Edited and Translated by Huang Beibei, People's Daily Online
During the Group of Eight (G8) summit, the EU leaders and US President Barack Obama plan to start negotiations on the Transatlantic Trade and Investment Partnership (TTIP). Negotiators intend to conclude the negotiations before the end of next year. Europe and the United States generate about half of the world’s economic output, and one third of world trade. The value of their trade averages 2.7 billion US dollars per day, and mutual investment amounts to 3.7 trillion US dollars. Therefore, if the TTIP comes into effect, it will play a leading role in regulating world trade and investment, and re-establish the Western world’s leadership in the economic field. In addition to TTIP, the EU is also conducting comprehensive economic and trade agreement negotiations with Canada. That the US and European economic power axis started TTIP talks during the G8 summit is symbolic.
The European and US free trade agreement is more than a free trade area agreement; it also represents an internal market of far-reaching political influence. The negotiations will focus on eliminating trade barriers between the two major markets in the administrative field, and promoting common development in Europe and the US. Its strategic significance extends far beyond economic matters. TTIP negotiations will create the world's largest free trade agreement, and might represent the largest boost to the transatlantic relationship since the end of the Cold War. German magazine Der Spiegel and the Atlantic Council of the US have pointed out that TTIP is not only a Free Trade Agreement, but that it implies plans for a coordination mechanism with the ultimate goal of forming an interest group comprising the US and Europe - an "economic version of NATO" - in response to the new opportunities and challenges brought by the ever-changing international economic environment.
The world today is changing rapidly, and traditional Western countries are losing their position of preeminence. Could TTIP arrest the West's decline and help Europe turn things around? Jose Manuel Barroso, the president of the European Commission, the EU's executive body, has said that TTIP could serve a broader strategic purpose in shifting US focus back towards Europe, opening a new chapter in 21st century Free Trade arrangements.
During the Cold War, the US pressed for the EU to set up a transatlantic free trade zone. Today it is the EU that pursues US engagement in TTIP, covering both trade and investment. This change is in itself a reflection of the evolving strategic considerations of the US and Europe.
In international markets, the EU is confronted by competition from both the US and emerging countries. Its enthusiasm for TTIP shows that the EU is choosing to “dance with the wolves” and maintain the established order - a response to the US strategy of focusing on the Asia-Pacific axis. Politicians naturally expect to gain political capital from TTIP, demonstrating that the EU is not isolated, and that it expects to lead the world again. Barroso’s political bet on TTIP effectively represents his pitch for a term as President of the EU Commission.
The EU's objective is to increase two-way trade and investment between Europe and America and promote employment and economic growth through market access, regulatory coordination, and common standards. Of the three driving forces for economic growth - investment, consumption and exports - the EU can rely only on exports. An all-out effort to promote free trade through the prioritization of TTIP represents the EU’s core strategy to resolve its economic and strategic dilemma. This is exactly what the US wants to see. Having bypassed China, the EU has reached agreements with South Korea and Singapore, and is conducting negotiations with Japan, India, Vietnam, Malaysia, and Indonesia in Asia. In some ways this mirrors the US strategy of returning to Asia.
In addition to reducing tariffs, TTIP negotiations will focus on the key issues that include market access and regulatory rules, non-tariff barriers, and market rules. Agreements between the US and Europe on technical standards will have a significant impact on the world economy, as they will in effect become new international standards. If agreement is reached, TTIP will become the base of new international trade and investment rules, thereby affecting the entire global regulatory process. Together with the Trans-Pacific Partnership Agreement (TPP), the impact on China will be a significant increase in the cost of participation in globalized markets.
Theoretically it is impossible for TPP to exclude China, but because of the narrow economic gap between the US and Europe, TTIP will be easier to achieve than TPP. The result will be increased pressure on China, and China will once again face remodeled western rivals. The challenge for China’s strategic wisdom will be whether it seeks to resolve the issue through focus on the EU, on FTA, or on its economic relationships with the BRICS.
Author: Wang Yiwei, Senior Research Fellow of the Chahar Institute, Professor of Centre for European Studies, Renmin University of China
Read the Chinese version: “经济版北约”能否重塑西方
, source: People's Daily Overseas Edition, author: Wang Yiwei
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