trade and Investment Partnership talks that have run into opposition particularly as regards one of the deal's most controversial components.

Talks on the TTIP have been ongoing for more than a year now. Its aim is no less than to create the world's biggest free-trade and investment agreement, making it easier to buy and sell goods and services between the EU and the US, and removing trade barriers in a wide range of economic sectors.

The EU-US pact would be the biggest free-trade agreement ever, with bilateral trade in goods last year worth some EUR 500 bn, another EUR 280 bn in services and trillions in investment flows.

The EU and the US are looking at tackling barriers behind the customs border, including differences in technical regulations, standards and approval procedures - all seen as adding to the burden in time and money on companies who want to sell their products on both markets.

Supporters of the package point to benefits for consumers - more choice, savings, better competitiveness and high quality jobs - and for business particularly smaller firms (SMEs) - basically an extension, and indeed completion of, the single market, removing red-tape and non-tariff barriers, which is supposed to lead to more opportunities and opening up the markets for services, investment, and public procurement.

The TTIP is seen as having the potential to shape global rules on trade. The world's trading countries are watching closely the progress of these talks. A successful TTIP would show as a model for trade cooperation in a global, inter-connected world, showing up those from less democratic and protectionist countries.

Russia, for example, is not a supporter, seeing TTIP as a challenge to Russian efforts to divide Europe from America, as well as frustrating Russia's efforts on the export of natural gas to Europe.

The criticism does not however only come from outside.

The fears of labour unions and activists have focused on the so-called investor-state dispute settlement, or ISDS, which would allow firms to sue national governments if they feel that local laws - for example health and safety regulations - violate the trade deal and threaten their investments.

British PM David Cameron brushes off the controversy, saying ISDS has been part of every single trade deal the UK has ever signed, and "we haven't lost a single case".

Much the same line is taken by the US Ambassador to the EU, Anthony L Gardner, who says that "nothing in it undermines the sovereign right to regulate. Thresholds are very high. One can be sure, it doesn't mean that you are going to win".

Nevertheless, Cecilia Malmstroem hinted in her recent European Parliament hearing that this key stumbling block might be ditched.

There are also other issues, such as data protection concerns, which would need to be addressed before any agreement is made. And it is right that the whole process should be made transparent and accessible, to counter the criticism that the talks favour big business.

Despite the many obstacles that remain in the way of an agreement, however, for many, the TTIP is an important opportunity that business, and SMEs in particular, should get behind.

While some outside countries, and Member States also, will continue to worry about short-term threats to domestic industries, the longer-term benefits of success in these talks could be huge, significantly reducing the cost of trading across the Atlantic, and leading to consumer savings and to better competitiveness and high quality jobs.

According to a new report by the Atlantic Council, TTIP can make a real difference in 'jump-starting" the transatlantic economy. But the effect of a successful TTIP agreement does go beyond the US-EU trade relationship.  It sends "a strong message to international partners that open markets paired with efficient regulatory regimes backed by the rule of law remain the world's most effective economic model."

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Nick Prag

Nick Prag

Nick Prag is founder and managing editor of EUbusiness.com. Prior to EUbusiness, he was senior editor at Europe Online SA in Luxembourg, where he played a major part in the launch of Europe Online International.