Today, EU trade ministers are meeting in Luxembourg to try and agree on a mandate for the TTIP - the Transatlantic Trade and Investment Partnership.
What is the TTIP?
The TTIP is a trade agreement that is going to be negotiated between the EU and the US. The aim of the negotiations will be to remove trade barriers (e.g. whether tariffs, unnecessary regulations, investment constraints) over an array of sectors so as to make it easier to trade. The EU and US also want to make it easier for companies to invest in each other's economies.
Before negotiations can begin, the EU's member states must approve the negotiating guidelines.
How negotiating works
The European Commission negotiates on behalf of the EU and its member states. The Commission will represent the EU at the negotiating table led by Karel De Gucht, the EU Trade Commissioner. The basis of negotiations will be the guidelines agreed by the Council, where the governments of all EU Member States are represented.
The EU/US relationship as it stands
The EU and US have the largest bilateral trade relationship and most integrated economic relationship in the world.
- They account for about half of the world GDP and one third of global trade flows.
- It is estimated that goods and services worth almost €2bn are traded bilaterally every day.
- Total US investment in the EU is three times higher than in all of Asia.
- EU investment in the US is around eight times the amount of EU investment in India and China added together.
- It is estimated that a third of the trade across the Atlantic consists of intra-company transfers.
- Either the EU or the US is the largest trade and investment partner for almost all other countries in the global economy.Source: European Commission
EU trade in goods with the US, € billions, source: European Commission
Why do it?
The upshot of the negotiations will depend on what is agreed between the parties but evaluations by the Centre for Economic Policy Research (CEPR) show that the EU's economy could benefit by €119 billion a year and the US economy by €95 billion a year.
The goal of the TTIP is to get as near as possible to the removal of all duties on transatlantic trade in industrial and agricultural products, (but with special treatment of the most sensitive products). WTO estimates that transatlantic tariff barriers are currently comparatively low, an average of 5.2% for the EU and 3.5% for the US but, given the size of trade between the EU and the US, these costs still add up to considerable amounts.
There is also a big gain to be had in tackling non-tariff trade barriers – the CEPR research shows that 80% of the benefits could come from this area. At the moment, manufacturers who want to sell their products in both markets will often need to pay and comply with regulations and standards on both sides of the Atlantic and the cost of this can add the equivalent of tariffs of 10-20% to the price of goods.
There are intentions to align, or mutually accept, standards and procedures, and also work on regulatory compatibility in specific sectors, e.g. chemical, automotive, pharmaceutical, and medical appliances.
The launch of formal negotiations will probably be this summer, dependent on the Council approving the negotiating guidelines in June as scheduled and that US Congress does not object to the US starting talks. It should be possible to get an agreement within a couple of years.