Europe Trading Up: The Strategic Importance of the TTIP
by Connor Wahrman
On February 13 of last year, President Obama, European Council President Herman Van Rompuy, and European Commission President José Manuel Barroso released a joint statement initiating new talks regarding the development of the Transatlantic Trade and Investment Partnership.(i) This economic partnership, referred to as the TTIP, would standardize tariff rates, regulatory processes, and investment rules between the United States and the European Union, in an effort to promote global economic growth and strengthen transcontinental relations. This partnership has the potential to redefine American strategic interest in Europe and institutionalize the economic alliance necessary as the balance of economic power shifts to the East.
The U.S. and EU and economic blocs already account for about half of global economic output, and trade in goods and services between the two accounts for millions of jobs and nearly a trillion dollars of yearly value. Over the past twelve years, however, The U.S. and the largest European exporters – Germany, the UK, and France – have seen their share of global exports fall from 31.5 to 24.2 percent.(ii) The TTIP would increase global exports by six percent in the EU and eight in the U.S., bringing the transatlantic share up to almost forty percent.(iii) Additionally, the agreement would increase incentives for transatlantic investment. The EU and the U.S. already have $3.7 trillion invested in each other’s economies. Both seek to not only protect their holdings, but also to encourage further growth through foreign direct investment.(iv)
Despite these benefits, which mainly flow from resolving conflicts in overlapping and often conflicting regulatory standards and processes, the U.S. and Europe have historically been unable to reach consensus on actually implementing a new trade partnership. Both the Clinton and Bush administrations attempted to implement similar trade agendas with the EU, but disagreements over environmental protection, consumer safety, and privacy prevented talks from becoming policy.(v)In the presence of the seemingly irreconcilable stances on GMOs, trade in cultural goods, and global warming, the persistence on behalf of both sides of the Atlantic would seem futile without some greater issue at stake. As it happens, there are quite a few.
First, the passage of new free trade legislation would be symbolic of continuing worldwide efforts to liberalize the international economy. In the 1990s, the Uruguay Round of global trade negotiations, which formed the World Trade Organization, and the establishment of the North American Free Trade Agreement, was a huge step forward for the international economy. The 2000s saw revisions to NAFTA, new WTO negotiations, and the opening of Panama, Columbia, and South Korea to free trade.(vi) The TTIP, as well as the Trans-Pacifc Partnership between North American and Southeast Asian economies, stand to offer this decade its share of trade liberalization. More importantly, it allows this decade’s leaders – Presidents Obama, Van Rompuy, and Barroso – to claim the benefts of trade liberalization as their own. And even if they are unable to accomplish the trade negotiations, it wouldn’t be for lack of trying.
Besides its symbolic value, the TTIP also has the practical potential to change the face of global trade patterns. One disturbing potential trend of globalization is the ‘race to the bottom’ – countries reducing environmental protections, working standards, and other regulations to attract foreign private investment.(vii) Although actual investment patterns suggest that multinational corporations are attracted to countries with more exacting standards, since those countries also tend to have larger and wealthier consumer markets, the fear persists. Passage of the TTIP would not only harmonize these standards in the new trade bloc, but also give the transatlantic community regulatory hegemony in the global investment market.(viii) By offering the same rules and standards to the rest of the world, a U.S.-EU partnership would force most major international trade to conform to its desires. By tying higher standards to access to the world’s largest market, the TTIP can force investors to ‘trade up,’ creating higher quality products up to par with Western standards.
Another effect of the transatlantic partnership is a redefinition of state interest among the parties involved. The TTIP can serve, according to Hillary Clinton, as an “economic NATO,” a new strategic link between the U.S. and European nations in the post-Cold War world.(ix) With the rising powers in Asia, there is an increasing likelihood that the U.S. will ‘pivot’ away from dealing with European and Middle Eastern issues, the main focus of NATO operations, and instead devote more of its political and economic power to its Pacifc front.(x)Renewed institutional bases for cooperation across the Atlantic, such as the TTIP, can retrench the historical, ideological, and commercial ties between the United States and Europe in a practical context of global security.
