Is TTIP Worth the Trouble?

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As the one-year anniversary of negotiations for the Transatlantic Trade and Investment Partnership (TTIP) approaches, it’s time to recognize the proposal’s potential “to generate growth not only in Europe and the United States, but also in the developing world,” write Anne Ruth Herkes and Miriam Sapiro in the following opinion piece. Herkes was state secretary at the German Ministry of Economics and Technology from 2012 to 2014. Sapiro was deputy U.S. trade representative from 2009 to 2014 and is a visiting fellow at the Brookings Institution.

Is TTIP Worth the Trouble? If the answer is yes, then U.S. and EU leaders have their work cut out this week at the G-7. As they sit down in Brussels to discuss a number of challenges, they should include the imperative of forging a stronger Transatlantic Trade and Investment Partnership, known as TTIP. As the negotiation’s one-year anniversary approaches, it is the right time to make the case, publicly and forcefully, that the agreement is needed to generate growth not only in Europe and the United States, but also in the developing world.

The successful conclusion of TTIP will lead to greater integration between the U.S. and the European Union, two economies that represent half of global GDP and a combined market of 800 million consumers. This new partnership has the potential to generate billions of dollars in new exports and thousands of new jobs with the goal of not just benefiting large companies and their workers, but also the small and medium enterprises that make up the backbone of both economies.

Given the size of our trade today — $2.7 billion in goods and services flowing daily and $4 trillion invested in each other’s economy, supporting more than 13 million jobs — people are often surprised that no comprehensive trade framework exists. Imagine what an agreement designed to eliminate industrial and agricultural tariffs, improve regulatory cooperation and tackle shared global challenges could do to reduce unemployment and poverty at home and elsewhere. In many parts of Europe, youth unemployment is a major concern with no immediate solution in sight. And in the United States, nearly 22% of children under the age of 18 live in poverty. While debate intensifies about whether income inequality is growing at an alarming rate, as French economist Thomas Piketty contends but his data may not support, we risk missing an opportunity to narrow the gap.

“Imagine what an agreement designed to eliminate industrial and agricultural tariffs, improve regulatory cooperation and tackle shared global challenges could do to reduce unemployment and poverty at home and elsewhere.”

The steps we take to make our rules more compatible with each other, and more transparent, participatory and accountable to public input, will also yield gains for our trading partners, especially in the developing world. Recent studies in the United Kingdom and Germany have estimated that TTIP could grow the global economy by nearly 100 billion Euros ($136 billion) annually and increase average global per capita income by 3.3%. Greater openness and responsiveness in developing regulatory rules would also address concerns by European voters that Brussels suffers from a democratic deficit.

In addition, TTIP holds great importance strategically. There is no shortage of countries vying to join the negotiations, even though no decision on expansion has been made. Adding new parties to the table at this stage doesn’t make sense, but figuring out the process for doing so later is key. Signalling TTIP will be open to others that can meet its high standards would be a powerful incentive for interested countries, such as Turkey and potentially Ukraine, to take seriously economic reforms and democratic principles.

Symbolically, a commitment by U.S. and EU leaders to redouble efforts to conclude TTIP would demonstrate that our economic relationship is just as strong and enduring as the political, military and security ties that underpin our alliance. Conversely, failing to finish TTIP would severely weaken the broader U.S.-EU partnership and further dampen prospects for a return to multilateralism at the WTO.

A Rising Tide of Misinformation

Notwithstanding its economic, strategic and symbolic benefits, TTIP faces serious challenges in the United States and the EU. A majority of Congress has so far shown little appetite for renewing trade promotion authority (TPA) before the midterm elections in November, even though a recent Pew poll showed that 60% of Democrats and 44% of Republicans back TTIP. Committee leaders could cement their legacies by trying to get a bipartisan bill ready now to pass after the midterms. While such authority is not needed to conclude either TTIP or the Trans-Pacific Partnership (TPP) also under negotiation, it’s an important signal of America’s commitment to both deals.

Europe is preoccupied with figuring out what the results of the European Parliament elections mean, although a strong anti-EU trend had been expected. Key governments, particularly France and the United Kingdom, may become less willing to deepen intra-EU economic integration when in fact, as German Chancellor Merkel has noted, the better response is to refocus on the economy to boost competitiveness, growth and jobs.

But the biggest obstacle to the negotiation right now is a rising tide of misinformation about what TTIP is, and what it is not. Unfortunately, TTIP’s opponents are more organized and vocal than TTIP’s proponents. Three claims in particular are repeated frequently, with sensational effect. Europeans are getting nervous that TTIP will flood their markets with “frankenfoods,” forcing them to ingest genetically modified beef or chicken rinsed with chlorine. But TTIP is not a puppet of sinister market forces intent on lowering quality standards. What TTIP aims to do is ensure that both sides use science and risk assessments as the only legitimate basis for such decisions. For example, Europe now permits approved GMO imports, but the process is slow and politicized. Moreover, given the incidents of mislabelled and contaminated food in both markets, whether horsemeat in Europe or listeria in the United States, consumers should be insisting that both authorities find better ways to cooperate.

“Signalling TTIP will be open to others that can meet its high standards would be a powerful incentive for interested countries … to take seriously economic reforms and democratic principles.”

Another misleading claim is that improving regulatory compatibility is actually a race to the bottom. Nothing could be farther from the truth, which is that both systems have the highest standards of health, safety, environment and consumer protections. No one wants to change this, nor would they dream of trying. The challenge, rather, is to see how we can coordinate better to avoid unnecessary duplication and costs while maintaining our high standards that, over time, can become global norms. While large companies can afford to build two assembly lines in the same plant to make essentially the same product, companies in developing markets and smaller businesses in Europe and the U.S. usually cannot.

Investment is a third area where misunderstandings prevail. Germany, other EU countries and the United States have signed hundreds of agreements that enable investors to bring a claim against a state when they have been discriminated against solely because they are foreign. These provisions do not limit a government’s ability to regulate fairly in the public interest. Still, both sides are open to improvements in the process, such as enhancing transparency and increasing penalties for any frivolous actions. But keeping this option in TTIP sets an important precedent for future agreements the U.S. or the EU will negotiate with other partners, which have more problematic legal systems. And even in advanced judicial systems like the U.S. and the EU, there are places where a foreigner may not get a fair trial.

It’s important for President Obama and the EU leaders gathered around the G-7 table to articulate why a stronger economic partnership is worth fighting for, as Merkel has started to do. Obama will also have the chance for a heart-to-heart talk with the two other G-7 members — Japan and Canada — about what needs to be done to get TPP across the finish line as both partners continue to protect domestic markets despite pledges not to do so. Rather than fret about the dangers of growing protectionism around the world, it’s time G-7 leaders throw their weight behind ambitious and courageous steps to reduce their own trade barriers in order to stimulate growth and employment. The fate of TTIP — as well as TPP — and the strengthening of our economic alliances depend on it.

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