Transatlantic Trade and Investment Partnership (TTIP)

The Transatlantic Trade and Investment Partnership (TTIP) was a free-trade agreement being negotiated between two of the world's largest economies, the U.S. and the EU. The two economies generated over 40% of world's gross domestic product of $86.4 trillion in 2019, and the TTIP would have been the largest trade agreement in the world.

The Direction of International Trade

The United States trades more with the EU than with China. The total amount traded was over $1 trillion in 2019. It was projected to boost U.S. GDP by 0.5% and the EU's by 0.4%. That's by eliminating all tariffs and other trade barriers.

The importance of the EU is even greater for foreign direct investment (FDI). European companies accounted for $2.87 trillion, or 64% of total FDI in the United States in 2019. American companies accounted for $3.57 trillion, or 60%, of FDI in Europe.

In 2018, European companies employed 4.7 million workers in the United States, while American companies employed 4.9 million workers in Europe. For example, the German company Siemens employs 40,000 people in the United States. General Electric employs 92,000 workers in Europe.

G8 Negotiations

Negotiations for TTIP began right after the 2013 G8 Summit. The two sides agreed to adopt the High-Level Working Group (HLWG) on Jobs and Growth Report as a basis to continue negotiations. On February 11, 2013, the HLWG presented recommendations grouped in the following three areas:

Market Access

The best way to improve this would be to:

• Eliminate all duties and tariffs on non-sensitive products. Continue negotiations for sensitive markets, such as commercial aircraft and agriculture. (In 2016, negotiators agreed to eliminate tariffs on 97% of trade.)
• Make licensing and qualification requirements more transparent for services.
• Liberalize investment procedures while retaining protection.
• Improve access to government procurement opportunities.

Behind-the-Border Processes and Regulations

These are differences in processes that aren't tariffs or laws but still make it difficult for foreign firms to do business. To overcome this, the HLWG recommends that the two sides:

• Use the standards set by the World Trade Organization (WTO) to use agreed-upon scientific methods to address sanitary issues. In other words, the EU would have to drop its refusal to accept GMO and hormone-treated foods.
• Use WTO standards to create uniform testing, certification, and standardization requirements.
• Work together to implement existing regulations and to develop new ones.
• Where rules and certifications remain different, agree to accept approved goods and services from the other trading partner. For example, doctors and pharmacists could use their licenses to work anywhere in the trading area.
• Develop procedures to cooperate on developing future regulations.

Rules Addressing Shared Global Trade Challenges and Opportunities

These are issues that will set a standard for trade agreements everywhere. The HLWG recommends that both sides:

• Cooperate and present a united front on protecting intellectual property rights.
• Include environmental and labor protections in any free trade agreement, using existing guidelines.
• Reach agreement in areas that are vital to global trade. These include customs and trade facilitation, competition policy, state-owned enterprises, protection of local industries, raw materials and energy, small- and medium-sized businesses, and transparency.

The Future of TTIP

Despite progress toward the agreement over Obama's second term, negotiations stalled out at the end of his tenure. President Trump then did not make the treaty a priority. Instead, he started a trans-Atlantic trade war.

On June 23, 2016, Great Britain voted to leave the EU. Brexit threw the negotiations into a new level of uncertainty and clouded its status as a member of the trade agreement. The vote strengthened the anti-globalization and anti-trade voices within Congress.

In 2017, President Trump suspended TTIP negotiations. Trump was following an "America First" policy of economic nationalism. He escalated a trade war with the EU by imposing tariffs on steel and aluminum.

As a result, the TTIP has been abandoned, and new treaty negotiations are focused on areas that appeal to both sides. Representatives have made progress on harmonizing safety testing procedures and other regulations. The resulting agreement will likely be much smaller and less significant than the original TTIP.

The Biden administration is generally more favorable toward global free trade, and experts expect new negotiations to gain momentum during his presidency.

Pros of Transatlantic Trade and Investment Partnership

Several advantages of the proposed TTIP were evident. Greater growth would have created jobs and prosperity for both areas. Former U.K. Prime Minister David Cameron announced it could create 2 million jobs.

Some industries would have benefited more than others. For example, drug companies could cut costs. That's because there would be one agreed-upon drug testing program for the United States and the EU. The electric car industry could profit by complying with one unified standard. American farmers could expand if the EU permitted genetically modified (GMO) agricultural products.

An agreement would have strengthened the geopolitical standing of the Trans-Atlantic bloc against the rising economic power of China, India, and other Pacific nations, as well as the growing success of Latin America. If the United States and the EU could have ironed out their differences, they would stand as a united front against market threats from the rest of the world. 

Cons of Transatlantic Trade and Investment Partnership

There were some clear downsides, however. Many industries could have suffered from increased competition from Europe. That might have led to fewer jobs for American workers. These disadvantages, of course, are risks in any trade agreement.  

For example, European agribusiness would suffer from cheaper American-made food imports. Both governments would have to stop protecting industries such as French champagne. Boeing, an American plane company, is in fierce global competition against France's Airbus. The agreement could have hurt one more than the other.

Obstacles to TTIP

The biggest obstacle to the TTIP was the protected status of each country's agribusinesses, which receive government subsidies. Neither trade partner was likely to decrease the amount of government support. That would increase food prices even more.  

The EU bans all genetically modified crops. It prohibits meat from animals treated with growth hormones. It also refuses poultry that's been washed with chlorine. These are all practices common with U.S. food. European consumers would protest if these bans were lifted. They want protection from tainted or lower quality food.

Then there are many smaller issues. For example, Greece requires any cheese labeled "feta" be made from sheep or goats. U.S. dairies, on the other hand, make feta cheese from cow's milk.

In the end, it was highly unlikely that the EU would compromise by relaxing regulations. Opposition to lowering these standards is what finally rang the death knell for the Doha round of world trade talks.

One way to overcome these obstacles might be a tiered-approach. Negotiations could be successful in areas that aren't major sticking points. For example, remaining tariffs could be eliminated. But this wouldn't have much of an economic impact since tariffs are already low.