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Last Updated: 28. October 2019

Would TTIP Be a Good Deal for European Citizens?

This is what some experts think about TTIP

Would TTIP Be a Good Deal for European Citizens?

What Is the Transatlantic Trade and Investment Partnership?

One of today’s most important political discussions in the European Union has to do with a trade deal. As unlikely as that may sound in such a complex time for the Union, the truth is the Transatlantic Trade and Investment Partnership (TTIP) negotiations with the United States are playing a key role in the European political scene. In the particular case of the United Kingdom, the possibility of the country leaving the EU implies a different way of addressing TTIP negotiations than that of mainland Europe.

So, Market Inspector searched what exactly is the TTIP agreement. As any other trade deal, TTIP will reduce tariff barriers between the parties involved; the EU and the US in this case. Nowadays, tariffs for most products and services are very low across the Atlantic. So, their virtual elimination would only have a limited impact.

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The most important and ambitious part of the deal is that which is related to non-tariff barriers. It’s also one of the most challenging and controversial ones. Non-tariff barriers refer to the homogenisation of standards and procedures. Their potential to foster business opportunities for European companies in America and vice versa is significantly higher than that of tariff barriers.

As Lionel Fontagné, an expert on international trade at the Paris School of Economics, puts it: “Significant economic gains could be achieved from an agreement. Actually, [...] the main expected benefits might result from regulatory convergence and from the enhancement of signatories’ normative influence. Benefits in this area would be fully realized only if the final deal outmatches what has been achieved so far by most FTAs [Free Trade Areas]”.

What Would Be the Impact of TTIP in Europe?

On the other hand, some experts in the field voice concern about the risk of lowering many European standards that are currently higher than their American counterparts as a direct consequence of their homogenisation. The same applies in the opposite direction. Among the subjects that would be affected by TTIP, there are many sensitive ones, such as labour law, GMOs, meat or pesticides, where Europe has a stricter legislation.

In the opinion of William Outhwaite, professor of sociology at Newcastle University: “Although the US has some quite good consumer protection (vide the VW scandal), on most dimensions, and also particularly labour law, it's very poor by European standards - which are themselves being eroded”.

Ttip -partnership -cubeThese potential implications of TTIP have mobilised some sectors of European society against the treaty. If the upcoming political events in the US and some big European countries are also taken into consideration, it’s unlikely TTIP will be signed in the foreseeable future. Whereas some people view that prospect as a relief, some other think that would postpone a desirable step for North Atlantic societies and economies.

According to Dennis Novy, Associate Professor of Economics at the University of Warwick: “TTIP has the potential to benefit millions of consumers. It goes far beyond an economic project. Its current timetable seems ambitious. Without considerable attention and support from the highest levels of government, it will be hard to lead TTIP to a successful conclusion any time soon”.

From a strategic point of view, Novy, as well as many other experts, points out the crucial role TTIP could play as regards to EU member states’ relative power on a global scale: “Given the rise of emerging economies, TTIP might be the last opportunity for individual EU members such as the UK to have a major impact on setting high­ standard global trade rules. The price of failure might therefore be high”.

What Are the Possible Scenarios?

The benefits a trade deal such as TTIP would bring to the signing members depend on many factors, some of which are external and difficult to control, and some are related to the terms of the deal. In the case of TTIP, the degree of uncertainty of those terms make it very difficult to predict its effects on the EU population and businesses.

It is often stated that some of the main advantages of trade deals are the wider range and lower prices of products (for consumers), and the more favourable conditions for doing business on the supplier side of the market (for companies). But reality is much more complex and, inside the EU, there would be many different implications for each member state based on the specific terms of TTIP.

Some research has been conducted so far on the possible consequences of TTIP, based on different scenarios. Benedikt Heid, researcher at the University of Bayreuth, has worked on some of them. This is his view on TTIP: “A free-trade agreement between the USA and EU has important welfare effects on the countries directly involved and on countries that are only indirectly affected by the agreement. Within the EU as well there are differences cutting across the countries. Within Europe, the Baltic states benefit most from eliminating tariffs in trade with the USA. Relative high gains arise also in Great Britain and in the countries bordering the Mediterranean. Located at the other end are France, the Benelux countries and Austria with its neighbors.”

What Is ISDS and Why Is It Important?

A crucial aspect when it comes to speculating on the economic impact of TTIP is the exact terms under which the Investor State Dispute Settlement (ISDS) would work. This independent arbitration body is typically used in trade agreements, and is responsible for regulating legal relationships between companies and states. While many businesses and some political actors justify its existence and defend its independence, public opinion and some parties in many EU countries believe their sovereignty would be directly threatened by ISDS, and propose its elimination from the treaty, or at least, more transparency in their regulatory operations.