In a push to make the Transatlantic Trade and Investment Partnership (TTIP) work for SMEs, small and medium-sized business owners have asked for a carefully-crafted deal that would reflect their needs not only in a dedicated chapter, but across the full treaty.
“We want a carefully-crafted TTIP that promotes economic growth, from which SMEs can then benefit,” said Ulrike Rabmer-Koller, president of UEAPME, the European Association of Craft, Small and Medium-sized Enterprises.
“A specific chapter in TTIP on SMEs must reflect their interests. We welcome the inclusion of that chapter, but we also urge these needs to be reflected in all the other chapters too,” she added, insisting that Europe should push for the ‘Think Small First’ principle when it comes to regulatory cooperation.
99% of European and US companies—over 20 million in the EU, and 28 million in the US – are SMEs. The EU-US trade deal is supposed to create new opportunities especially for SMEs, given that trade barriers tend to disproportionately burden smaller firms, which have fewer resources to overcome them than larger firms.
SMEs provide two-thirds of all private sector jobs and have a tremendous capacity to create new employment. However, when it comes to exports they are burdened by tariffs and regulations.
The European Commission and the US International Trade Commission have run a series of consultations that highlighted a number of cross-sectoral factors that create disproportionate burdens for SMEs. These include the cost of adjusting to different regulatory systems in different jurisdictions, the cost related to the protection of Intellectual proper rights, and for customs procedures, rules of origin, and tax requirements, among others.
Struggling SMEs: Regulation, taxes and transparency
Taking as an example Gynius, a medical device company based in Stockholm, Trade Commissioner Cecilia Malmström told euractiv.com that it took them a great deal of effort to get their gynaecological cervical cancer screening equipment to get approved in the US.
“TTIP would have made that easier for this life-saving product,” she said. The same happened to an Austrian company in Tirol, Montavit, which, faced with high annual fees for double inspections of its facility by EU and US authorities, found it too expensive to do business in the US.
Trade barriers are cumbersome, expensive and complex, insisted the Director General for Swedish Enterprise, Carola Lemne. “But large businesses still manage. They can afford to set up shop across the Atlantic, build factories, etc. It’s SMEs that struggle,” she said.
Looking at the mechanical engineering sector, which is by far the largest EU exporting sectors, according to trade expert Jacques Pelkmans from CEPS, could boost growth and innovation if barriers, which are incredibly complex, can be successfully negotiated.
“We are very competitive in the engineering sector because of customised machinery. China is competitive because of the volume of goods it produces,” added Pelkmans, adding that SMEs are going to make the difference in that sector.
Bernd Supe, the owner of the a medium-size company which is the world’s leading manufacturer of industrial cutting tools, pointed at the SME chapter in TTIP sidelining the issue of taxes.
“I don’t want to complicate things, they are difficult enough as they are,” he said. But it has to be kept in mind that when SMEs operate in another country, and have subsidiaries in that country, they have to deal with the same tax administration and legislation as large companies. They can’t afford to comply in the same way.”
Some SMEs though feel at odds with TTIP, because the negotiations still lack transparency.
“We welcome that the negotiations are more transparent than they used to be. But transparency is more than just providing access to documents,” argued Rabmer-Koller. “It’s also about explaining the consequences of the deal and raising awareness. Stakeholders and SMEs have to get more involved.”
The cost of non-TTIP
Supe flagged the risk of failing to reach a palatable deal. “This, I think, is our last chance to come up with a free trade blueprint or regime that can be followed by the rest of the world,” he said.
“If we miss this opportunity, then the rest of the world, where a bigger portion of trade is commanded, will not want to listen. This will lead to a fracturing of the European market and SMEs will be rendered meaningless or less important in the future. We’ll be serving our SMEs up on a silver platter to our Chinese friends.”
“We, for instance, would have to consider relocating outside of Europe in that case,” Supe added.
“We have to be honest. Not everyone is going to benefit from TTIP,” said Lemne. “There might be casualties, and there might be protected areas that don’t’ stand up to competition. But overall, the results will be beneficial.”
“We need to keep in mind that global competition will not go away if we don’t sign TTIP,” she added.
The European Commission has estimated that an ‘ambitious’ TTIP deal would increase the size of the EU economy by around €120 billion (or 0.5% of GDP) and the US by €95 billion (or 0.4% of GDP). Economically, TTIP can benefit consumers by creating cheaper products, according to the Commission.
A study by the Centre for Economic Policy Research estimates that in total, the average European household of four will see its disposable income increase by an estimated €500 per year, as a result of the combined effect of wage increases and price reductions.
This would be a permanent increase in the amount of wealth that the European and American economies can produce every year.
But the deal has been beset by controversies centering on accusations that the talks are too secret, will drive down environmental standards or leave governments at the mercy of lawsuits brought by rich multinational companies.
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European Commission: Report of the 13th round of negotiations (25-29 April - New York)