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THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (TTIP)
AND THE FUTURE OF U.S.-EU ECONOMIC RELATIONS
Earl H. Fry
Professor of Political Science
Brigham Young University
[email protected]
American Chamber of Commerce
in Luxembourg
May 12, 2015
What is the TTIP?
• Proposed Transatlantic Trade and Investment Partnership
• Launched negotiations July 2013 involving U.S. (320 million people) and
European Union (composed of 28 nations and 507 million people)
• EU Trade Commissioner Cecilia Malmström and U.S. Trade Representative
Michael Froman directing the negotiations
• 9th round of negotiations held in New York City April 20-24, 2015
• Negotiations for U.S. occurring at same time as ongoing talks on a TransPacific Partnership (TPP) (U.S., Japan, Malaysia, Singapore, Vietnam, Brunei,
Australia, New Zealand, Mexico, Chile, and Peru)
The Economic and Geo-Strategic Considerations
• NAFTA, TPP, and TTIP would make the U.S. a signatory to agreements
covering most of the world’s trade, investment, and consumer markets
• NATO and TTIP within the parameters of a more dangerous and uncertain
European continent
• Burden-sharing
• The energy dimension
• The transatlantic region in comparison to Asia circa 2050—could over half
of world’s population, GDP, exports, and direct investment be concentrated
in Asia by mid-century?
• Supply chains
Defense Spending by NATO Member Countries
as Percentage of GDP, 2010 and 2013
•
•
•
•
•
•
•
•
•
•
Albania 2.0, 1.4
Belgium 1.1, 1.0
Bulgaria 1.7, 1.4
Croatia 1.5, 1.5
Czech Rep 1.4, 1.1
Denmark 1.4, 1.4
Estonia 1.8, 2.0
France 2.0, 1.9
Germany 1.4, 1.3
Greece 2.9, 2.3
•
•
•
•
•
•
•
•
•
Hungary 1.1, 0.9
Italy 1.4, 1.2
Latvia 1.0, 0.9
Lithuania 0.9, 0.8
Luxem 0.5, 0.4
Neth 1.4, 1.3
Norway 1.5, 1.4
Poland 1.9, 1.8
Portugal 1.6, 1.5
•
•
•
•
•
•
•
•
•
•
Romania 1.3, 1.4
Slovak Republic 1.3, 1.0
Slovenia 1.6, 1.1
Spain 1.1, 0.9
Turkey 1.9, 1.8
UK 2.7, 2.4
NATO - Europe 1.7, 1.6
Canada 1.5, 1.0
United States 5.4, 4.4
NATO Total 3.3, 2.9
Source: NATO, “Financial and Economic Data Relating to NATO
Defense,” March 2011 and February 2014
The International, National, and Regional Settings
• The “triple combination” of
• Globalization
• Unprecedented technological change
• Creative destruction
• In the United States during calendar year 2012, 800,000 new businesses were created
and 733,000 terminated
• In the United States from mid-2013 through mid-2014, 28.7 million private-sector jobs
created and 25.7 million terminated
• U.S. civilian labor force totals 157 million with a 62.7% labor participation rate
• European Union and Eurozone
• North American Free Trade Area (NAFTA)
• Asia and emerging markets
Major Objectives of TTIP
• Reduce trade and investment barriers while maintaining health,
safety, and labor standards, privacy rights, individual’s financial
security, and overall environmental protection
• Major goal reduced regulations and reduced tariff and non-tariff
barriers in agriculture and industrial sectors
• Another objective liberalized rules covering trade in services
• Permit companies easier access to public procurement contracts
• Establish a level playing field between private and state-owned
enterprises (SOEs)
• Strengthen intellectual property protection (IPR)
Why Now From U.S. Vantage Point?
• U.S. already number one export market for EU companies
• 2014 U.S. exported more goods to Canada with 35 million people
than to EU with over 500 million people
• Hasten recovery from Great Recession
• Facilitate much greater foreign direct investment (FDI) flows and
supply-chain expansion
• Improve transatlantic competitiveness
• Combat specter of transatlantic drift and global shift to Asia and
emerging markets
What Are Immediate Prospects for Approving TTIP?
• Recent developments in the U.S. Congress:
• President Obama very much in favor of TTIP but many Democratic Party
members of Congress lukewarm or opposed
• Many Republican members of Congress agree with the concept of TTIP but
are hesitant to act alone without sufficient Democratic Party support
• Labor and environmental groups and populists are generally opposed to TTIP
(too much power to corporations and insufficient protection of jobs)
• Important role of November 2014 congressional elections—Republicans now
control House of Representatives and Senate—unofficial 60 vote hurdle in the
Senate
• Obama is a “lame-duck” President and his approval rating currently at
48%--70% of Americans still “dissatisfied” with the direction U.S. is
going
• European Parliament elections last May added more populists,
nationalists, and Eurosceptics
Glimmer of Hope?
• Bill Clinton, a Democratic President, orchestrated the passage of
NAFTA in 1993 even though a majority of Democrats in both
chambers voted against it
• If Trade Promotion Authority (TPA) is granted to the President by
Congress, the prospects for TTIP are much brighter
• Plurality of Americans believe U.S. influence globally has waned over
past decade, but strong majority believe U.S. involvement in the
global economy has been positive
• Recent compromise between Republicans and some Democrats on
Capitol Hill
Difficult Issues—Real or Alleged
• Is their sufficient “value added”?
• Agricultural roadblocks, including GMOs
• Good for multinationals, not so much for SMEs and work force
• Is timing right for an EU which continues to face numerous internal
issues, including very slow economic growth, job creation, and some
major regional disparities?
