Whether an EU-US trade deal is concluded this year, next year, or 2020, is irrelevant in the larger scheme of things. As the world’s centre of gravity inexorably moves towards Asia, Europe has an appointment with history, writes René van Sloten.
René van Sloten is Executive Director for Industrial Policy at CEFIC, the European Chemical Industry Council.
When talks for a Transatlantic Trade and Investment Partnership (TTIP) were launched, EU politicians hailed the move to take down trade barriers between two of the world’s largest trading partners as essential to Europe’s economic recovery. Together with our biggest trading partners, the US, we’d be better positioned to fend off competition from Asia if we inked the deal.
Yet, three years since negotiations opened, the mood around TTIP is distinctly pessimistic.
The arguments in favour of TTIP remain valid: it’s an important instrument for Europe’s long-term economic growth and position as a global standard-setter. Europe has a big internal market, but in the aftermath of the economic and financial crisis, growth remains low. Other global regions – most notably Asia and the Middle East – are much more attractive for companies deciding where to invest.
So what’s changed in the last three years?
A new political and economic reality is emerging, and the world is struggling to absorb it. According to an EU Commission report, The World in 2025, the centre of gravity of world production will move inexorably towards Asia. The projected share of Asia will hit over 30% of the world’s GDP by 2025 and would surpass that of the EU, estimated at slightly more than 20%.
At World Trade Organization (WTO) level, the increasing influence of developing countries like Brazil, Russia, India and China has led to stagnating talks, as Western countries struggle to integrate these new powers in the mix. These days, bilateral or regional free trade agreements (FTAs) are the de rigueur route to trade liberalisation. Increasingly, politicians are focusing on short-term electoral gains instead of long-term plays like TTIP which will take more time but pay off with solid economic growth.
This is a critical issue for Europe’s chemical manufacturers. About 20% of EU chemicals trade is with the US, and this trade and regulatory process already takes place without TTIP. Chemical companies and regulators have decades of experience cooperating, and we see room to improve this process via TTIP. By taking down trade barriers, we can help cut red tape for EU companies, especially SMEs, and enlarge their market. This will help those companies in turn to create more jobs for EU citizens. That’s why we’ve asked TTIP negotiators to help EU chemical companies and regulators to work together better, which they can do while maintaining their own independent regulatory systems.
A common misperception around TTIP is that it could compromise Europe’s high health and safety standards. Concluding TTIP wouldn’t change the safety standards in either region, but could help spread them to other global regions as they develop their own chemicals management legislation so they can trade more easily with the EU and US. Classification and labelling schemes are a case in point, while the risk evaluation of chemicals can be speeded up while maintaining our high standards.
A seismic shift of economic power will occur over the next decade, irrespective of whether TTIP is achieved. TTIP could strengthen Europe’s economy and help it face the coming challenges – most importantly offering its young people jobs and a future.
Whether TTIP will be achieved this year, next year or by 2020 is irrelevant in the larger scheme of things. Europe has an appointment with history, and Europe’s decision makers should be wary not to sell out Europe’s long term future for short term political gains.