Along these lines, the trade agreement can also serve to strengthen cooperation within NATO, and give it new purpose. The mission of NATO, as an organization of collective security, is “policing the international system so as to insure that vital interests are not violated,” especially those of its members.(xi) A transatlantic economic partnership would help to redefne these vital interests. Under the TTIP, all trade routes and centers of commerce within the EU become geopolitically strategic for NATO. This is not new for the organization – the 1994 Partnership for Peace in Central Europe and subsequent Mediterranean Dialogue and Istanbul Cooperation Initiative all broadened the nominal interests of the North Atlantic Treaty Organization.(xii) The trade deal would once again re-prioritize NATO’s direct interests, keeping it active and effective in the case of future conflict.
But this strategic interdependence can also be seen as ‘bandwagoning’ on behalf of the EU as a whole in regards to American global hegemony. In a post-Soviet world, the U.S. and EU could see each other as natural rivals for power in the international system. This rivalry would lead the two powers to ‘balance,’ preventing one another from gaining too much power. By proposing the TTIP, however, the two powers seem to be signaling that they seek to cooperate. Although both great powers, the two parties do not perceive themselves as threats to the other, and therefore are more likely to work together.(xiii) This unification of power serves the EU well. With its members unwilling to coordinate military policy, and military budgets being cut by eight to thirty percent among EU members, there is increasing dependence on American military aid to secure regional objectives.(xiv) And because of the mutual economic benefits of the TTIP, the EU would be falling into America’s open arms.
There is another actor, though, that complicates the balance of power in this situation. In 2012, the U.S. National Intelligence Council estimated that by 2030, developing states will overtake developed states in terms of global economic power.(xv) China and India are the leaders in this power shift, which threatens not only American hegemony, but also Europe’s position in the global power hierarchy. The developing world’s imminent rise thus creates the incentive for the U.S. and EU to balance against it. The U.S. can also balance against China through the Trans-Pacifc Partnership with other Southeast Asian and Pacifc island nations, but Europe’s only main recourse is to balance with the U.S. Of course, this preemptive balancing might encourage other actors, such as Russia, to align itself economically with China, but, in this case, where trade spillovers benefit the global community as a whole through growth, the potential harms are limited. The TTIP will strengthen the West’s future ability to compete with economic rivals and deal with strategic threats.
There are other potential political challenges that might cause state actors to act out against the transatlantic partnership. The consolidation of European and American regulatory standards can be touted as a triumph of inter-state bureaucracies. From this, TTIP success could be a factor in increasing the federalization of European nations.(xvi) Also, the fact that America is partnering with the EU as a whole, and not its separate individual nation-states, gives more legitimacy to the authority of the European Union over its members. If, however, the TTIP includes other, non-EU European countries, such as Turkey and Switzerland, there would be less of an incentive for them to join the EU. There would then be less motivation for current EU members to comply with the EU, as they can attain economic benefits without actual membership. This trend would delegitimize the EU, and act against any federalization trend. But, either way, any influence on European federalization would be minimal.
Additional potential harms for Europe could come from the effects of bandwagoning with the U.S. Over the past few decades, the United States has proven relatively aggressive and interventionist compared to European states. With this in mind, the tethering together of transatlantic security interests could draw Europe into more conflicts than it would otherwise be comfortable with.(xvii) The U.S. has shown, however, restraint from unilateral action in response to crises in Libya and Syria, preferring to work more with European and UN counterparts. If this trend continues, the EU has to worry less about their foreign policy being dictated by Washington.
Other fears have come up in regards to recent confirmations of NSA spying on European governments, but the economic and foreign policy implications of the TTIP are not significantly impacted by such news, and the negotiators have not harbored any resentment because of them.(xviii) Also, concerns about environmental harms do not stand up against the predictions and calculations of policy experts. But even if policy changes could, out of this context, have deleterious effects for safety, consumer protection, or the environment, the agreement is structured to not supersede EU national laws or U.S. federal laws. In fact, exposing consumers to stricter regulations could lead to political will for their being adopted throughout the entirety of the partnership.
