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Economics

Study Notes

Transatlantic Trade and Investment Partnership

Level:
A Level
Board:
AQA, Edexcel, OCR, IB

The Transatlantic Trade and Investment Partnership is a potential trade and investment deal between the United States and the European Union. If the deal is concluded and ratified, it will be the biggest trade and investment deal that the global economy has ever seen. But there are many barriers in the way before this is reached.

Average import tariffs between the United States and the EU are already at a low level - around 3% - although tariffs on particular products such as textiles can be significantly higher (close to 40%). A trade deal would help to eliminate tariffs and hopefully bring about the trade creation effects emphasised in the economics textbooks.

The biggest change arising from TTIP would be changes in the non-tariff barriers that affect nearly every industry ranging from the cosmetics industry to health care services. These non-tariff barriers (NTBs) include:

  1. Local content rules applied to government procurement e.g. awarding contracts for providing state-funded services
  2. Environmental standards e.g. emissions from vehicles
  3. Product quality standards e.g. affecting farming including food safety standards and regulations on the provenance of food
  4. Labour market rules e.g. minimum wage legislation, employment protection, pensions

Big business broadly supports the drive towards a TTIP deal. They want to benefit from easier access to respective markets. Supporters of TTIP argue that a trade deal will act as a catalyst for growth, investment and jobs especially in Europe which has been suffering from persistently high unemployment rates and stagnant real GDP growth.

Read: EU-US trade deal could add £10bn to UK economy a year, claims minister:

The main opponents of TTIP come from organisations such as the trade unions, anti-poverty groups and the environmental movement. They fear that TTIP will lead to a surge in imports and investment from US corporations that do not hold to the same environmental and ethical standards that currently apply in Europe.

Opponents claim that American corporations would pose a threat to the UK national health service. And that food safety could be compromised by giant food businesses who have attempted to drive down unit costs through genetically modified foods and much laxer standards on animal welfare.

Carmakers seek reduction in import tariffs "The heads of German car companies including BMW , Daimler and Audi lobbied politicians on Wednesday to reach a trade deal that could see tariffs dropped between the United States and the European Union. 40 percent of all cars produced are sold in Europe and the United States. Removing import tariffs would yield savings of around 1 billion euros (724 million pounds) for the German auto industry alone."

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