Hopes are for Obama Administration to push for TTIP ratification before the new U.S. Congress is sworn in, says Georgetown University’s Michael Czinkota. Check the video below to see the latest interview of Prof. Michael Czinkota on TTIP with CNBC.
Since its founding in 1948, the World Trade Organization (WTO) and its precursor have remained quite tightly targeted on the trade and investment zone. With its particular focus on tariff reduction and trade negotiations, it serves as the pre-eminent glorious knight battling on behalf of consumers.
However, all that began to change in the past two decades. Success attracted allies. The number of WTO members rose from 27 in 1948 to 162 today. Decisions of the WTO remain consensus based, which means that all votes have to be unanimous. Pervasive terror threats, encouraged politicians to focus on the high-intensity and visibility politics of national security and war, as opposed to the low-intensity politics of trade and investment. Progress was also slowed due to shifts in the center of trade gravity and challenges in current markets by rapidly growing new competitors. The global recession intensified the tendency to ignore international economic issues, as attention shifted to domestic job creation and the protection of domestic credit markets. In consequence liberalization has stepped outside of the WTO. The last two decades brought a do-it-yourself approach, defined by mega-regional agreements and preferential pluri-lateral trade negotiations, tailored for only a limited number of players.
The Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) are key to this development. TPP is a free trade agreement covering 12 countries from North and South America to the Pacific Rim, while TTIP represents a free trade agreement between the United States and the European Union. The TPP negotiations concluded in October 2015 after four years of intensive talks. Legislative ratification will be the next step. TTIP has been under negotiation since June 2013; hopes are for completion by the end of 2016, making use of the transition time for U.S. administrations and Congress.
The combined trans-Pacific and trans-Atlantic space covered by these agreements encompasses 60 percent of the world economy, and 22 percent of its population, according to the International Monetary Fund.
But the economies differ in terms of per capita incomes and living standards. The TPP economies represent 27.3 percent of world GDP and 10.7 percent of the world’s population. The TTIP economies represent 33 percent of world GDP, with 11.2 percent of the population. However, there are also notable differences in the scope and goals of the agreements themselves. TPP is focused at opening markets and eliminating tariff barriers on trade and investment. TTIP mainly concentrates on tackling costly non-tariff barriers and strengthening Foreign Direct Investment (FDI) rules.
Trans-Atlantic average tariffs at 4 percent are much lower than the trans-Pacific ones. TTIP is much more about investments than free trade, with both parties extensively embedded in each other’s economies. Such relationship has produced more income, created more jobs and generated more wealth than trade alone.
TTIP is more ambitious in comparison to TPP. In addition to to the financial and economic benefits, TTIP will have a larger geostrategic impact, since it reinforces the strong ties that exist between Europe and the United States. TTIP is a natural Western partnership, with mature, well-developed and consolidated markets, and a strong mutual defense relationship based on the North Atlantic Treaty Organization (NATO). Both components are missing in Asia. However, this might change with a tumultuous re-formation of the EU and perceived instability of the region.
Economic realities emphasize TTIP as well. The trans-Atlantic economies are the innovation powerhouses of the global economy, and a crucial element of future growth and balance. The United States and the EU are by far the two largest trading blocs in history. Given the size and scope of the trans-Atlantic economy, standards negotiated by the United States and the EU could become a leading benchmark for future global rules, and slow down the acceptance of competing standards.
TTIP and TPP are strategically interlinked with each other. Both agreements are important in terms of how the various partners, including the pivot of the United
States, jointly relate to newly rising powers, and whether the West still has the energy and dedication to set new standards for the international economic order. Both TTIP and TPP take on an increasing strategic importance in light of the continuously growing role of China, and other emerging markets in the global economy. A simplification of trade and investment relations via the two agreements would also push the WTO to expand its useful life.
TPP is also important for the EU. Higher growth rates in the trans-pacific region will help Europe through increased exports. TPP also reinforces the geopolitical reality of rebalancing Asia.
Achieving progress in the simplification of trade and investment relations is important to global prosperity. The approaches taken by TPP and TTIP may well indicate the future of trade negotiations – tightly focused talks between selected participants aiming for improvements in fields of comparative advantage within a clearly defined time frame.
Michael Czinkota (firstname.lastname@example.org) works at Georgetown University and is a former Deputy Assistant Secretary of Commerce in the United States Department of Commerce. His key test is International Marketing, 10th ed. Cengage
Valbona Zeneli (email@example.com) is a professor at the George C. Marshall European Center for Security Studies. The views presented are those of the author(s) and do not necessarily represent views and opinions of the Department of Defense or the George C. Marshall European Center for Security Studies.
News reaches us from Liechtenstein about the visit of Foreign Minister Frick to Washington and to the Advocacy Project placing Peace Fellows in developing countries. For direct linkage with the Embassy’s Newsletter click here.
