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Economic sectors Act. 06 Nov 2018

The TTIP: What is it and opportunities for Spanish companies

The Free Trade Agreement between the EU and the US seeks, in broad terms, to foster the trade of goods and services and investment between both blocks. The partnership will boost growth and create new jobs, becoming a frame of reference for other economies.

How will the TTIP affect Spanish SMEs?

Basically, by helping them to export. In contrast with the positions that some sectors defend, the TTIP will not only benefit the largest Spanish companies, but fundamentally the small and medium enterprises. How? By eliminating the barriers that keep their products out of the US.

The purpose of the TTIP is to remove the commercial barriers between the US and the European Union (suppress customs, unnecessary regulations, restrictions to investment, etc.) and thus simplify the purchase and sale of goods and services.

The effect of commercial barriers - especially non-custom barriers – on SMEs is disproportionate. Having access to limited human and financial resources, compared to large companies, to overcome these barriers, the costs of exporting or investing outside Europe for SMEs usually outweigh the benefits.

Which are its benefits?

The TTIP could turn them into exporting companies. And, for this purpose, the agreement will include specific provisions to benefit small and medium enterprises in future commercial agreements. These are some of its benefits:

Tariffs. There are millions of small manufacturers and producers in Europe and the US that manufacture approximately 30% of the products exported from both markets. These entrepreneurs are very well positioned to benefit from the removal of customs.

Regulation and non-custom barriers. Companies, especially the smallest, on both sides of the Atlantic, can be affected by non-custom barriers, in the shape of requirements at the border or by «internal» hurdles that restrict trade and limit innovation.

Services. The EU and the US are the world’s top service exporters and many suppliers - lawyers, accountants, architects, engineers, IT specialists and environmental service consultants – work in the smallest companies, that are often part of the value chain of larger companies. These smaller service suppliers could benefit from enhanced levels of legal certainty and new ways to access the market that the TTIP would provide.

Public contracting. The improvement in transparency in public contracts and access thereto could also yield additional benefits for small companies in the shape of new public contracts and sub-contracts.

Tariffs and commercial facilitation. A key objective that TTIP negotiations seek to fulfill is the promotion of international trade and transport reducing unnecessary costs and delays that operators have to bear to obtain custom clearance, making the outcome of the proceedings more predictable, simple and consistent.

Intellectual and industrial property rights (Copyright). The TTIP will allow reaffirming the shared transatlantic commitment to enforce rigorous protection and enforcement of company copyrights, even with respect to their commercial partners.

E-commerce. The provisions of the TTIP that promote the trade of digital products without custom tariffs, and the access of consumers to the online services and apps they choose, can help promote online US and EU retailers and service providers.

Value chains. The TTIP will benefit many companies that do not export directly to the EU or the US through the sale of intermediate goods and services to companies that do engage in overseas trade.

Advantages for the Spanish economy

The agreement has a relevant strategic component for Spain. Among EU countries, the Spanish economy could be among those that venefit the most from the TTIP. Indeed, SMEs comprise 90% of the country’s productive fabric, and are responsible for the creation of most jobs.

Currently, most of our exports concentrate on the EU (67%). This high dependency from a limited number of countries increases our foreign sector’s exposure to the Eurozone’s economic climate.

At 4.4%, Spain’s exports to the US are still small compared to the size of the potential market it represents. According to the most optimistic scenario set out in a report by the Institute for Economic Studies (IEE – Instituto de Estudios Económicos), the TTIP will increase Spanish exports to the US by 32%.

According to the same report, the agreement could generate 334,836 jobs in Spain during its first five years in force. Likewise, the Spanish GDP would grow by €36.74 billion. Even in the short term, one or two years after its ratification, the TTIP would represent additional annual revenues of about €4.53 billion. For this reason, Spain - especially from an SME standpoint, but also from a more structural perspective - should be especially interested in the passage of the partnership.

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