Trade policy is an exclusive competence of the European Union (EU) since the Rome Treaty in 1957, meaning that the EU rather than individual Member States is responsible for commercial policy and trade agreements with non-EU countries. That could certainly be considered a revolution in 1957 but in nowadays global economy this is an undeniable trend that has both positive and negative consequences; for example the impact of trade agreements on growth and jobs could certainly be a source of debate among the EU countries.

Negotiations between the EU and United States on Transatlantic Trade and Investment Partnership (TTIP) are coming to a decisive moment as highlighted during the recent visit in Germany of the US president, Barack Obama. “As you see other markets like China beginning to develop and Asia beginning to develop and Africa growing fast, we have to make sure our businesses can compete,” Obama said backing the deal during a recent meeting with German Chancellor Angela Merkel in Hannover.

Through this deal, the EU and the US aim at creating the biggest free trade zone in the world, with more than 820 million consumers, as the United States is still the EU’s top export market. This deal could bring the EU and the United States closer together, given the challenges posed by globalisation. With the rise of emerging markets, it is a big opportunity and the EU and United States leaders recognizes this.

In front of the general public, the promise of more jobs as a result of TTIP has been the common declaration by the deal proponents. With Europe still coping with the consequences of the economic crisis, the jobs question remains the top priority for many European governments and an ongoing worry for European citizens. But can TTIP really be helpful in reaching this aim?

TTIP Trojan Horse, Creative Commons, Flickr

Can the TTIP Really Be Helpful in Creating Jobs?

The European Commission says the treaty will promote economic growth and create jobs. One of the most commonly cited figure, from a research done on behalf of the Commission, estimates that the EU’s economic output could rise by 0.5 per cent by the year 2027 as a result of the deal. EU says TTIP could result in millions of Euros of savings to companies, as well as in hundreds of thousands of jobs. Removing the remaining transatlantic tariffs would enhance the ability of American and European companies to sell products in each other’s markets. Streamlining customs procedures would get products to markets cheaper and more efficiently.

On the other hand, there are various studies arguing that this positive scenario of the job markets is due to the assumption of a fixed labour supply and full employment; in this model employment can shift from one sector to another because rising demand for labour in expanding sectors will draw in labour from other sectors. Thus, the free trade agreement will have no effect on employment in the long term.

Furthermore, in the confrontation between promoters and opponents of the TTIP it is difficult to hear the voice of the small and medium enterprises. Only few of European SMEs, in fact, export to the United States and the value of exported goods is limited. Thus TTIP could have a seriously destabilising effect on them by significant diverting inter European trade to the US, encouraging the importing of cheap American products and supporting large groups to enter European markets. It could be said that trade is a two way street: while expanding both exports and imports between partner countries, exports support domestic jobs but imports displace jobs that would be located in Europe.

What is at Stake with the TTIP?

The main issue is the potential risk of putting the corporate interests of the industrial lobbies before the states’ and citizens’ own interests. In this regard it is also relevant to notice that safety standards in the food and agriculture sectors or data protection standards are quite different in US and EU and thus it could be difficult to harmonise the two.

But despite of all the differences, US and the EU may still have an important common goal: while the trade load has shifted to the East and China due to lower standards and cheaper labour force, it is an undeniable fact that the US and the EU still have the world’s biggest integrated economic relationship.

Since US investment in the EU is altogether around three times higher than in all of Asia, while EU investment in the US is around eight times the amount of EU investment in India and China together; EU and US investments are the leaders of the transatlantic relationship, providing growth on both sides of the Atlantic. Thus, it is right to negotiate the issues related to the conflicting standard between the EU and the US. But in more general terms, calling into question the TTIP deal for the EU seems almost as questioning the basis of the trade policy among European countries as envisaged in the founding treaties.