Overall, the only problems still standing in the way of TTIP approval are the specifics of regulatory practices and investment protections. In the end, careful compromise and finding common ground can ensure that both the United States and the European Union both receive the best terms of transatlantic partnership. While negotiating, representatives from all sides should recognize the strategic importance of the TTIP in the shifting global balance of economic power. With this agreement, the EU can strengthen its partnership with the U.S. and reassert its influence on the international stage.
i. Obama, Barack, Herman van Rompuy, and Jose Barroso. Council on Foreign Relations, “Joint Statement on U.S.-EU Negotiations for a Transatlantic Trade and Investment Partnership, February 2013.” Last modifed February 13, 2014. Accessed March 5, 2014.
ii. Alden, Edward, Jane McMurrey, and Rebecca Strauss. Council on Foreign Relations, “Trading Up: U.S. Trade and Investment Policy.” Last modifed December 2014. Accessed March 5, 2014.
iii. Francois, Joseph. Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment.” Last modifed March 2013. Accessed March 5, 2014.
iv. Offce of the United States Trade Representative, “White House Fact Sheet: Transatlantic Trade and Investment Partnership (T-TIP).” Last modifed June 2013. Accessed March 5, 2014.
v. Thomas, Bollyky, and Anu Bradford. Foreign Affairs, “Getting to Yes on Transatlantic Trade.” Last modifed July 10, 2013. Accessed March 5, 2014.
vi. Alden, Edward. Reuters, “Obama: Building Trade to Build Growth.” Last modifed December 5, 2013. Accessed March 5, 2014.
vii. Ibid. Bollyky and Bradford, “Getting to Yes on Transatlantic Trade.”
viii. Van Ham, Peter. Clingendael Institute, “The Geopolitics of TTIP.” Last modifed October 2013. Accessed March 5, 2014.
ix. Ibid.
x. Volker, Kurt. “Reaffrming Transatlantic Unity.” Policy Review. no. 172 (2012): 109-118.
xi. Bracken, Paul, and Johnson Stuart E. “Beyond NATO: Complementary Militaries.” Orbis. no. 2 (1993): 205-22.
xii. Ibid. van Ham, “The Geopolitics of TTIP.”
xiii. Wivel, Anders. “Balancing against threats or bandwagoning with power? Europe and the transatlantic relationship after the Cold War.” Cambridge Review of International Affairs, no. 3 (2008): 289-305.
xiv. Menon, Anand. Foreign Affairs, “The Other Euro Crisis.” Last modifed December 10, 2013. Accessed March 5, 2014.
xv. Ibid. van Ham, “The Geopolitics of TTIP.”
xvi. Ibid.
xvii. Ibid.
xviii. Ibid. Obama “Joint Statement on U.S.-EU Negotiations for a Transatlantic Trade and Investment Partnership, February 2013.”
by Connor Wahrman
On February 13 of last year, President Obama, European Council President Herman Van Rompuy, and European Commission President José Manuel Barroso released a joint statement initiating new talks regarding the development of the Transatlantic Trade and Investment Partnership.(i) This economic partnership, referred to as the TTIP, would standardize tariff rates, regulatory processes, and investment rules between the United States and the European Union, in an effort to promote global economic growth and strengthen transcontinental relations. This partnership has the potential to redefine American strategic interest in Europe and institutionalize the economic alliance necessary as the balance of economic power shifts to the East.
The U.S. and EU and economic blocs already account for about half of global economic output, and trade in goods and services between the two accounts for millions of jobs and nearly a trillion dollars of yearly value. Over the past twelve years, however, The U.S. and the largest European exporters – Germany, the UK, and France – have seen their share of global exports fall from 31.5 to 24.2 percent.(ii) The TTIP would increase global exports by six percent in the EU and eight in the U.S., bringing the transatlantic share up to almost forty percent.(iii) Additionally, the agreement would increase incentives for transatlantic investment. The EU and the U.S. already have $3.7 trillion invested in each other’s economies. Both seek to not only protect their holdings, but also to encourage further growth through foreign direct investment.(iv)
Despite these benefits, which mainly flow from resolving conflicts in overlapping and often conflicting regulatory standards and processes, the U.S. and Europe have historically been unable to reach consensus on actually implementing a new trade partnership. Both the Clinton and Bush administrations attempted to implement similar trade agendas with the EU, but disagreements over environmental protection, consumer safety, and privacy prevented talks from becoming policy.(v)In the presence of the seemingly irreconcilable stances on GMOs, trade in cultural goods, and global warming, the persistence on behalf of both sides of the Atlantic would seem futile without some greater issue at stake. As it happens, there are quite a few.
