23 September 2013

Commissioner De Gucht: Team Europe - What we need for a successful TTIP

We believe that the European economy will produce some €120 billion extra every year and the US some €95 billion extra as a result of this agreement. For the UK alone, the figure could be between €4 and €10 billion a year.

But to get these results – we must first succeed in negotiating the agreement. And that will be a challenge. Why? Because this deal needs to be ambitious to be effective. Today's reality is that the EU and US already have a deep trade and investment relationship – the largest in the world in fact: More than €2 billion worth of traded goods and services crosses the Atlantic every day … and our mutual stocks of foreign direct investment amount to more than €2.7 trillion.

An important reason these connections are so dense is that we are already both extremely open economies. A lot of trade liberalisation has already happened:

This may be the first time that Europe and America have sat down for a bilateral negotiation but we have actually been negotiating with each other to remove trade barriers for 65 years in the World Trade Organisation and the GATT before it. As a result, the barriers that remain between us are often the most difficult ones to remove… which is why this negotiation will not be easy.

Let me give you a sense of what we are attempting:

Our first task is to eliminate the customs duties that companies have to pay at the border. In general these are low...

The second task is to free up trade in services. This is very important for Europe – not only because services trade is important in itself, but also because competitive service companies contribute to the success of the rest of the economy. More than half of the value embodied in Europe's goods exports is added by services like finance and business services – two areas where Scotland and the UK in general are very strong.

So we need to remove barriers to services trade if we want the agreement to be effective. A good deal will also bring direct benefits to services industries here in the UK, with exports from the finance sector predicted to expand by 3 per cent and business services by 0.4 per cent.

Our third task is to open up public procurement. This is important for Europe as companies whose business have a large part of their sales to government bodies account for 25 per cent of EU GDP and 31 million jobs.

However, a number of US federal and state level laws limit European participation in tenders there, meaning lost opportunities. We know that there are powerful lobbies who support those restrictions and that removing them will be a challenge. But it is essential if this agreement is to be economically valuable.

The final, most difficult, and certainly most important goal for this agreement is to reduce regulatory barriers to trade and investment. Why regulation? Surely the purpose of regulation is protect people from risks to their health, safety, environment and financial security. That is true, but often regulations also effect trade:

• They may needlessly ban imports of particular products.
• They can make it too expensive for foreign producers to enter a market, especially a small one.
• Or they can just raise the cost of doing business, reducing growth.

And this agreement – if it is to be effective – needs to reduce some of those unwanted effects, while keeping in place the protections that people need.

The goal here is not a transatlantic, deregulatory free-for-all. Instead we are taking a pragmatic approach. On the one hand, we want to look at some existing regulations. There, we will try to make the technical aspects of EU and US regulations more compatible – while leaving the political choices about the level of protection firmly intact. This is what we would like to do with chemicals and financial services for example – key sectors in this part of the world.

On the other hand, we want to bring more transparency and cooperation into the way we make new regulations, to gradually bring our systems closer together.

But even with this pragmatic approach we should be under no illusions that the regulatory chapter will be easy. Each side has a very deep culture of regulation that is resistant to change. But if we do a good deal it will be doubly valuable:

• Valuable economically: Reducing non-tariff barriers in goods and services is between the US and the EU is estimated to be worth €70 billion a year each to the European and American economies.
• And valuable strategically: By experimenting with solutions to the challenge of international regulatory cooperation the EU and the US are paving the way for future global approaches to these issues.

Unfortunately the World Trade Organisation is not today in a position to take up these challenges. But when it is, we will also be ready. And in the meantime, any common transatlantic approaches we develop will be worth a great deal to exporters around the world, who will face a single set of costs to access our two great markets.

Meeting all of these challenges – and concluding these negotiations – means having the active support of all who want the European economy to succeed. Because politically, negotiating with the United States is very different to negotiating with any other partner...

As the negotiator, we in the European Commission need to be as open as possible about what we are doing and make as clear a case for it as possible. It means national governments have to play their part in communicating the importance of this agreement for their economies. And it means the business and wider policy community need to be as vocal as possible about where they see benefits in terms of jobs and growth.

Full speech

A joint study by the Atlantic Council, the Bertelsmann Foundation, and the British Embassy in Washington, entitled TTIP and the Fifty States: Jobs and Growth from Coast to Coast, outlines the clear regional impacts TTIP will have on US states. View

“The study is a once in a generation opportunity to entrench prosperity and create jobs", said UK deputy PM Nick Clegg. "The EU and US represent half the world GDP and one third of all global trade.”

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