Economic Policy and Infrastructure

What is TTIP?

Questions and answers about the Transatlantic Trade and Investment Partnership (TTIP)

What is TTIP?

Free access to the world’s markets and the removal of trade barriers are key requirements for securing our competitiveness and thus also for growth and employment. Good trade policy creates the basis for investment. Germany and Europe should aim primarily to negotiate with those countries that represent economic growth and major future markets. Import duties and non-tariff trade barriers must be reduced. A transatlantic free trade agreement will provide considerable economic stimulus for both parties.

What is TTIP? - TTIP is the abbreviation for Transatlantic Trade and Investment Partnership. The US and the EU have been negotiating it since July 2013. In terms of economic area, TTIP would be the largest bilateral free trade agreement to date anywhere in the world.

Q&A: How big is the transatlantic economy today?

The EU and the US:

  • comprise almost 12% of the world population,
  • generate around 40% of the world’s total GDP,
  • represent nearly 50% of world production,
  • a third of the world trade in goods and services and
  • a third of the world’s patent applications, and
  • account for 60% of existing foreign direct investment.

Source: ifo-Institut

Q&A: What are non-tariff trade barriers?

Non-tariff trade barriers (NTBs) are regulations introduced by a country, which make it more difficult for foreign producers to sell their products in that country. They include technical standards, import bans, and legal provisions.

Q&A: What would TTIP mean for the EU?

CEPR-study: “An ambitious and comprehensive transatlantic trade and investment agreement could bring significant economic gains as a whole for the EU (€119 billion a year) and US (€95 billion a year).” (page VII)

"Under a comprehensive agreement, GDP is estimated to increase by between 68.2 and 119.2 billion euros for the EU and between 49.5 and 94.9 billion euros for the US (under the less ambitious and more ambitious scenarios).” (page 2)

Numerous studies exist about the creation of new jobs. These studies assume that the effects on the labor market are greater the more comprehensive the free trade agreement TTIP will be. A study by the ifo-instute for the Federal Ministry of Economic Affairs and Energy predicts that an “ambitious reduction of non-tarriff barriers” could create up to 110.000 new jobs in Germany. A study by the Bertelsmann Foundation claims that for the scenario of a “deep liberalization” up to 180.000 new jobs can be achieved.

CEPR assumes in an ambitious scenario that the EU can increase their exports to the US by 2027 up to 28 percent. Even in the less ambitious scenario in which only 10 percent of NTBs will be reduced the EU´s exports will increase by up to 16 percent. (CEPR-study p.49/50).

Q&A: Will the free trade agreement TTIP lower European environmental and consumer standards in the automotive industry?

Standards should be harmonised only in fields where the EU and the US have similarly stringent regulations. The European and US industries have jointly commissioned a number of studies to identify these areas. Moreover, the United States and the European Commission have repeatedly emphasised, both before and during negotiations, that no existing standards are to be relaxed, especially in environmental and consumer protection.

Q&A: Will consumers benefit from TTIP?

Consumers will benefit from TTIP. Opening up the market enables companies to offer their products on the market. That increases competition and benefits the customers in several ways. They get more car for their money, the range of products on offer becomes more diverse, and innovations are stimulated. According to the CEPR-study: „For a family of 4 the comprehensive scenarios yield disposable income gains between €306 and €545 annually in the EU and between €336 and €655 in the US." (page 47)

Q&A: Will all regulations for registration be equal?

No. Requirements are not going to be made all the same. Regulations providing an equivalent level of protection should be mutually recognised. So the regulations themselves can take different forms, as long as they achieve the same safety level. Mutual recognition should avoid unnecessary duplication of regulations and superfluous bureaucracy. The opportunities are even greater in areas where standards have to be defined from scratch. In the future, trade barriers can be avoided right from the outset in these areas by implementing a free trade agreement. One example would be electric mobility: here we could set international standards right from the beginning. This would apply to drawing up rules governing the labelling, testing or safety of batteries, or standardised connectors, charging sockets or charging procedures. We need global standards if this new technology is to be made suitable for everyday use. This will then benefit not only automotive manufacturers, the electrical industry and network providers, but above all the customers.

Q&A: What are investment protection agreements?

Investment protection agreements are treaties under international law, which safeguard foreign investments. They provide protection against discrimination and appropriation without compensation, and guarantee the free transfer of capital. If a state infringes one of these aspects, a foreign investor can take action under the Investor-State Dispute Settlement system. Critics fear that investors will abuse the settlement process to restrict states’ regulatory autonomy.

Q&A: What would the alternative to TTIP be?

For the EU there is at present no alternative to the free trade agreement TTIP, if it wishes to maintain and strengthen its right to have a say at international level. At the same time, however, the US is also negotiating the TPP (Trans-Pacific Partnership). This planned free trade zone includes countries such as Japan, Chile and Australia. If TTIP fails, the TPP region will be strengthened and in future the standards will be set there. The EU and its members would become far less important.

Dr. Martin Koers
Dr. Martin Koers Head of Department Economic and climate protection policy

Tel: +49 30 897842-350 Fax: +49 30 897842-600
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