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Analysis and opinion 23 Dec 2015

The TTIP: What is it and how will it benefit export businesses

World trade has cooled down in an economic climate of moderate growth and uncertainty in emerging countries, precisely the drivers of dynamism before the 2007-2009 crisis. But what have also been slowing down over the past decade are the pre-crisis liberalization movements. Instead of falling, some tariff and non-tariff commercial barrier have been bolstered in some key economies, resulting from initiatives that are detrimental to society’s wellbeing, to corporate earnings, to the availability of goods and in terms of both quantity and prices for consumers.

In this economic context, it is very positive that the US and EU seek to improve the regulatory environment and enable easier economic exchange, and for that purpose have been negotiating since July 2013, a new free trade agreement, the Transatlantic Trade and Investment Partnership (TTIP).

With 11 rounds of negotiations concluded as of October 2015, the absence of a defined calendar for the ratification of the final treaty bears witness to the complexity of the process, but also to the ambitious objective it pursues: Clearing the way to increase even more the trade of goods and services and investment flows between the two economic areas, two of the largest and most affluent in the world.

The flows of exports and imports of goods and services, and the cumulative stock of direct investments already represent for the US almost 50% of its GDP, and for the EU more than 70%, but additional gains should be expected for both sides, due to the complementary nature of their export and import structures. This context of increasing import and export flows is especially beneficial for companies engaging in foreign trade.

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. It will therefore allow European and US companies, both big and small, to boost their exports.

How? Essentially, by removing the entry barriers that keep their products from moving freely on both sides of the Atlantic. The TTIP will benefit them by removing tariff and non-tariff barriers, enhancing the levels of legal certainty and offering new ways to access new markets, while reducing custom clearance requirements and boosting commercial exchange.

Economic Strategy

The partnership should yield a relevant strategic component for the Spanish economy and Spanish companies should be among that benefit the most from the TTIP. 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%.

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