In his State of the Union address two weeks ago, U.S. President Barack Obama announced that Washington would launch negotiations with the European Union this year on a comprehensive venture called the Transatlantic Trade and Investment Partnership (TTIP). Negotiators in the United States and Europe aspire to make the TTIP the most advanced economic agreement in the world, and any deal will likely go beyond the most basic aspect of free trade -- namely, the elimination of tariffs. More broadly, Europe and the United States can be expected to align their regulations regarding manufacturing and services such as finance and telecommunications. The deal would also address new frontiers of economic growth, including the U.S. shale gas market and online intellectual property. They also hope to eliminate almost all barriers to foreign direct investment.
The elimination of tariffs alone, which average out to four percent on goods traded between the United States and Europe, could remove a $24 billion impediment to transatlantic trade. Beyond free trade, however, the real gains from the deal would come from regulatory cooperation. Transatlantic business would flourish, for example, if German cars that passed safety inspections in Stuttgart also met standards appropriate for U.S. drivers, if drugs and medical devices designed in one market could be sold to consumers in the other more quickly, and if smart-phone plugs built for both markets would be interoperable. In the highly regulated areas of advanced manufacturing and services, the backbone of the U.S. and European economies, streamlining business would give each side a huge boost in competitiveness.
The idea for such a deal is not new. Apart from the enlargement of NATO and the EU to formerly communist countries, no joint project has captured the imaginations of American and European leaders as much as the creation of a transatlantic marketplace. Together, the U.S. and European economies account for approximately 50 percent of global GDP, and the trade, investment, and commerce that passes between them amounts to $5 trillion