Next week will mark one year since President Obama introduced the Transatlantic Trade and Investment Partnership (TTIP) to the nation in his State of the Union Address.  Although the TTIP received only a brief nod in the President’s speech, the TTIP initiative has moved forward at a stunning pace . . . well, a stunning pace for an international trade negotiation, a process that normally crawls along.  As discussed in this blog, the U.S. and European parties to this proposed partnership set an ambitious goal of finalizing an agreement by the end of 2014.  A year into the process, we take a look at the progress to date and the challenges to come.

TTIP Background

We often hear news of trade agreements and other arrangements designed to increase business between the United States and one or more partner countries.

TTIP is different. It’s bigger.

The European Union and the United States comprise the largest and wealthiest market in the world, accounting for over 54% of the world’s GDP and 40% of the world’s purchasing power.  It follows that even the slightest reduction in marketplace barriers on a scale that large could result in sizeable trade increases and economic benefits.  The European Centre for Economic Policy Research estimates that TTIP could boost U.S. exports to the EU by $300 billion annually and add $125 billion to U.S. GDP each year.

Tariffs between the trading partners are already some of the lowest in the global market.  Accordingly, TTIP focuses on reducing non-tariff-barriers (NTBs) to trade between the United States and Europe.  The proposed NTB reductions include aligning domestic standards, cutting costs imposed by bureaucracy and regulations, and liberalizing trade in services and public procurement.

TTIP Negotiations Thus Far

Over the past year, U.S. and EU representatives have met for three rounds of negotiations – the first round was primarily introductory and the other two were more substantive.  The most recent of these negotiation rounds, completed in December, left the U.S. Trade Representative sanguine.  The USTR stated on its website that, “it is a measure of progress that we are firmly in the phase of discussing proposals on core elements of each of the main negotiating areas, as well as beginning to confront and reconcile our differences on many important issues. We have a lot of work to do in 2014, but I am optimistic about what we’ll be able to accomplish in the coming year.”

TTIP in the Coming Year

The next round of TTIP negotiations will be held in Washington, D.C. from March 16 – 20, 2014.  In this fourth round, negotiators expect to work on the wording of provisions designed to ease compliance with existing rules.  Negotiators also expect to draft agreement language to enable U.S. and EU regulators to work together as they draft their respective domestic regulations in the future.  Specific provisions to be addressed in this fourth round will include rules on food safety and animal and plant health, as well as technical regulations, product standards, and testing and certification procedures.  Taken together, these items are often referred to as “Technical Barriers to Trade” (TBTs).

The Chief Negotiator for the EU made clear that, although this set of negotiations will focus on the reduction of TBTs, “TTIP is not and will not be a deregulation agenda.”

This statement exemplifies the numerous conflicts that the negotiators will face in the coming year.  They will have a mandate to harmonize two regulatory systems, reducing the NTBs and TBTs without overly compromising or placing inordinate burdens on either system.  In other words, the negotiators must aim to reduce regulatory barriers without having a deregulation agenda – a tough target to hit.

From that conundrum, potential snares for the negotiating team only multiply.  Interest groups and protectionist factions from both sides of the Atlantic will continue to actively oppose the partnership.  Some Europeans will raise an objection that the deal gives away too much to American business interests.  Further, the voices of labor unions, consumer advocates, environmental groups and other skeptics in opposition to TTIP may grow louder as the parties get closer to a final agreement.  Finally, political sways – a backlash against NSA monitoring of European communications as well as elections in the U.S. and EU in 2014 – may adversely affect the ongoing negotiations.

TTIP proponents remain optimistic, however, confident that a deal can be completed by the end of 2014.  We will keep an eye on developments and report on how nimbly these negotiators can manage the myriad concerns to achieve a useful partnership for the economies on both sides of the Atlantic.