CED: Last month, the United States and the EU initiated negotiations on the TTIP. What will the TTIP encompass and what are the main objectives that the deal will seek to achieve?
Amb. Vale de Almeida: The TTIP will encompass virtually every facet of the transatlantic economic relationship. It is a trade agreement unlike any other before it precisely in that it will be comprehensive in scope.
The TTIP can be best understood by looking at the three pillars of work we are undertaking. The first pillar is the traditional trade agreement portion. This area comprises of negotiations between the United States and the EU seeking the full elimination of tariffs, with the exception of only the most sensitive products for the two parties. This part will also include a discussion on investment policy, as well as on what rights we afford to foreign investors and what protections they are entitled to.
The second pillar is the regulatory component. This is, by many accounts, the crown jewel of the negotiations and involves a substantive deliberation between EU and U.S. regulators about “smart” regulations. It is very much about “regulatory coherence” and how we can regulate effectively in the public interest, while eliminating duplications in the system. We have all seen studies that cite regulatory barriers and conflicting standards as the major impediment to trade. The TTIP can thus be a vehicle for EU and U.S. regulators to foster closer cooperation, and develop policies that are compatible with and cognizant of what their counterparts are doing. This process will be driven by the regulators themselves, and I look forward to seeing their progress unfold.
The third pillar is the development of 21st Century global trade rules that take into account the complexity of modern supply chains, and the role of services and the internet economy, while also taking a good, hard look at the existing “gaps” within the World Trade Organization (WTO) rule book and the recent rise of state-based capitalism.
CED: The TTIP has been touted as a way to help both the United States and Europe overcome the ongoing economic crisis. If successful, what are the kinds of benefits that the TTIP will bring about and more importantly, for whom? What everyday benefits can U.S. and EU citizens expect? In the long run, how can this agreement strengthen the U.S. and EU economies and enhance their competitiveness at the global level?
Amb. Vale de Almeida: The TTIP has something for everyone. Our guiding light is the creation of jobs and growth, and in pursuing this we are looking at what can actually encourage companies to export, firms to hire, entrepreneurs to invest and consumers to buy. Consumers will gain from lower prices and more international product options. Companies will gain from tariff eliminations that will make it less expensive to export. Investors will find peace of mind in that their investments will not be discriminated against and that they will enjoy due process just as domestic firms do. This holy trinity is the formula that will get our economies moving again, and most importantly — that will get firms hiring again.
We estimate that an ambitious TTIP can boost the EU’s Gross Domestic Product (GDP) by half a percentage point. That may appear insignificant at first glance, but it amounts to over $130 billion, or to put it in perspective, about $800-900 per year for the average household.
In the long term, the TTIP can make EU and U.S. companies more competitive by providing them with a consistent regulatory framework and lower tariffs, and facilitating cross-border investment. This will allow companies to focus on their core business and on efficiently allocating capital. By coming together to craft rules for 21st Century issues we raise the bar and the global expectations about the direction that the United States and the EU are heading. Together we are the top FDI originators in the world, and we are home to global innovation centers and leading education institutions. What we need today is to kick start the engine of growth and hopefully, the TTIP will provide the boost the global economy needs. More so, according to our impact assessment, the rest of the world too stands to gain considerably, as the TTIP will lead to higher global trade flows.
CED: A transatlantic trade deal has long been envisioned, but a lengthy list of contentious issues has precluded any real progress until now. What are the most significant obstacles to concluding the TTIP deal, and what is the likelihood of overcoming them during the negotiation process this time around?
Amb. Vale de Almeida: Given the size and scope of the U.S.-EU economic relationship, it should be no surprise that we occasionally encounter some difficult issues. But rather than dwelling on the obstacles, the TTIP offers a unique chance to tackle some of our historic challenges. The comprehensive nature of the discussions allows us to put the difficult issues in perspective and focus on the larger goal of a successful TTIP.
We have different cultures and different sensitivities, but at the end of the day, the TTIP is about enhancing trade and investment. Just eliminating tariffs and making regulations more cohesive would go a long way in achieving that. We may not come to agree on every single issue, but the amount of political will to deliver on the TTIP is unprecedented and the post-crisis era warrants an effective coordinated response from the world’s two largest economies. The negotiators understand what is at stake, and everyone is working hard to ensure the successful conclusion of the negotiations.
CED: Some of the areas that the TTIP is looking to liberalize – among others the agricultural sector, financial regulation, intellectual property rights, data protection and privacy – are particularly sensitive for Washington and Brussels. How reasonable is it to expect that the negotiators will be able to move past the existing emotional resistance? What are the issues we can realistically expect to reach a compromise on?
