Calculating the Risks and Rewards for the U.S.-EU Transatlantic Trade and Investment Partnership (TTIP)

January 23, 2015International Tradeby Asia Pathways

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Experts are suspicious about the TTIP goals.

Negotiations between the European Union (EU) and the United States (US) on the Transatlantic Trade and Investment Partnership (TTIP) are currently dragging on without a clear time target—no wonder in view of the highly complex topics on which to agree.  Nevertheless, international speculation is running high about the potential economic and geostrategic implications of the TTIP for the EU’s economic relations with Asia, and the People’s Republic of China (PRC) in particular. Some people even claim it to be the foundation of an “economic NATO” or consider it “a response to the rise of [the PRC], revitalizing the post-World-War II international economic order.” This drastic diction undoubtedly bears the risk of unnecessarily heating up the global debate on the partnership. Recent conversations, especially with PRC government and business representatives, have shown me how much this can jeopardize a constructive atmosphere of economic cooperation. But does the EU really want to take the TTIP into such an extreme and conflict-bearing direction?

The Objectives of the TTIP

The negotiation directives published by the EU Council clearly define the EU objectives for the TTIP: “to increase trade and investment between the EU and the US by realising the untapped potential of a truly transatlantic market place, generating new economic opportunities for the creation of jobs and growth through increased market access and greater regulatory compatibility and setting the path for global standards.” Surely, this means the TTIP would go beyond a mere trade agreement and could bring geostrategic consequences in the form of strengthened transatlantic economic ties and a new, powerful EU–US trade and investment partnership. But that corresponds pretty much to what a trade and investment agreement usually is about. Asia’s integration projects like the ASEAN Economic Community (AEC), ASEAN+3, and the Regional Comprehensive Economic Partnership (RCEP) go basically in the same direction in following the current global trend toward more regional and even mega-regional economic agreements.

Some commentators are especially suspicious about the specific TTIP goal of global standard setting misused to be “global trade imperialism.” However, first, would it be so detrimental to the rest of the world if the TTIP and a huge integrated transatlantic market set the initiative for common global standards that would make global trade generally easier and cheaper? Second, seen from a purely rational perspective, this goal stems from the EU’s logical self-interest: its export success depends on its ability to find matching product standards in other markets as EU consumers expect EU-quality standards for products imported into the EU. This negotiation point is a hot discussion in the EU. Many citizens are afraid of losing high-level EU standards in the fields of environment and consumer protection, as well as jurisdiction to US lobby interests. Freshly founded, public movements like “Stop TTIP” actually lead to a rather emotionalized, “anti-US” atmosphere. Nowhere in the EU public in general or in the recently published German TTIP negotiation guidelines can you find hints of support for an “anti-Asia/pro-US” TTIP objective, an “economic NATO,” or even an “economic Chinese wall against the PRC.” On the contrary, for instance, Germany’s export industry explicitly warns of thoughtlessly using an allusion to NATO or describing the TTIP as a firewall against other trade partners.

The Economic Effects of the TTIP on the EU

Most probably, the TTIP would bring immense advantages to the EU. The economy could benefit by around $145 billion per annum and additional growth of up to 1%, creating millions of new jobs. Apart from the EU and US, there would also be positive spillover effects to Asia. From the TTIP boost, we could expect higher demand for raw materials, components, and other products delivered by other countries. The EU Commission calculates an extra $120 billion surplus to the world economy, a major part of which would go to Asian suppliers.

For the EU, the importance of concluding the TTIP can in no way overshadow the overwhelming significance of a close economic partnership with Asia, and the PRC in particular. The EU and the PRC are the two largest traders in the world. Behind the US, the PRC is the EU’s second-largest trading partner, while the EU is the PRC’s largest trading partner. European investments in Asia are huge, and Asian investments in the EU are quickly increasing, especially by PRC investors. The PRC is also about to become the biggest economy in the world, pushing the US to second place. From an EU perspective, the TTIP can of course open up new economic potential with the US, but it should not damage the EU’s close economic relations with Asian partners. In other words, for the EU, there is no “US/TTIP or Asia/PRC” but only a “US/TTIP as well as Asia/PRC” perspective. Therefore, the EU cannot fall into a corset of encapsulated trade blocs. The goal must be to continue to diversify global economic partnerships via integration into a well-balanced global system of multi-polar economic dependency networks and partnerships. The US is just doing the same by balancing its close transatlantic partnership via its pivot to Asia (see the Trans-Pacific Partnership [TPP]) or via its integration projects on the American continent (see the North American Free Trade Agreement [NAFTA]).

This means that in parallel to the TTIP (and in consequent continuation of the 2011 free trade agreement between the EU and the Republic of Korea), the EU should now move more proactively forward in the direction of trade and investment partnerships with other Asian partners, predominantly with the PRC, ASEAN members, Japan, and India. This would not only unleash huge additional potential for further economic growth in the EU and Asia, but would also contribute to a more balanced and better integrated, world economy in general.

TTIP—is the EU really interested in an “economic NATO”? is republished with permission from Asia Pathways