• Concern about transparency in negotiations and the democratic
process
• Rise in European populism and nationalism
• Achieving consensus among all 28 nation-states within EU (how will
Greece vote?)
Investor-State Dispute Settlement (ISDS)
• Over last half century, 180 countries have entered into more than 3,000 agreements
providing some form of investment protection—European countries are party to more
than 1,400 of these agreements vs. about 50 for United States
• In NAFTA from 1996 to beginning 2015, 77 cases filed, 35 vs. Canada, 22 vs. Mexico, 20
vs. U.S.—3 decided officially vs. Canada, 5 vs. Mexico, 0 vs. U.S. (some others decided out
of court)
• From CETA and TPP negotiations, should find:
• Governments will continue to regulate in the public interest—including health, safety, &
environment—cannot be sued by investors when governments act in “good faith”
• Easier to dismiss frivolous claims
• Closing of loopholes preventing sham corporations from accessing investor protection
• Proceedings will be open and permit non-parties to file briefs before the dispute panels
• International Centre for Settlement of Investment Disputes (ICSID)—World Bankaffiliated
Overall Transatlantic Unity in a Stressful Period
• NATO and Russia’s involvement in Ukraine
• Burden-sharing tends to place most of the financial burden for
defense on Washington (70% of overall spending)
• TTIP would strengthen the overall transatlantic alliance and take away
some of the sting felt in Europe over Obama’s “pivot” to Asia
• TTIP could eventually be expanded to other “like-minded nations”
and compensate for the lack of multilateral trade and investment
liberalization on the part of the World Trade Organization (WTO)
INTERNATIONAL EVENTS ARE TRANSFORMING LIFE IN
THE UNITED STATES
INTERNATIONAL SECTOR
weapons
proliferation
conflict
sports and
entertainment
economics
cyberspace
terrorism
immigration
energy
religion and
ideology
environment
culture
resources
crime
disease
AMERICAN CITIES AND
NEIGHBORHOODS
European Union’s Member-States’ GDP and World Ranking 2013
Member-States
GDP (US$ billions)
World Ranking
Germany
3,730
4
France
2,806
5
United Kingdom
2,678
6
Italy
2,150
8
Spain
1,393
13
Netherlands
854
17
Sweden
580
22
Poland
526
23
Belgium
525
24
Austria
428
28
Denmark
336
34
Finland
267
42
Greece
242
43
Ireland
232
45
Portugal
227
48
Czech Republic
209
50
Romania
190
53
Hungary
133
59
Slovak Republic
98
63
Luxembourg
60
73
Croatia
58
74
Bulgaria
54
78
Slovenia
48
83
Lithuania
46
86
Latvia
31
97
Estonia
25
102
Cyprus
22
105
Malta
10
138
Comparison of EU Member-States and
US States: GDP and World Ranking, 2013
Member-States
GDP (US$ billions)
World Ranking
Germany
3,730
4
France
2,806
5
United Kingdom
2,678
6
Italy
2,150
8
Spain
1,393
13
Netherlands
854
17
Sweden
580
22
Poland
526
23
Belgium
525
24
Austria
428
28
Denmark
336
34
Finland
267
42
Greece
242
43
Ireland
232
45
Portugal
227
48
Czech Republic
209
50
Romania
190
53
Hungary
133
59
Slovak Republic
98
63
Luxembourg
60
73
Croatia
58
74
Bulgaria
54
78
Slovenia
48
83
Lithuania
46
86
Latvia
31
97
Estonia
25
102
Cyprus
22
105
Malta
10
138
U.S. State
California
Texas
New York
Florida
Illinois
Pennsylvania
Ohio
New Jersey
North Carolina
Georgia
Virginia
Massachusetts
Michigan
Washington
Maryland
Indiana
Minnesota
Colorado
Wisconsin
Tennessee
Missouri
Wisconsin
Arizona
Louisiana
Connecticut
Oregon
Alabama
South Carolina
Kentucky
Oklahoma
Iowa
Nevada
Utah
Arkansas
District of Columbia
Mississippi
Nebraska
New Mexico
Hawaii
West Virginia
New Hampshire
Delaware
Idaho
Alaska
North Dakota
Maine
Rhode Island
South Dakota
Wyoming
Montana
Vermont
GDP
2203
1533
1311
800
721
645
565
543
471
455
453
446
433
408
342
317
312
294
282
288
276
282
279
254
249
220
194
184
183
182
166
132
141
124
113
105
110
92
75
74
68
63
62
59
56
55
53
47
45
44
30
World Ranking
8
12
14
18
19
20
22
22
27
27
27
27
27
28
33
35
35
36
36
37
38
38
38
42
42
47
52
54
55
55
57
58
58
59
60
61
61
63
66
66
69
71
72
73
75
76
78
82
85
85
98
Utah’s (Bangladesh’s) Business Community and TTIP
• If producing a globally competitive good or service, take advantage of
the international marketplace consisting of over 95% of the world’s
customers and 80% of global GDP
• The EU has a larger population base and larger combined economy
than the United States, representing huge market potential, especially
for SMEs
• Accord would solidify the economic, political, and strategic
competitiveness of the transatlantic region
The Future
• USTR Michael Froman in Berlin, May 5, 2014:
“With a free trade area we can set standards with respect to third
countries and the entire world: on labor rights, environmental
standards or protection of intellectual property rights. All of these
are about creating jobs, improving competitiveness and furthering
innovation.”
• A NAFTA-EU link in the future? Mexico already has a trade agreement
with the EU, and Canada has an agreement awaiting ratification. If
NAFTA and EU join together, there will be a combined market of
almost 1 billion people and an annual GDP of $35 trillion.