In my blog from May 9, I discussed the challenges that the US faces in its attempt to double its exports within the five year time frame set by the President.
Although there are many obstacles to meeting this goal, there are also opportunities to be pursued in this regard and TTIP is one of them.
TTIP stands for “Transatlantic Trade and Investment Partnership,” a plan for eliminating trade and tariff barriers between the EU and the US in order to foster additional business activity between these two economic giants. Trade in goods and services between these two entities amounts to nearly $1 trillion annually, and bilateral investment between them totals nearly $4 trillion. According to a recent article in the Economist, getting rid of remaining tariffs could raise Europe’s GDP by about 0.4% and the US’ by a full percentage point.
Lest anyone be put off by these small percentage differences, remember US GDP hovers around $15 trillion so a 1% increase means $150 million or about 2,000 additional jobs, which, in these economic times, is nothing to sneeze at. Concomitantly, a 0.4% increase in European GDP translates to about $16 million.
While there is always reluctance in the US congress to lower tariffs given the fear of a flood of cheap imports, the fact is that tariffs between these two markets are already quite low so the risk of a significant negative effect on any particular manufacturer would be minimal.
From a world-wide perspective, the importance of passing the legislation which would put TTIP into action is that it would potentially have a roll-over effect on other bilateral agreements as well and, ultimately on the entire world economy. Such talks are already going on in many places. The US and Turkey, for example, agreed on May 16th to establish a high-level committee that will examine ways to deepen bilateral economic relations and liberalize trade. TTIP is expected to feature prominently in these discussions.
It is entirely possible to imagine that future global trade talks could look at TTIP as a framework to be replicated in other markets and, thereby, create additional growth worldwide. In these challenging economic times the world’s leaders need to examine every avenue of opportunity that has the potential to stimulate growth and then pursue them to their logical conclusion.
John Maynard Keynes may have said it best when he remarked: “The difficulty lies not so much in developing new ideas as escaping from old ones.” A statement that is as true today as it was when he said it 80 years ago.