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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.