The Implications of TPP for TTIP
Given the discriminative nature of the TPP on non-participants, the signing of the agreement on February 4, 2016 will augment pressure on the EU to accelerate their own path to finalizing a transatlantic trade deal. Notwithstanding the strong opposition to the TTIP, negotiations are poised to produce an ambitious deal in line with US preferences and allow the EU to consolidate its leading position within global markets thereby reducing the potential pernicious effects of TPP.
Although the agreement still requires ratifications in the member-countries' parliaments, the signing on February 4 of the Trans-Pacific Partnership (TPP), the largest regional trade accord in history between 12 countries in the Asia-Pacific that comprise 40% of the world economy, has been widely hailed as an important victory for free trade. The agreement has revealed itself as a "21st-century agreement" that calls for comprehensive liberalization of tariffs and non-tariff barriers to trade, including in hitherto sensitive areas, such as agriculture. The TPP is also expected to have wide-ranging implications for regional trade agreements (RTAs) elsewhere.
What are the implications of the TPP for the Transatlantic Trade and Investment Partnership (TTIP), another grandiose trade pact currently under negotiation between the US and EU? In general, three outcomes of the TTIP negotiations are possible: a modest deal that largely accommodates the interests of all major groups concerned; a more comprehensive deal that is currently under negotiation but is opposed by different groups for its alleged backing of the interests of transnational corporations at the expense of the general public; and a no deal in the form of Doha-style inconclusive negotiations.
As I argued before, a modest deal is not an option for the US, for it will contradict its trade policy of the last quarter century and will see the US stuck in a mediocre deal with no viable option for upgrading it to a more ambitious agreement. From the remaining two options, a comprehensive deals appears to be a more plausible outcome because the newly signed TPP will exert discriminative pressures on third countries, including the EU, which they cannot ignore.
The TPP itself is largely a result of discriminative pressures, whereby its members could not afford to be left out while their competitors started to trade with the US on preferential terms. This was one of the key factors that made the TPP possible after the US joined the negotiations in 2008. With the conclusion of the deal, the TPP-induced discriminative pressure has augmented. South Korea and China, for example, have felt the need to react to the TPP either through accession to the club or the formation of a broader trade pact built on the TPP.
The EU's reaction to discriminative pressures as a result of third-party RTAs has led to a change in EU trade policy in the 2000s. As per the Global Europe Initiative of 2006, the new strategy calls for the opening up of new markets for EU companies, including through RTAs with relatively big and pro-free-trade countries, to level the playing field for EU businesses abroad. With the conclusion of the TPP, the EU will need to counter yet another source of discriminative pressure on EU businesses. The discriminative effects of the TPP will be too strong for the EU to ignore.
Hence, the signing of the TPP will reinforce the TTIP negotiations, putting additional pressure on EU negotiators to complete the trade talks in the shortest possible time, before the negative effects of the TPP on EU businesses emerge. This, notwithstanding the strong opposition to an ambitious TTIP by different groups, is likely to produce an ambitious TTIP deal that is largely in line with US preferences.
Davit Sahakyan has a PhD from the School of International Studies, University of Trento (Italy). He has been a researcher at Columbia University (New York) and has an MSc degree in Development Management from the London School of Economics and Political Science.
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