2016 is a very critical year for TTIP, and a conclusion of negotiations couldn’t come soon enough for small and medium size companies (SMEs). Nearly 95,000 out of the 28 million US SMEs export to the EU, while about 150,000 of the 20 million SMEs in the EU export to the US Most SMEs do not have the human, financial, or time resources that larger companies have to develop export markets when faced with tariffs, complex customs procedures, duplicative and expensive regulatory approval requirements. These barriers are cost prohibitive for too many SMEs.
A trade liberalising agreement between the world’s two largest and wealthiest economic markets would open new opportunities and proportionately benefit SMEs more than larger companies.
The two governments intend to add a chapter to the final TTIP agreement in order to provide clear explanations of the benefits of the agreement for SMEs, direct them to sources of information, and establish bilateral committees to examine how well SMEs are utilizing the agreement and to identify problems that implementation of the agreement might cause for SMEs. Inclusion of such provisions in a trade agreement is unprecedented.
SMEs would also benefit from numerous specific provisions in other chapters of the agreement. Elimination of almost all tariffs will not only provide cost savings and possibly make for more competitive pricing, but in the case of some high tariff items, will make exporting possible for the first time ever.
Regulatory harmonisation or convergence where possible could potentially provide the greatest benefit if duplicative requirements can be eliminated. Paying for two product certification procedures, for example, or plant inspections, can be time consuming and expensive. In such cases, a SME has to choose which market to focus on, which is almost always the home market. Eliminating or reducing these burdens would create new export opportunities.
Other areas of benefit could be improved transparency for and access to government procurement opportunities, recognition of the importance of cross border data flows to the provision of digital services, and reduction of red tape at the border via coordinated and simplified customs procedures. Indirect benefits would flow from increased exports by larger companies for which many SMEs are suppliers.
When TTIP negotiations began in July 2013, many hoped they could be completed by the end of 2015. That proved impossible due to the prolonged negotiations of the TransPacific Partnership (TPP) and the protracted internal EU review of foreign investment protection procedures. With a tumultuous start to this year in global stock markets and once-again revised downward 2016 projections for both global economic growth and growth in international trade, there is the possibility of countries turning their focus inward and a spread of protectionist measures. SMEs have less resources than larger companies to respond in such conditions. TTIP would lock in many of the benefits noted above.
It is urgent that the text of the agreement be finalised this year. 2017 will be a year of personnel transition in the US Administration regardless of who wins the November presidential election. French and German elections next year could be additional complicating factors. Even if a TTIP agreement can be completed in 2016, the legislative review and approval procedures will likely not occur until some point in 2018. That’s far off for most SMEs, many of which will struggle in the current global slowdown. A more open and integrated transatlantic economic space via a TTIP agreement would be a very important assist to the ability of many SMEs to compete, and ultimately survive.