Based on our work with emerging economies to make international trade really happen, Sandler Trade LLC has taken a different view on the anticipated U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) Agreement. We have sought to examine its impact on global emerging economies. We believe this is extremely important, as the United States (U.S.) and European Union (EU) are major export and service markets for the 146 emerging economies[1] of the world,[2] in which nearly 5.84 billion[3] people live.
Click here for the detailed report prepared by Sandler Trade LLC
Our examination has found that there is a serious omission in the current plans for the TTIP negotiations. The U.S. and EU have failed to consider promoting economic development goals through this “Super-FTA,” as well as to identify and address potential adverse impacts on developing country exports from the TTIP. With the standstill of the WTO’s Doha Development Agenda (Doha) Round, the TTIP is an essential negotiation in which the partners should identify opportunities the TTIP presents to increase emerging economies’ trade with them and then address them in each pertinent subject area.
We believe that this approach is not just a “nice idea” to be considered by benevolent developed economies. It would be of strategic benefit to the U.S. and EU economies as well.
In 2003, the EU accounted for 40.4 percent[4] of global merchandise trade[5]. The U.S. share was 13.4 percent. However, nine years later, the two regions’ shares have decreased markedly to 32 percent and 10.7 percent, respectively. There are many reasons for these decreases, but bottom line, these two markets are no longer the only game in town.
Today, emerging economies turn to other major markets. A plethora of free trade agreements in which these economies are full partners help to encourage the flow of goods and services elsewhere. Our experience is that exporters of goods and services to the U.S. and EU seek other markets because of the great difficulty they have doing trade with the TTIP partners. Indeed, the World Bank’s “Ease of Doing Business Report,” ranked the United States #22 (of 183 participating economies) in term of trading across borders. Of the EU-27, Denmark had the highest ranking (#4) after leaders, Singapore, Hong Kong, and Korea. Germany is ranked #13, the United Kingdom #14, France #27, Spain #39, and Italy #55.
Barriers to trade include impractical and expensive sanitary and phytosanitary requirements for emerging economies’ important agricultural exports, tariff peaks for traditionally protected sectors, such as agriculture and textiles; high tariff rates and other quotas for agricultural products; complex rules of origin under preference programs, and burdensome and trade-restrictive application of anti-dumping and countervailing duty protections.
Therefore, it is in the economic interest of the U.S. and EU, as well as in the interest of emerging economies, to use the TTIP as a means to expand global trade from an economic development perspective. This opportunity, in our view, should not and cannot be wasted.
With the mutual economic interest of doing so firmly established, and with the United States and the EU poised to launch active negotiations in July, we next researched whether this topic is on the TTIP negotiations agenda.
We reviewed the TTIP negotiating mandates and recent high-level statements to see what they say about “development.” (Spoiler alert — they say nothing about development!)
We went back and examined the Doha development goals to assess whether any of these long-standing (and now largely abandoned) objectives will be up for discussion under the TTIP (– they won’t).
We reviewed recently published studies on the TTIP to read their analyses on likely TTIP implications for emerging economies’ development. We found little discussion.
While the TTIP does envisage setting global precedents, unfortunately, all of the stated goals entail U.S. and EU offensive interests – how to deal with developing country behaviors that may undermine U.S. and EU companies’ interests, such as disciplining state-owned enterprises and export controls for raw materials. Disciplining anti-competitive behaviors in these areas may well be worthwhile goals, but, in our view, they should not be the only goals with respect to emerging economies.
Seeing the dearth of discussion and, more importantly, no negotiation mandates to address TTIP’s impact on emerging economy trade, Sandler Trade LLC has authored a discussion paper that puts this issue on the table. Its goal is to identify regulatory and other changes the TTIP should include to improve emerging-economy exporters’ access to U.S. and EU markets, thereby meeting global development goals.
Our work included a review of TTIP’s ramifications for emerging-economy exports to U.S. and EU markets. That analysis raised issues that we believe should be closely analyzed and discussed by all stakeholders. For example, we looked at the potential for trade displacement and the ramifications of adopting mutual recognition of standards, rather than standards harmonization, on a number of products exported by emerging economies. We examined opportunities for simplification of complex preferential rules of origin and harmonization of other standards. We also considered what 21st century issues the TTIP could examine, other than U.S. and EU offensive priorities. Of interest to emerging economies is the disciplining of the behavior of state-owned enterprises as well as simplifying and harmonized regulations for their export priorities.
The following are our key recommendations for steps the U.S. and EU should take in the TTIP or as part of the TTIP preparatory process. We identified these through our investigation of a range of exports and TTIP areas of negotiation (e.g., market access, agriculture, etc.) with a view to promote the global economic development agenda and expand mutually beneficial economic opportunities.
Within the TTIP:
- Adopt standards harmonization, rather than mutual recognition agreements, for products that emerging economies export to the TTIP markets to ensure benefits also flow to them.
- Extend the benefits of mutual recognition to emerging economies for products that they also export to TTIP markets.
- Where bilateral removal of tariffs and NTBs is likely to adversely affect competing emerging- economy exports, provide potentially affected countries the opportunity to negotiate plurilateral or multilateral liberalization.
- For key exports of emerging economies (as identified by them), harmonize the U.S. and EU preferential rules of origin as well as overall product, shipment, and inspection standards.
- Grant the benefits of TTIP tariff elimination and NTB removal or reduction to GSP beneficiary countries.
Identify other changes that should be included in the TTIP by promptly:
- Elicit public comments on development aspects of the TTIP.
- Analyze the impact on key directly or indirectly competing emerging economy exports from the removal of tariffs and NTB’s to U.S.-EU trade, along with steps to be taken to avoid adverse effects on emerging economy exports.
- Undertake an independent assessment of opportunities under the TTIP to expand emerging economy trade, while avoiding potential adverse impacts.
- Undertake an independent assessment of emerging, 21st century, global issue that may inhibit emerging economies’ economic development and export growth and the TTIP could be used to help address these issues.
We welcome our readers’ thoughts and feedback. If you are an emerging market exporter, especially, who faces or has faced obstacles to entering the U.S. and EU markets, what do you think the TTIP should include to remove these barriers? Let us know what they are! Please share your thoughts with Gordana Earp, earp@sandlertrade.com
[1] Also called “developing countries.”
[3] This population calculation is the sum of countries that the World Bank designates as “Developing Economies) http://databank.worldbank.org
[4] These figures are calculated using data from the United Nations Commodity Trade Statistics Database (UN COMTRADE)
[5] Goods imports and exports.
