The ABCs of the TTIP
Gary Hufbauer spells out what’s at stake in the U.S.-EU Transatlantic Trade and Investment Partnership as talks begin.
Negotiators for the United States and the European Union began their initial round of talks on the proposed U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) this week. So far, there’s no shortage of optimism (early criticisms from some consumer advocates aside) and proponents of the deal are touting the dramatic economic gains that will accrue on both sides of the Atlantic. There is less reason for optimism from Canada’s perspective, however, for its efforts to close a deal with the EU may be further delayed as a result of the talks. With so much seemingly at stake for North America, Europe, and the global economy, we asked Gary Hufbauer of the Peterson Institute for International Economics to spell out what Canadians should know about the TTIP.
A. Could this agreement really transform the existing U.S.-EU trade relationship?
If the agreement is concluded, it will become a really big deal. Ever since I was a graduate student at Cambridge University in the 1960s, there has been on-and-off talk about a “NAFTA” – North Atlantic Free Trade Area. Nothing came of several feeble attempts in past decades. Maybe the fifth try is a charm. If it goes through, transatlantic economic ties will get as much attention from top leaders as transatlantic geostrategic and military ties. TTIP will be as important as NATO. Right now, all the economic issues are on the table – tariffs of course, audio/visual, data flows and privacy, regulatory differences in everything from finance to environment to pharmaceuticals, government procurement, geographic indications, food safety standards, and more. The big question in the months ahead is whether leaders will hold out for a single package with a great big bow, or whether they will be satisfied with three or four smaller packages.
B. They’ve given themselves a year to resolve their differences – is that realistic?
Probably the biggest friction points are GMOs and hormones, privacy standards for data flows, financial regulation, and the extent to which the USTR can get “buy in” from the 10 biggest states on regulatory convergence and government procurement. It’s way too optimistic to think that a big package can be assembled and agreed by the United States Congress (or the EU Parliament) before the end of 2015. My crystal ball, however, shows a decent package of less difficult items coming together by that time. If leaders in Washington and Brussels agree on a step-by-step approach, they can negotiate a very substantial package in the next two years.
C. Is the TIPP ultimately directed at counterbalancing China and forcing open emerging markets?
The China story has too much Dr. Strangelove in the plot. Recently I was in China, talking to some top leaders, and they are no longer making the containment complaint – either about TPP or TTIP. What is true is that, if TTIP comes together, China and other emerging powers will have to pay close attention to the new rules of the world trade and investment road. If they choose to adopt those rules, they will enjoy another two decades of rapid growth. If instead they go down the path of state capitalism, growth will be much slower.
D. There’s been talk of a transatlantic agreement before, why push ahead now? Should Canada really be worried?
Why is this a magic moment for TTIP? In Washington, the answer is easy: besides TPP and TTIP, what else will President Obama have from his second term to brag about to historians? Long-term fiscal reform? Nope. Gun control? Nope. Immigration reform? Not likely. Stability in the Middle East? Dream on. For the Europeans, the answer is also easy: they need to do something big to spark confidence and private investment in the old Continent. TTIP could be something big – and a hook for domestic reforms in everything from labor policy to taxation. Should Canada worry? You bet. Canadian diplomats should be working day and night to get in the tent, rather than gazing at the stars.