First, the passage of new free trade legislation would be symbolic of continuing worldwide efforts to liberalize the international economy. In the 1990s, the Uruguay Round of global trade negotiations, which formed the World Trade Organization, and the establishment of the North American Free Trade Agreement, was a huge step forward for the international economy. The 2000s saw revisions to NAFTA, new WTO negotiations, and the opening of Panama, Columbia, and South Korea to free trade.(vi) The TTIP, as well as the Trans-Pacifc Partnership between North American and Southeast Asian economies, stand to offer this decade its share of trade liberalization. More importantly, it allows this decade’s leaders – Presidents Obama, Van Rompuy, and Barroso – to claim the benefts of trade liberalization as their own. And even if they are unable to accomplish the trade negotiations, it wouldn’t be for lack of trying.
Besides its symbolic value, the TTIP also has the practical potential to change the face of global trade patterns. One disturbing potential trend of globalization is the ‘race to the bottom’ – countries reducing environmental protections, working standards, and other regulations to attract foreign private investment.(vii) Although actual investment patterns suggest that multinational corporations are attracted to countries with more exacting standards, since those countries also tend to have larger and wealthier consumer markets, the fear persists. Passage of the TTIP would not only harmonize these standards in the new trade bloc, but also give the transatlantic community regulatory hegemony in the global investment market.(viii) By offering the same rules and standards to the rest of the world, a U.S.-EU partnership would force most major international trade to conform to its desires. By tying higher standards to access to the world’s largest market, the TTIP can force investors to ‘trade up,’ creating higher quality products up to par with Western standards.
Another effect of the transatlantic partnership is a redefinition of state interest among the parties involved. The TTIP can serve, according to Hillary Clinton, as an “economic NATO,” a new strategic link between the U.S. and European nations in the post-Cold War world.(ix) With the rising powers in Asia, there is an increasing likelihood that the U.S. will ‘pivot’ away from dealing with European and Middle Eastern issues, the main focus of NATO operations, and instead devote more of its political and economic power to its Pacifc front.(x)Renewed institutional bases for cooperation across the Atlantic, such as the TTIP, can retrench the historical, ideological, and commercial ties between the United States and Europe in a practical context of global security.
Along these lines, the trade agreement can also serve to strengthen cooperation within NATO, and give it new purpose. The mission of NATO, as an organization of collective security, is “policing the international system so as to insure that vital interests are not violated,” especially those of its members.(xi) A transatlantic economic partnership would help to redefne these vital interests. Under the TTIP, all trade routes and centers of commerce within the EU become geopolitically strategic for NATO. This is not new for the organization – the 1994 Partnership for Peace in Central Europe and subsequent Mediterranean Dialogue and Istanbul Cooperation Initiative all broadened the nominal interests of the North Atlantic Treaty Organization.(xii) The trade deal would once again re-prioritize NATO’s direct interests, keeping it active and effective in the case of future conflict.
But this strategic interdependence can also be seen as ‘bandwagoning’ on behalf of the EU as a whole in regards to American global hegemony. In a post-Soviet world, the U.S. and EU could see each other as natural rivals for power in the international system. This rivalry would lead the two powers to ‘balance,’ preventing one another from gaining too much power. By proposing the TTIP, however, the two powers seem to be signaling that they seek to cooperate. Although both great powers, the two parties do not perceive themselves as threats to the other, and therefore are more likely to work together.(xiii) This unification of power serves the EU well. With its members unwilling to coordinate military policy, and military budgets being cut by eight to thirty percent among EU members, there is increasing dependence on American military aid to secure regional objectives.(xiv) And because of the mutual economic benefits of the TTIP, the EU would be falling into America’s open arms.
There is another actor, though, that complicates the balance of power in this situation. In 2012, the U.S. National Intelligence Council estimated that by 2030, developing states will overtake developed states in terms of global economic power.(xv) China and India are the leaders in this power shift, which threatens not only American hegemony, but also Europe’s position in the global power hierarchy. The developing world’s imminent rise thus creates the incentive for the U.S. and EU to balance against it. The U.S. can also balance against China through the Trans-Pacifc Partnership with other Southeast Asian and Pacifc island nations, but Europe’s only main recourse is to balance with the U.S. Of course, this preemptive balancing might encourage other actors, such as Russia, to align itself economically with China, but, in this case, where trade spillovers benefit the global community as a whole through growth, the potential harms are limited. The TTIP will strengthen the West’s future ability to compete with economic rivals and deal with strategic threats.
