Transatlantic Trade and Investment Partnership (SCRIPT)

Did you know that the United States invests 3 times more in Europe than in entire Asia? And that the European economy is the biggest in the world, surpassing even the US (not to mention China)?

Even so, there are lots of so-called ‘regulatory’ issues that set the EU and the US quite apart and make business investments much harder in each other’s regions.

But what are these ‘regulatory’ barriers? For example, if Ford makes a new model in the US, it needs to make sure it meets European standards when exporting to the European Union. Or think of an X-ray machine: the European company fabricating it may need to spend tens of thousands of dollars in compliance costs to meet US requirements when selling its healthcare products overseas.

That’s why the Transatlantic Trade and Investment Partnership, or TTIP has been launched. Its aim is to secure a groundbreaking free trade agreement between the world’s two largest economies: the United States’, which produced $15.66 trillion, and the European Union, which produced $15.7 trillion worth of goods and services in 2012.

So what are these talks about? Briefly, about two things: regulations and tariffs.

First, about regulations. Regulations are laws that protect people for risks to their health, safety, environment and financial security. The EU and US try to make their regulations more compatible, while keeping people protected.

For existing regulations, this can mean that when US regulations and EU regulations have the same effect, like prescribing the safe level of food additives or approving drugs: they can be recognized even if their content or the authorization process is different. The regulations can also be brought closer to each other by changing or updating them.

Or think of car safety guidelines. For instance, the EU and US have different, but similar, safety requirements in relation to car lights, door locks, seatbelts and electric windows. Many of these could be formally recognized as providing the same level of safety across the board, even if the way the safety rules and checks are in place is quite different on the two sides of the Atlantic.

Second, the tariffs. Both the US and the EU protect their economies from importers in many fields through trade tariffs. Many of these are no longer needed or actually hurt the economy. If the new agreement eliminates all tariffs and so-called trade barriers, it could boost US economic output by 5%, and the EU’s by 3.4%. This means billions of extra dollars and euros, and hundreds of thousands of new jobs on both sides of the Atlantic Ocean.

So how would all of this happen? There are essentially two ways this is being done: by working on what is already in place and by coordinating better when we make laws in the future.

Will this lead to the removal of important regulations? Absolutely not. Regulation is here to stay, to protect the environment, make sure foods and drugs are safe or to avoid another financial crisis.

The talks will also deal with licensing and qualifications requirements, liberalizing investment procedures in both the EU and the US, and improving access to government procurement opportunities so private firms can bid for public tenders in both markets. Government protection of certain industries, like in the case of Airbus and Boeing, may therefore become important issues in the talks.

The Transatlantic Trade and Investment Partnership, or TTIP, talks are therefore worth paying attention to: they can open tremendous opportunities but may require flexible adjustment too. Fingers crossed!

UPDATE: I’m very happy to see that the EU’s representative office to the US has favorited and retweeted this animation video. Many thanks!

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