US-EU trade agreement could benefit small, medium companies

By Jared Angle

WASHINGTON — The upcoming Transatlantic Trade and Investment Partnership (TTIP) will provide a boost for small and mid-sized companies (SMEs) in the United States and Europe, according to business leaders and industry analysts in a panel discussion on Nov. 14.

The event, hosted by the Atlantic Council, a Washington-based international relations think tank, coincides with the release of a report examining the agreement’s effect on SMEs.

The report, written by Garrett Workman of the Atlantic Council’s Global Business and Economics Program, identifies major export challenges for SMEs and proposes policy changes that would encourage American and European SMEs to begin exporting products or increase the volume of their existing exports.

Harmonizing US, EU trade policies

Brussels and Washington are no strangers to regulation, according to event moderator Dan Price.

One of the primary goals for TTIP is to make those regulations more “transparent, consistent [and] predictable,” according to Representative Erik Paulsen (R-Minn.), the event’s first guest.

According to the report, differences in some US and EU regulations make transatlantic trade difficult for SMEs.

US-EU ties are strong, with the two economies representing “nearly 50 percent of the world GDP,” Paulsen said.

According to Eurostat data compiled in 2012, the EU represented 22.9 percent of total world GDP, with the US following closely at 22.3 percent of world GDP.

With US-EU trade representing roughly 30 percent of US trade, “it only makes sense to enhance that relationship,” Paulsen said.

Despite low tariffs between the US and EU, reducing them further would encourage new exports and would have a large effect due to the scale of existing trade, while regulatory coherence between the US and EU would increase the pace of innovation and product distribution in both economies.

According to Paulsen, the creation of similar regulatory structures in each region under TTIP would allow products to gain approval from EU regulators more quickly once they have secured approval from equivalent US regulators, and vice versa.

Modernizing transatlantic regulatory processes will also facilitate the movement of goods and services between the US and EU, according to Paulsen.

Regulatory coherence will set also higher global standards for nations like China to follow, including rules regarding intellectual property protection, Paulsen said.

Mixed views across the Atlantic

Some members of the European Parliament (MEPs) don’t share the same level of enthusiasm for TTIP showed by their American counterparts, Price said.

“They were asking, ‘is the United States going to move forward, are they going to move forward on [trade promotion authority] and TTIP?’” Paulsen said.

While politicians in Brussels continue to debate the specifics of the trade agreement, there will be increased momentum in Washington now that midterm elections have concluded, according to Paulsen.

Like other recent trade agreements initiated by the US, “[TTIP] is bipartisan, everyone in Congress and the country is expecting us to work in a bipartisan manner, and this is one of those issues that will continue to be bipartisan,” Paulsen said.

Other political and procedural issues have contributed to skepticism over TTIP negotiations, including the role of investor-state dispute resolution (ISDS) and allegations of American espionage activities.

The European Parliament’s left-leaning Greens/European Free Alliance and a large citizens’ initiative coalition have challenged TTIP negotiations, with a particular focus on negotiation transparency and ISDS, which they claim will give multinational corporations an unfair advantage in legal proceedings against EU member state governments.

During Trade Commissioner Cecilia Malmström’s confirmation hearing, an MEP affiliated with the UK Independence Party asked if the United Kingdom would be cut out of TTIP if it leaves the EU in the future. German politicians, on the other hand, reacted negatively to the agreement after allegations in 2013 that the National Security Agency had wiretapped Chancellor Angela Merkel’s mobile phone. 

Making international trade friendlier for small business

Newly-elected MEPs will understand the benefits of economic growth, which has been slow on both sides of the Atlantic, according to Paulsen.

Despite making up more than 99 percent of American and European companies, only 1.3 percent of American SMEs to Europe and 13 percent of European SMEs export to the US, according to Raj Subramaniam, executive vice president of FedEx.

“If we can break down the trade barriers and bottlenecks, it makes economic growth more robust,” Subramaniam said.

The Atlantic Council polled roughly 100 SMEs and several trade and small business associations to gauge the obstacles that prevented them from exporting or made existing exports challenging, according to Dr. Fran Burwell, director of the Program on Transatlantic Relations at the Atlantic Council.

In the end, four key obstacles played a significant role in limiting SME exports, according to Burwell.

For some companies, a lack of labeling and shipping information prevented exports, while others had difficulty identifying export markets and locating suitable distributors.

Shipping costs, tariffs and duties were prohibitively expensive for SMEs with low profit margins, and regulatory inconsistency between the US and EU posed problems for these companies when it came to the affordability of additional product testing and making multiple product variants to meet the needs and standards of different markets.

View the full discussion on the Atlantic Council’s website here.

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