Foreign Minister Frick Visits Washington
On September 23 Foreign Minister Aurelia Frick visited Washington. Foreign Minister Frick used the one-day visit as an opportunity to showcase Liechtenstein as an active trader with the US as well as internationally. The US is Liechtenstein’s second largest trading partner (after the European Union) and Liechtenstein industrial companies are important players in the US automotive, construction, audio-visual, and dental industries, to name just a few. Internationally, Liechtenstein is a member of the European Free Trade Association (EFTA) which is made up of Iceland, Liechtenstein, Norway and Switzerland. As countries that are highly integrated into the EU’s Single Market, EFTA is the world’s 8th largest trader in goods and 5th largest in services.
Foreign Minister Aurelia Frick with Dan Mullaney, Assistant USTR for Europe and the Middle East.
As the current Chair of the EFTA Council, Minister Frick’s visit focused on learning more about the negotiations between the US and EU on the Transatlantic Trade and Investment Partnership (TTIP), which seeks to reduce barriers and increase trade in goods and services. As part of a trade dialogue established in July between EFTA and the United States Trade Representative (USTR), Foreign Minister Frick met with Dan Mullaney, Assistant USTR for Europe and the Middle East. She explained that within specific industries and given their geographic locations, EFTA members play vital roles in the European and US supply chain of goods and therefore have a keen interest in the development of the TTIP talks. Assistant USTR Mullaney welcomed the dialogue with EFTA and reiterated the USTR’s wish to to explore discussions on bolstering trade and investment.
Foreign Minister Frick’s visit also included a visit to The Advocacy Project, a non-profit organization based in Washington, DC and supported by the Government of Liechtenstein and for which Ambassador Claudia Fritsche serves as a member of the board. The Advocacy Project recruits graduate students, placing them as Peace Fellow, along with partnering organizations, in marginalized communities in developing countries in a grass roots effort to aid them in claiming their rights and producing social change.
To view the article on the Embassy’s website click here.
Today, the United States Trade Representative Michael Froman addressed the Transatlantic Trade and Investment Partnership during his stay in Brussels.
“Today, the U.S. and the European Union are each other’s largest economic partners, with $2.6 billion dollars’ worth of goods and services flowing between us each day. We invest nearly $4 trillion in each other’s economies, creating the world’s largest investment relationship. And more than 13 million people owe their jobs to the transatlantic economic relationship. The U.S.-EU economic partnership is second to none.
“But we know that we can do more. We can do more for economic growth. We can do more to create jobs. We can do more to strengthen rules-based trade that supports the entire global trading system.
“And that is precisely why we launched the Transatlantic Trade and Investment Partnership, or T-TIP. Together with the Trans-Pacific Partnership, or TPP, and the work being done at the WTO to negotiate a multilateral Trade Facilitation agreement, a plurilateral Trade in Services Agreement (TISA) and an expansion of the Information Technology Agreement (ITA), we see T-TIP as an opportunity to raise the standards, to introduce new disciplines and ultimately to strengthen the multilateral trading system.
Read more here.
The New Transatlantic Trade and Investment Partnership (TTIP).
Andreas Pinkwart, former minister of science, technology, research and innovation, and now president of Handelshochschule Leipzig in Germany, said that if innovation and free trade are maintained, they will stimulate open borders. He sees negotiations on agriculture as a key impediment to progress in a transatlantic partnership but expects its success.
The TTIP, a newly inaugurated trade negotiation between the United States and the European Union may lead to further open export markets, expand the U.S. and E.U.’s investment partnership, address non-tariff barriers, and increase cooperation on issues including combatting discriminatory localization trade barriers and promoting SMEs’ global competitiveness.
The three key challenges that the partnership must address are climate problems, terrorism and economic imbalances. Also, the TTIP collaboration will serve well as a political and economic counterweight to China, even though the European Union and the U.S. combined are likely to soon have a lower GDP than China.
Speaking on behalf of the German government, Peter Fischer, head of economic affairs at the embassy of the Federal Republic of Germany, suggested strong encouragement of a TTIP. Since the E.U. and the U.S. are the largest economies in the world, their collaboration could only strengthen world trade, in particular with a convergence of regulatory approaches. Results would be achieved within 18 to 24 months, he said.
Howard Fogt, a partner at Washington, D.C.-based law firm Foley & Lardner LLP who specializes in international trade regulation, took issue with such a time frame. He believes that the implementation of an agreement would be long, slow and expensive. Politically, he sees the leadership for a TTIP as emerging from the bottom, if major movements are to be achieved. He also stated repeatedly that culture matters and economics cannot be negotiated by itself, particularly when fundamental issues such as food are to be discussed. (For example, the acceptance or rejection of hormone-injected beef demonstrates national differences.)
This article is a part of a series written by Michael Czinkota and Charles Skuba who report on the March 2013 meeting on trade policy and international marketing, a collaboration between the American Marketing Association, Georgetown University and the U.S. International Trade Administration. View part 4 here. Guest writer Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.