ECIPE PRESENTATION » 21.11.2013

Natalia Macyra Trade Policy Analyst, European Centre for International Political Economy (ECIPE)

Implications of the Transatlantic Trade & Investment Partnershipfor the Global Trading System

4th ‘Turkey - Europe Forum’, Istanbul 21-22 November 2012Session: Transatlantic Trade and Investment Partnership and Its Effect on International Economic Security and Multidimensional Relations

2

» Multilateral trading system: From GATT to Doha

2

‣ In 1947, GATT - post-war world governance

‣ Cold War - maintaining security through the development of prosperous and stable economies

‣ Changes in trade policy objective after 1989

‣ 1990s the technological expansion, new patterns in global production chains and emerging economies in Asia

‣ The increase of WTO members and trade volume covered by agreements in last twenty years

‣ Traditional production patterns replaced by trade in value added

‣ Reduction in tariffs for goods from 20-30% to 4% (1950 - 2006)

3

» Shifting trade priorities

‣ From WTO impasse to bilateral FTAs

» Initial worries about ”undermining the multilateral system” now expunged

» Bilateral, plurilateral and regional trade agreements being a response to the gridlock in the

WTO negotiations

» FTAs generally negotiated much more quickly than WTO accession

» Yet little economic value in small FTAs (< 0.1% of GDP); failure of India & Mercosur

» Refocusing on ’big’ trading partners, plurilaterals or RTAs since 2012

‣ New trade issues and barriers

» From manufacturing tariffs to services and NTBs

» Digital economy and regulation of Internet

» Increasing attempts of exporting rules to mid-sized third countries

» Regulatory harmonisation vs. regulatory co-operation

3

4

» Previous attempts to create transatlantic agreement failed

‣ 1995—’New Transatlantic Agenda’, Transatlantic Business Dialogue

‣ 1998—New Transatlantic Marketplace

‣ 2007—Transatlantic Economic Council (TEC)

‣ Before 2011, only resulted in “open skies” and weak co-operation agreements on IP, innovation, energy and chemicals

‣ The impasse in multilateral negotiation

» Bilateral or regional negotiations as ways to gain new market access

» Incentive to trade with major trading partner bigger than with smaller economies

‣ Ideological drift between EU/US after 9/11

‣ The increased growth in emerging economies in Asia

4

5

» Why TTIP now?

‣ Response to emerging markets and Asia

» Relative share of EU and US GDP diminishing

» Necessity to coordinate against BRICs

» Liberal, free trade order replaced by priority to domestic protection or foreign policy

‣ New era of economic statecraft

» The economics back at ‘the heart of foreign policy‘

» Trade expansion as a core objective for Obama second term

» Strong links to trade in the EU ‘Jobs and Growth’ policy

‣ An answer to economic and political needs

» Serving only political purposes results in a weaker commitments

» A reaction to the potential economic loss

» ‘Lock-in mechanism ‘ of trade agreements as an anchor for domestic trade and related policy

reform

5

6

» Economic impact of transatlantic agreement

6

‣ Global income increase by almost US$130 billion annually

‣ 5% of NTB reduction between the US and EU = 1% NTB reduction for the 3rd

country

‣ Improvements in market access for third countries Deep liberalization

increases real income of 3,27%

‣ Tariff-only reduction results in growth of 0,1%

‣ Economic impact on partner countries:Changes in per capita income

Tariff-only scenario: NTB scenario:

China -0,2% China -0,4%

India -2,5% India -1,7%

Mexico -1,1% Mexico -7,2%

Canada -0,7% Canada -9,5%

Turkey – 0,3% Turkey -2,5%

Brazil +0,5% Brazil +2,5%

7

» Multidimensional implications of TTIP

‣ Bringing comprehensive liberalization in transatlantic trade

» Mutual interest in trade openness in both countries

» Similarities in values, culture, size and structure of the economy

» Possibility to improve the economic situation and recovery from the crisis

‣ Complex impact on the world trading system

» Strengthening the existing rules

» Establishing a set of regulation in a new areas

» An anchor for trade and related policy reforms

‣ New areas for trade liberalization

» Non-tariff barriers, investments, government procurement, IPR

» Regulatory cooperation and standard harmonization, energy and environmental standards

» Internet and digital economy

‣ The ‘gold standard’ for deep and comprehensive global trade and

investment integrations

» Only in case of comprehensive agreement going behind tariff liberalization

7