Amb. Vale de Almeida: The TTIP provides a platform to have these difficult discussions. The regulatory piece — I want to stress this in particular — will be driven by the regulators. They understand their respective mandates and the need to protect public safety, and they will work together to decide what might be achievable. Bringing them together to share their regulatory experiences and understand each others’ processes is going to foster the trust and confidence they need to work together. The stakes are incredibly high, but the gains are so obvious if we can better coordinate how we regulate our economies.
The sectors we have flagged due to their exceptional importance for the transatlantic economy are the auto sector as well as the pharmaceutical and the chemicals sectors. Because the negotiations will be driven by regulators in different sectoral areas, the outcomes will be different. With agencies that have a long track record of transatlantic cooperation we might reach more advanced outcomes, as opposed to where the two sides’ regulators have never worked together before. Overall, we feel good about the regulatory pillar going into the negotiations, and the ability of our regulators to find common ground.
CED: The TTIP has been subject to an inordinate level of attention over the last few months. How much is this a function of the lack of a broader agenda for the transatlantic relationship? In this context, to what extent is the political enthusiasm surrounding the TTIP a result of the breakdown in global trade talks?
Amb. Vale de Almeida: I am not sure that I would agree with the premise of the first question. The transatlantic relationship is quite robust. We are working ever closer together as our relationship evolves in line with the EU taking on more responsibilities and tasks. We are witnessing an unprecedented degree of cooperation and coordination between the EU and the United States with regard to foreign policy, security, counter-terrorism and non-proliferation. We find ourselves working in tandem as we share and promote our common values.
There is no question that the TTIP will be the key anchor project for the U.S.-EU relationship in the next two to three years. But there are a myriad of other ongoing activities between the two partners. We are coordinating on our sanctions against Iran’s nuclear proliferation effort. Our financial regulators just concluded a deal on the regulation of cross-border derivatives transactions. We collaborate closely on our foreign development assistance, and on our political engagement in the MENA region. We also have extensive Information and Communications Technology (ICT) and Research and Innovation (R&D) dialogues, to name just a few. There is a lot of substance in the partnership, but yes, the TTIP is receiving the lion’s share of the attention at the moment. If you delve a little deeper, however, you will see that the TTIP is just one of many initiatives that make up the transatlantic relationship.
The second question is spot on. Yes, there is a sense that the TTIP is effectively two economic giants coming together to craft what we have tried to for over ten years at the multilateral level. But this is also a global trend — we are seeing a spike in bilateral and regional trade agreements over the past 10-15 years. Proponents of trade liberalization are looking for it, wherever they can find it. The global economy has changed, and the sense that the rule book has not kept up is out there. The TTIP and the Trans-Pacific Partnership (TPP) are the two big trade and investment agreements that the international community is following very closely for hints as to what might be possible in the multilateral arena.
Yet, I would never underestimate the capacity of the multilateral agenda to deliver. The advanced talks on trade facilitation going on right now are a case in point. We have a new WTO Director General who will provide a shot of adrenaline to the multilateral agenda. China is coming around to concluding a Bilateral Investment Treaty with the United States. Japan is joining the TPP. The levers for global trade liberalization all seem to be turning in unison. The TTIP is very much at the forefront of the attempt to show the world that the United States and the EU are serious about trade liberalization, that we are looking into our technical barriers to trade and crafting new rules for the shifting economic landscape.
CED: Given the range of controversial issues and the tight timeline of the negotiation process, the comprehensive TTIP envisioned might prove out of reach. How useful would a less ambitious, more limited deal be? How would the TTIP’s value and potential benefits be affected, should key sectors need to be taken off the table?
Amb. Vale de Almeida: We have run simulations which show that the highest gains would come from a comprehensive deal. The U.S. Trade Representative Michael Froman and EU Trade Commissioner Karel De Gucht received very broad mandates from their respective legislatures. Their ability to deliver on a comprehensive deal is a function of the difficult task of holding it all together. But the process is also self-reinforcing — the comprehensive nature of the discussions makes tackling the difficult issues more achievable.
You could, in theory, just cut tariffs, or you could adopt a piecemeal approach as some have suggested. But in doing so, you will run out of steam and lose the political will to keep going. And given that our tariff rates are already quite low, would this lead to a wave of trade activity and ultimately to more jobs and growth? I would wager to say “no.” The true gains of the TTIP will come from opening up all sectors, incorporating greater regulatory coherence in our systems, creating a more predictable and level playing field for businesses, and ensuring consumers have more options. These are the real catalysts for jobs and growth creation.