Wednesday

23rd May 2018

Magazine

Are the EU and US ready for free trade?

  • US president Barack Obama's term is likely to end before TTIP is concluded, but there is no guarantee that the next administration would support it. (Photo: Reuters)

European business broadly backs the The Transatlantic Trade and Investment Partnership (TTIP), because the EU-US pact is expected to boost economic growth.

But Europe's engineering industry has lit an amber light, saying that the two markets are very unlike and that a lot of effort is needed to be able to achieve a good trade deal.

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  • TTIP faces political an popular resistance on both sides of the Atlantic. (Photo: Greenpeace)

American firms would get direct access a single European market, which has the same rules and standards in all 28 countries. But the US market is not as unified or easy to sell into.

Testing of products is regulated by the US Department of Labour's Occupational Safety & Health Administration, (OSHA). Currently, 39 different product types are subject to testing and certification in the US.

OSHA's main priority is workers' health, which is why it operates under the Labour department.

The products are tested and certified at 17 privately owned test centres (NTRLs), but the 17 US entities are not obliged to recognise each other's results.

One third of export affected

Up to one third of Europe's exports to the US is subjected to this system. As much as 75 percent of electronic exports are affected.

"The decentralised nature of the US system makes it difficult for European companies, in particular small and medium size businesses," said Adrian Harris, Director General of Orgalime, representing the European engineering industry.

"In practice, such fragmentation and lack of transparency means that European companies need to spend much more time and effort to continually monitor new standardisation work", he said.

"This also results in the need to purchase standards from different sources, which is becoming increasingly complex and costly".

When an EU company sells, for instance, an electronic sensor to US clients, the product must jump through 17 regulatory hoops. But under TTIP, its US competitor would have direct access to 28 markets through just one.

One study found that 5 percent of the price of any product sold in the US market is made up of certification costs.

US behind the curve

There's been little talk of the issue until now, one source told EUobserver. But OSHA recently began negotiations with the European Commission as part of the TTIP process.

Orgalime's Adrian Harris underlined that industry is not against TTIP as a whole.

"You'll never find Orgalime campaigning against TTIP. We depend on trade and want as much free trade as possible," he said, adding that export to the US in the sector had grown from €75 billion in 2010 to €116 in 2015.

He said both American and EU firms would benefit from unified global standards.

Some US multinationals, such as GE, have managed to set global norms with their products. But in general US regulators have less international standards than the EU.

Running short on time

TTIP would form the world's biggest free trade area if it is agreed.

It faces political and popular resistance on both sides of the Atlantic.

In Europe, the pact would have to be approved by an increasingly sceptical European Parliament as well as member states.

In the US, president Barack Obama's term is likely to end before TTIP is concluded, but there is no guarantee that the next administration would support it.

Presidential candidates from both leading parties, Donald Trump and Bernie Sanders, have opposed trade agreements for decades.

The leading Democratic Party candidate, Hillary Clinton, endorsed the Trans-Pacific Partnership, a US trade pact with Asian states, when she was secretary of state. But she has flip-flopped on free trade.

"I have said I oppose the TPP agreement - and that means before and after the election," she said in early May at an election rally.

This story was originally published in EUobserver's 2016 Business in Europe Magazine.

Click here to read previous editions of our Business in Europe magazine.

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