POSITIVE IMPLICATIONS OF A TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (T-TIP)

The implications of a trade deal are huge for business. The U.S. and EU account for half of global GDP (about € 22 trillion of annual output) and a third of global trade, with more than €1.1 trillion in goods, services and income receipts flowing across the North Atlantic annually. Approximately €2.7 trillion in investment flows both ways, constituting a total commercial relationship of more than €3.7 trillion. A successful trade deal would increase exports by more than €112 billion, create more than a half million new jobs and grow the world’s two largest economies by more than € 187 billion in the next five years.

T-TIP negotiations aim to achieve the following:

• Eliminate all tariffs on trade across the North Atlantic;
• Strengthen rules-based investment to grow the world’s largest investment relationship;
• Tackle costly “behind the border” non-tariff barriers that impede the flow of goods, including agricultural goods;
• Obtain improved market access on trade in services;
• Significantly reduce the cost of differences in regulations and standards by promoting greater compatibility, transparency and cooperation while maintaining our high levels of health, safety and environmental protection;
• Develop rules, principles and new modes of cooperation on issues of global concern, including intellectual property and market-based disciplines addressing state-owned enterprises and discriminatory localization barriers to trade and
• Promote the global competitiveness of small and medium-sized enterprises.

Market Access and Regulatory Hurdles

Average U.S. and EU tariffs are already low (3.5 percent ad valorem average for the U.S. and 5.3 percent for the EU). However, given the size of the two economies, future reduction or elimination of tariffs could yield significant economic gains. Moreover, reducing tariffs would lower the tax burden on intra-company trade in goods (40 percent of transatlantic trade is intra-company) and lead to growth in the services sector (as manufacturers rely on services to reduce costs of production and improve productivity), thus enhancing the global competitiveness of U.S. and EU companies.

In addition to cutting tariffs, T-TIP would eliminate certain non-tariff barriers, including “force localization” measures (requirements to use local R&D manufacturing or technology transfer requirements) and differences in technical regulations, standards and approval procedures. These often cost time and money for firms who want to sell their products in both markets. A key of the T-TIP negotiations is to develop detailed sector-specific regulatory coherence and cooperation commitments to better equip the U.S. and EU to respond to new global regulatory and standards challenges while facilitating transatlantic trade and economic growth.

Customs and Trade Facilitation

One of the major issue areas for negotiation is to develop ways to reduce friction and costs at the borders for highly integrated transatlantic supply chains. If a deal is struck, greater convergence through harmonization of border procedures and modernization of customs processes will have a positive impact for U.S. and EU business, especially small and mid-size firms and emerging industry sectors. Specific issues under consideration include the following:

• Simplifying, streamlining and aligning duty drawback procedures – creating a “same condition” drawback provision in the EU – and promote consultation in advance of future duty drawback modifications to achieve greater convergence;
• Implementing a clearance process that would separate the physical release of goods from collection of payments and enable pre-clearance of imports based on advanced data;
• Coordinating the inspection activities of the relevant government agencies – via a “one government at the border” process – so that security, customs, product safety and other requirements are satisfied through a single, risk-based release mechanism;
• Committing to a single window, for the U.S. as well as the EU, through which importers and related parties can electronically submit all information to comply with customs and other government agencies’ information requirements;
• Harmonizing and modernizing U.S. and EU data requirements and transmission so the export data can be accepted as the import data from the exporting side.
• Raising the baseline de minimis threshold for low-value shipments – covering duties, taxes and fees upon entry – that would be applicable regardless of country of origin and further committing to link the de minimis value to the consumer price index (small and mid-sized businesses will benefit from this);
• Providing a separate and expedited customs procedure for express shipments, allowing the necessary information to be submitted and processed electronically before the shipment arrives to facilitate the immediate release of goods;
• Simplifying and aligning free trade zone approvals, processes and procedures, relying on common business systems instead of complex government regulations.
• Creating a forward-looking mechanism to cut through cross-border red tape, empowering the institution or agency to solve short and long-term issues that arise in supply chain.

These and other measures to develop future security, supply chain customs and other border processes will improve efficiency and strengthen competitiveness of U.S. and EU businesses when a final deal is reached.

Potential stumbling blocks in the areas of cultural and personal data protection and genetically-modified foods could impede efforts to achieve a comprehensive agreement between the U.S. and EU. Moreover, groups opposed to a deal have been weighing in on consumer safety, financial services liberalization, environment and labor issues, which may slow down the talks (more than 100 organizations from Europe and the U.S. have been raising their voices). However, many of the laws and regulations already in place in the EU consist of high standards for protecting consumers, workers and the environment.