6 August 2013
Bruce Stokes

Bruce Stokes

Associate Fellow, US and the Americas Programme


The creation of a Transatlantic Trade and Investment Partnership offer important economic and strategic opportunities to both the EU and US, but it is not without its challenges.

The economic case for a deeper and broader transatlantic market has never been more compelling. No other commercial artery in the world is the lifeline for so much trade and investment. Transatlantic merchandise trade totaled more than half a trillion dollars in 2012. TTIP has the potential to dramatically grow such commerce. 

Elimination of just half the non-tariff trade barriers would add €122 billion to the EU economy and $53 billion to the US economy. European-American trade would increase 79% if all customs duties and non-tariff trade barriers are eliminated, according to a 2013 study by the IFO Institute in Germany. Real income in EU member states would rise by as much as 9.7%, depending on the country, and by as much as 13.4% in the United States. And a total of 400,000 new jobs could be created in the EU, while employment in the United States could grow by more than one million.

Not so fast

Realizing these benefits poses new challenges, however. Transatlantic tariffs average less than 3% and primarily act as nuisance taxes on commerce. But peak tariffs remain on some apparel, textiles and shoes. Their continued existence is testimony to the influence of a small number of special interests. 

Transatlantic investment is healthy and a major contributor to trade and job creation. But some investment restrictions remain, such as limits on foreign investment in US air carriers or coastal shipping. 

The transatlantic harmonization of domestic regulations will require both sides to understand that in a global economy assertion of unfettered sovereignty over such rules is self-defeating. This will take time, sensitivity to local preferences and will involve flexible solutions in some cases. It may also require an initial focus on common principles and practices in regulatory rule making, especially for emerging technologies, rather than development of comparable regulation on existing products and services. 

Longstanding differences will also pose challenges. Americans and Europeans differ on the regulation of genetically modified organisms, for example. Processes are in place to deal with such differences. But this is a neuralgic issue that has the potential to rouse intense consumer concern.

The future of existing EU protections on film, television and music industries have caused some concern with EU member states; how best to safeguard cultural differences while not impeding digital commerce may be a sticking issue.

Public procurement has long been regulated at the state and local level in the United States. Europe wants that market open to transatlantic competition. Washington will need to find some way to accommodate such ambitions while respecting American federalism.

The right to privacy is a long cherished transatlantic democratic value. At the same time, big data holds great promise for creating significant jobs and growth. And analysis of phone, email and electronic data flows is used by governments to track criminal activity and guard against terrorism. Americans and Europeans differ over who should be able to gather data, how and where it can be stored and analyzed. The most recent revelations of data mining by the US National Security Agency and the strong adverse reaction in much of Europe to such actions underscores the need for a common, transatlantic understanding of the rules of the road governing the data digital economy.  


Beyond such substantive issues, the TTIP is unlike any other major trade negotiation ever attempted by either the European Union or the United States. 

This is a negotiation of equals. And as such it poses practical, psychological and political challenges. Before now, Brussels and Washington have negotiated trade and investment agreements with smaller, weaker economies that largely had to accommodate European and American interests. Successful completion of TTIP will require both sides to compromise and be willing to accept an agreement that may not achieve all that might have been originally desired. 

In launching TTIP both the European Union and the United States acknowledged that all regulatory impediments to economic integration cannot be harmonized in a defined period of time. And with regard to some issues, TTIP's success can only be measured by the establishment of mechanisms that enable promotion of more compatible approaches to current and future regulation. But politicians and publics may see creating coordination processes as failure, not success.

The cost of TIIP failing would be profound and long lasting. Without the potential of jobs the agreement would create, the chances of the recent economic slowdown prolonging are high. The European Union and the United States would continue to drift apart economically and strategically, and the rest of the world would take note and take advantage. Future global technical standards and regulatory norms and practices would not reflect transatlantic values. 

From within, Europe's temptation to divide into differentiated circles of integration – a two-speed Europe – might accelerate, leading to less predictable and more ad hoc transatlantic relations. Failure would undermine Europe's effort to speak with one voice in dealing with America and Washington’s long desire to have one person to call in Europe.

TTIP affords both Europe and the United States unique opportunities to spur growth and reinforce transatlantic interests and values. But the challenges it poses are also unprecedented. Much is at stake. And there is much to lose.