The Transatlantic Trade and Investment Partnership (TTIP) is a comprehensive free-trade and investment treaty, which is currently being discussed between the European Union and the United States of America. The main goal of the treaty is to remove regulatory barriers which could restrict potential profits by companies in the EU and US, and therefore strengthen both economies.
Fordings is confident that this partnership between the US and EU will help stimulate both economies. We also feel it will solidify the already positive relationship, and usher in a new age of collaboration on shared goals, both economically and politically.
TTIP adversaries have many worries. Among them, they fear American corporations with substantial lobbies in the food industry will force European consumers to eat genetically modified foods. And accordingly that US courts will decide the fate of governmental issues in favor of US firms. American companies have done this in the past, i.e. Cargill group sued Mexico based on the implementation of a new law on syrup in drinks in regard to the law infringing the rights laid down in the NAFTA agreement. Although these arguments and many more should be taken seriously, it is also important to realize the economic profitability on a greater scale.
The reduction of trade barriers is always a basis for concern among nations. One must not forget that trade barriers were initially put into place to protect markets from price-dumping invaders. However, as our economy has become more global, the needs and demands of the consumer have become more complex. Old trade barriers often add complications and bureaucracy when exporting goods and services.
Following the economic theory of comparative advantage, both the EU and US would profit greatly from being able to export their specialty goods with less bureaucracy. For example, machined parts from Germany and fruit/vegetables from the US would be able to flow freely between the two countries, giving the consumer a wider selection of niche products at an affordable price. Allowing a larger audience to experience “Made in Germany” and “Grown in California” will give producers the opportunity to supply a larger market, increase exported goods, and therefore create new jobs.
The US and EU together make up only 12% of the world’s population, yet are close to accounting for 50% of the world’s GDP, 75% of global trade, 75% of all financial transactions, and around 40% of global purchasing power. The current cooperation between the EU and the US is undoubtedly the biggest economic agreement in the world, and desperately needs to be optimized.
The current cooperation between the EU and the US employs approximately 14 million people on both continents. Looking solely at the German-American relationship, we can clearly see advantages the TTIP would bring. Alone in 2014, Germany exported 96 billion EUR to the US, making the US its 2nd largest export market after France. Germany itself benefits from 600,000 jobs thanks to American companies investing in Europe. New markets mean new employment. According to the German Chamber of Commerce, a June 2013 study forecasts the creation of up to 180,000+ new jobs in Germany.
There have been many criticisms that only large corporations would benefit from such a trade agreement. Matthew Joehnk, Executive Manager at Fordings and an expert on American business, sees small and mid-sized companies with innovative products as the biggest winners. “TTIP would aid these companies dramatically. The removal of administrative blockages in the export business would allow a quicker launch of innovative products and services thanks to common norms and standards.” Matthew goes on to add: “Not only do businesses profit from trade barriers being removed; an open trade agreement would also have multiple positive impacts on living standards here in Europe. This could take the form of a higher variety of products and lower consumer prices created by increased competition.”
Removing tariffs would level the playing field for all businesses, but particularly help smaller companies where even a minor tariff may affect their ability to turn a profit on an international level or expand distribution networks. Many small and mid-sized companies supplying larger exporting firms will benefit directly from increased exports, allowing them to expand and therefore create jobs.
It is important that we not only look at the short-term gains, but also the long-term possibilities that TTIP will generate. Creating a stronger and more prosperous economy in Europe and the US will encourage additional international investment. This new capital should help further stimulate the economy in an upward spiral, allowing companies to focus even more on innovation, higher exports, and job creation.
The worries which many citizens have both on the US and European side must be listened to and discussed. We cannot blindly march forward, looking only at the advantages. EU and US governments must also be very transparent in their talks, while keeping in mind the needs of the individual consumer along with those of companies.
Fordings strongly believes that TTIP will strengthen economies on both sides of the Atlantic, while creating jobs for Americans and all EU countries. It should reduce regulatory barriers, and more importantly provide the strategic foundation for a global affirmation of the common values both sides share. While NATO transformed international relations on a political level, TTIP will be an important step in transatlantic relations on a socio-economic level. The extensive collaboration that it represents will improve economic prosperity and more importantly further global peace between the regions.