Academic journal article Journal of Competitiveness Studies

Transatlantic Trade and Investment Partnership - Overview

Academic journal article Journal of Competitiveness Studies

Transatlantic Trade and Investment Partnership - Overview

Article excerpt


The European Union (EU) is an economic and political union of European countries started in the early 1950s in the form of the European Coal and Steel Community and the European Economic Community. It has grown from the founding six countries of Belgium, France, Germany, Italy, Luxembourg, and the Netherlands to a grand union of twenty eight countries with a combined population of over 500 million people and, as of 2013, a GDP of $17.26 trillion, the equivalent of 23% of the world economy (World Economic, 2013). As Table 1 shows, the EU is the largest trade partner with the United States generating total merchandize exports and imports of $649.23 billion (US Trade, 2013). Even in the service trade, the US is the largest service trade partner with the EU with 29% of EU service exports going to the US and 31% of EU service imports arriving from the US. The volume of their economies and trade, coupled with sluggish economic growth and the rise of new economies, have prompted interest on the part of Washington and Brussels to explore the possibility of building an alliance to boost their economies, trade, and employment.

In July 2013, negotiations began between the United States and the European Union for the purpose of forming a transatlantic agreement on trade, investment, and trade regulations. The proposed agreement is referred to as the Transatlantic Trade and Investment Partnership (TTIP). If successful, the agreement will cover the two largest economies in the world making up about 45% of the world GDP (World Bank, 2014), 33% of world trade in goods and 42% in services. With regard to bilateral trade and investment, the volumes and trends are equally impressive. According to the US Trade Representative's office, exports to the EU make up 21% of US exports and imports make up 19% of total US imports. Roughly speaking, one out of every five dollars of US exports or imports are to or from EU. Seventeen percent of EU merchandize exports and 29% of service exports go to the US. Eleven percent of EU merchandize imports and 31% of service imports come from the US. However, the relative share of EU-US trade has been declining, especially from the perspective of the European Union. In the decade between 2000 and 2011, while EU exports to the world rose by 7.6% a year, exports to the US grew by a mere 1%. As a result, the share of the US market in EU merchandize exports declined from 28.1% to a low of 16.9%, an alarming drop for a continent whose economy is strongly reliant on exports, where exports make up 177% of Luxembourg's GDP to 27% of France's. In every industry, as shown in figure 1, the EU exports more to the US than the US to the EU.


TTIP negotiation is divided into fifteen subject matters such as trade and investment barriers, transparency of trade regulations, intellectual property, worker rights, the environment, and government procurement. The topics are discussed in publications by the US Trade Representative (USTR) and European Commission (EC). The following is a sample of the key negotiation areas.

Removal of Tariffs on Merchandize Exports. Every day, the US ships $730 million worth of exports to the EU and the US wants to eliminate tariffs on exports to give them the same treatment awarded non-EU countries who are members of the EU free trade agreements, such as Chile, South Korea, Mexico, and South Africa whose exports are duty-free. With regard to agriculture exports, the US seeks significant reduction in tariffs (and regulations and quotas). The United States is the largest agriculture exporter in the world with annual exports totaling $145 billion. However, only 7% are destined for the EU, in contrast to the 21% for total US exports to the EU. To illustrate this, US apple growers pay 7% duty to the EU, whereas the EU growers pay no duties on their exports to the US. US olive oil exporters pay $1,680 per ton, while EU producers pay only $34 per ton on their exports to the US. …

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