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Analysis and opinion 15 Mar 2016

TTIP: Myths & facts?

by José Manuel González-Páramo, BBVA Executive Director

Over the past few months there have been many very different statements published about the TTIP, the Transatlantic Trade and Investment Partnership between the U.S. and Europe. To what extent are they based on myths or facts? BBVA Executive Director José Manuel González-Páramo explains in an  op-ed published in Spanish ElDiario.es

The TTIP is an agreement being negotiated by the European Union and the U.S. with the aim of moving toward a single market for both regions that is more integrated, larger, and thus more favorable for economic growth, investment and employment on both sides of the Atlantic. TTIP negotiations have been underway for more than two years and should be completed by the end of 2016. Now it is more important than ever, if possible, to become familiar with the implications this agreement would have for European society, and Spanish society in particular.

The implications of the TTIP on companies’ power, possible job loss in certain sectors, environmental protection, risks to food standards and labor rights concern many in European society. To clear up some existing questions, I would like to respond to some of the most common myths on these issues regarding the TTIP.

Which companies will benefit the most. Myth: Large multinationals will be the big winners of the TTIP, while the SMEs will be the big losers. Fact: SMEs will benefit more than large corporations who already work across the Atlantic. Eliminating bureaucratic and legal barriers to engage in economic activities in a new market will provide new opportunities to all companies. Small and medium sized enterprises will benefit the most, however, due to their lack of sufficient resources to overcome the obstacles to export that the multinationals get around easily. For SMEs, the agreement will open the door to markets that are currently inaccessible to them.

This is especially significant in Spain where more than 90% of export companies are SMEs and also very dependent on European markets.

The crisis has shown us that the export sector is one of the Spanish economy’s greatest assets. But this should not lead to complacency as emerging economies are taking great strides in their exports, with high tech, high-end, quality goods. Furthermore, trade agreements like the one recently signed between the U.S. and several countries in the Pacific could lead U.S. imports to lean toward this part of the world over the European market, with the related impact on job loss.

Jobs. Myth: The TTIP will eliminate jobs. Fact: The signing of the TTIP will essentially represent greater competition, similar to the process of Spain joining the European Community, which boosts economic activity and employment in the entire country. The TTIP enables the internationalization of Spanish companies due to lower trade barriers and greater investment flows. Creating more and better jobs means removing economic, legal and institutional barriers in order to foster entrepreneurship and growth. This increases our companies’ productivity and therefore that of the Spanish economy as well – the only way to ensure sustainable growth in activity and employment.

In all the studies, Spain appears as one of the main beneficiaries of the TTIP, not only in terms of higher GDP, but also in salary and job growth.

Labor rights, food safety and environmental protection. Myth: The TTIP will ease EU’s strict standards on labor rights, food security and environmental protection. Fact: The EU’s standards are simply not being negotiated in the framework of the TTIP. They will be maintained and the EU will continue to decide over its own standards in all these areas.

Public services. Myth: The TTIP will force EU governments to privatize public services. Fact: All the EU’s trade agreements allow the governments the freedom to manage their public services. The TTIP is no exception.

Multinationals’ respect of national laws. Myth: The TTIP will allow U.S. companies to sue governments at will. Fact: The TTIP will strengthen the current system for settling disputes between foreign companies and governments. The European Commission proposed a modification to the dispute resolution mechanism, which will be called the Investment Court System (ICS). It is a new system to resolve disputes between investors and governments that integrates demands from Parliament and the public. Arbitrators will be replaced by qualified judges and decisions must be transparent, in addition to the possibility of appeal.

Transparency. Myth: the U.S. government and the European Commission are negotiating the TTIP in secret. Fact: The European Commission is in close contact with the governments of the 28 member states of the European Union, before and after each meeting. It also regularly informs the European Parliament and consults other stakeholders extensively (NGOs, unions, business organizations, consumer protection organizations and environmentalist groups). The details of the negotiations are well known. A simple internet search reveals the websites of the European Commission, the European Parliament and the Office of the U.S. Trade Representatives on the TTIP.

I would like to conclude underlining that, as the historic digital revolution period we’re in the midst of blurs geographical boundaries, our circumstances are no longer restricted to the city or neighborhood, not even the country where we live. Our horizon is, at least virtually, the whole world.In this context, taking part in the creation of a larger market is the best way that Europe and the U.S. have to offer their citizens a road to a more brilliant and prosperous economic future, in a world economy that is globalizing at increasing speeds.

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