TTIP 2.0? Revised transatlantic trade and investment partnership would be good for Germany

_ Yuri Kofner, economist, MIWI Institute. Munich, 25 March 2022.

On March 20, 2022, Germany’s FDP-led Ministry of Finance proposed continuing negotiations on a new Transatlantic Trade and Investment Partnership (TTIP).[1] In fact, this far-reaching trade and economic cooperation agreement would be of great benefit to German business, provided the reformed agreement gave Germany and the EU sufficient sovereignty over issues such as the regulation of multinationals, food standards and the labour market.

In 2017, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU came into force. It has eliminated nearly 98 percent of previous tariffs, mandated mutual recognition of technical regulations and standards, intellectual property protection, yet also introduced a rather controversial investor-state dispute settlement mechanism between the parties. At the same time, USMECA came into force in July 2020 – a renewed version of NAFTA and a free trade agreement as deep and comprehensive as CETA.[2]

With Joe Biden as president in the White House, serious supply bottlenecks for German industry from Asian export countries and the war in Ukraine, it could be time to address the question of supplementing the EU-Canada CETA agreement with a revised preferential trade and investment agreement between the EU and the United States which would take account of the controversies surrounding the previopus Transatlantic Trade and Investment Partnership (TTIP) attempt.

In 2016, Washington halted the TTIP negotiations. The American side was concerned about potential adverse effects on domestic industrial workers, while European experts pointed to many contentious aspects of the deal, including a lack of transparency in the negotiations, a likely drop in food safety and labour standards, the controversial “arbitration board” to protect multinational corporate investments, which could have overridden national and EU law.

In August 2020, the USA and the EU were able to agree on a temporary end to their trade war and on mutual tariff reductions, which gives hope for a possible improvement in transatlantic trade relations.[3]

The USA was Bavaria’s second most important export destination after the EU in 2019 and accounted for 11.3 percent of Bavarian exports (EUR 21.3 billion). Bavaria’s most important export goods to the USA were high-tech goods with high added value: passenger and transport vehicles (EUR 6.5 billion 830 million).[4]

According to estimates by the ifo Institute, the CEPII (Center d’Etudes Prospectives et d’Informations Internationales), the CEPR (Center for Economic and Policy Research) and the Swiss Federal Institute of Technology (ETH) in Zurich thanks to such a preferential trade and investment agreement between the EU and the USA, German real per capita income would increase by an average of 3.1 percent, German exports to the USA would almost double (by 93 percent) and between 100,000 and 181,000 new jobs could be created in Germany.[5]

Sources:

[1] Greive M. et al. (2022). TTIP new edition: Lindner calls for a new free trade agreement with the USA. Handelsblatt. URL: https://www.handelsblatt.com/politik/deutschland/handelspolitik-ttip-neudition-lindner-Demands-New-Free-Trade-Agreement-with-the-usa/28178362.html

[2] Felbermayr G. (2021). Remarks on the CETA agreement. IfW Kiel. URL: https://www.bundestag.de/resource/blob/816668/8772ed53622b0edd57796ed1c1e3c3c3/19-9-921_Stellungnahme_Felbermayr-data.pdf

[3] European Commission (2020). Commission adopts proposal to make EU-U.S. agreement on tariffs effective. URL: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1572

[4] Observatory of Economic Complexity (2020). Bavaria. URL: https://oec.world/en/profile/subnational_deu/bavaria

[5] Elbermayr G. (2013). The Transatlantic Trade and Investment Partnership (THIP). Who benefits from a transatlantic free trade agreement? Bertelsmann Foundation, ifo Institute. URL: https://www.bertelsmannstiftung.de/de/presse/pressemitteilungen/pressemitteilung/pid/usa-und-entire-eu-would-benefit-considerably-from-transatlantic-free-trade-agreement/

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