There are other potential political challenges that might cause state actors to act out against the transatlantic partnership. The consolidation of European and American regulatory standards can be touted as a triumph of inter-state bureaucracies. From this, TTIP success could be a factor in increasing the federalization of European nations.(xvi) Also, the fact that America is partnering with the EU as a whole, and not its separate individual nation-states, gives more legitimacy to the authority of the European Union over its members. If, however, the TTIP includes other, non-EU European countries, such as Turkey and Switzerland, there would be less of an incentive for them to join the EU. There would then be less motivation for current EU members to comply with the EU, as they can attain economic benefits without actual membership. This trend would delegitimize the EU, and act against any federalization trend. But, either way, any influence on European federalization would be minimal.
Additional potential harms for Europe could come from the effects of bandwagoning with the U.S. Over the past few decades, the United States has proven relatively aggressive and interventionist compared to European states. With this in mind, the tethering together of transatlantic security interests could draw Europe into more conflicts than it would otherwise be comfortable with.(xvii) The U.S. has shown, however, restraint from unilateral action in response to crises in Libya and Syria, preferring to work more with European and UN counterparts. If this trend continues, the EU has to worry less about their foreign policy being dictated by Washington.
Other fears have come up in regards to recent confirmations of NSA spying on European governments, but the economic and foreign policy implications of the TTIP are not significantly impacted by such news, and the negotiators have not harbored any resentment because of them.(xviii) Also, concerns about environmental harms do not stand up against the predictions and calculations of policy experts. But even if policy changes could, out of this context, have deleterious effects for safety, consumer protection, or the environment, the agreement is structured to not supersede EU national laws or U.S. federal laws. In fact, exposing consumers to stricter regulations could lead to political will for their being adopted throughout the entirety of the partnership.
Overall, the only problems still standing in the way of TTIP approval are the specifics of regulatory practices and investment protections. In the end, careful compromise and finding common ground can ensure that both the United States and the European Union both receive the best terms of transatlantic partnership. While negotiating, representatives from all sides should recognize the strategic importance of the TTIP in the shifting global balance of economic power. With this agreement, the EU can strengthen its partnership with the U.S. and reassert its influence on the international stage.
i. Obama, Barack, Herman van Rompuy, and Jose Barroso. Council on Foreign Relations, “Joint Statement on U.S.-EU Negotiations for a Transatlantic Trade and Investment Partnership, February 2013.” Last modifed February 13, 2014. Accessed March 5, 2014.
ii. Alden, Edward, Jane McMurrey, and Rebecca Strauss. Council on Foreign Relations, “Trading Up: U.S. Trade and Investment Policy.” Last modifed December 2014. Accessed March 5, 2014.
iii. Francois, Joseph. Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment.” Last modifed March 2013. Accessed March 5, 2014.
iv. Offce of the United States Trade Representative, “White House Fact Sheet: Transatlantic Trade and Investment Partnership (T-TIP).” Last modifed June 2013. Accessed March 5, 2014.
v. Thomas, Bollyky, and Anu Bradford. Foreign Affairs, “Getting to Yes on Transatlantic Trade.” Last modifed July 10, 2013. Accessed March 5, 2014.
vi. Alden, Edward. Reuters, “Obama: Building Trade to Build Growth.” Last modifed December 5, 2013. Accessed March 5, 2014.
vii. Ibid. Bollyky and Bradford, “Getting to Yes on Transatlantic Trade.”
viii. Van Ham, Peter. Clingendael Institute, “The Geopolitics of TTIP.” Last modifed October 2013. Accessed March 5, 2014.
ix. Ibid.
x. Volker, Kurt. “Reaffrming Transatlantic Unity.” Policy Review. no. 172 (2012): 109-118.
xi. Bracken, Paul, and Johnson Stuart E. “Beyond NATO: Complementary Militaries.” Orbis. no. 2 (1993): 205-22.
xii. Ibid. van Ham, “The Geopolitics of TTIP.”
xiii. Wivel, Anders. “Balancing against threats or bandwagoning with power? Europe and the transatlantic relationship after the Cold War.” Cambridge Review of International Affairs, no. 3 (2008): 289-305.
xiv. Menon, Anand. Foreign Affairs, “The Other Euro Crisis.” Last modifed December 10, 2013. Accessed March 5, 2014.
xv. Ibid. van Ham, “The Geopolitics of TTIP.”
xvi. Ibid.
xvii. Ibid.
xviii. Ibid. Obama “Joint Statement on U.S.-EU Negotiations for a Transatlantic Trade and Investment Partnership, February 2013.”
