Published on January 26th, 2015 | by Jan SCHMITZ & Martina LODRANT (European Commission) | Credit: Wikimedia0
TTIP – What will be the benefits for SMEs?
A year and a half ago, Presidents Barroso, van Rompuy and Obama launched negotiations for a Transatlantic Trade and Investment Partnership, or TTIP. A deep and comprehensive free trade deal in generic terms, but it is much more than that from political, commercial and social perspectives. We have now held seven formal negotiating rounds, and it is time to re-state the importance of this deal for European businesses and in particular SMEs, the backbone of the European economy accounting for over 99% of all companies and more than two thirds of private sector jobs in the EU.
The overall figures are impressive. The EU and the US trade goods and services worth around 2 billion Euros every day, and together we make up roughly one third of global trade and half of the world GDP. An independent assessment indicates that both sides stand to gain significantly in terms of additional GDP per year (up to 120 billion Euros in the EU, 90 billion Euros in the US) – and equally so does the rest of the world (100 billion Euros). Such opportunity for growth is not to be missed in a time of hesitant economic recovery.
But these macro figures do not tell the whole story. TTIP’s potential to deliver results depends very much on our ability as negotiators to meet the interests of all our stakeholders. That is why we are looking at three distinct areas: market access, regulatory cooperation and trade rules. Our ambition is to make TTIP a trade partnership that widely opens our markets for goods, services and public procurement, that provides a framework for us to cooperate on regulatory issues affecting trade, and that sets high standards across a range of globally significant economic issues.
SMEs stand to benefit significantly from this agenda. There are already over 600.000 good exporting SMEs in the EU, equalling to more than 80% of all exporting firms. They make up for a third of all EU exports and employ more than 6 million workers. We know that many of the SMEs founded by Europeans with a migrant background are particularly strong when it comes to international business. Nevertheless, significant potential still remains for small companies to increase their role in international trade and investment through agreements such as the TTIP. The cost for SMEs to export or invest outside the EU, including the US, may outweigh the gains. Often finding the necessary information about regulatory and other requirements is already enough of a hurdle to stop small firms from selling or investing abroad.
The EU and the US have made it a key joint objective of the TTIP to help SMEs seize the opportunities of the transatlantic market. Provisions across all three pillars of negotiations – market access, regulatory cooperation and rules – matter greatly for small firms eyeing business in the transatlantic marketplace. Elimination of tariffs will boost European small manufacturers’ competitive position in the US market. Sectors mainly populated by SMEs such as textiles, footwear or food and beverages are expected to gain most in this respect because of US tariffs peaks in these areas. Similarly, small services providers, from accounting to IT and engineering, have an interest in greater legal certainty and new market access that the TTIP will deliver.
The efforts in TTIP on the regulatory front with the aim of enhanced transparency and compatibility of regulations are even more important for SMEs than for larger companies. The cost of complying with regulatory requirements doesn’t change with scale and small firms are less likely to find it profitable to adjust their products or obtain additional certifications to be allowed to expand their sales overseas. SMEs in many sectors, including food, pharmaceuticals, chemicals, electrical equipment as well as professional services, currently find themselves in this situation. The more TTIP can thus reduce the divergences in the way EU and US regulate to achieve the same level of health, safety and environmental protection, and eliminate duplicative testing, the better for SMEs in services and manufacturing sectors alike.
Furthermore, and for the first time as far as EU Free Trade Agreements are concerned, the TTIP will feature a dedicated SME chapter aimed at addressing those specific constraints that might otherwise still get in the way of SMEs taking full advantage of the improved TTIP market access. Three components of this chapter are currently being discussed, while further issues of interest to small firms may still be added as we continue our dialogue with the SME community. First, building on a robust record of past EU-US cooperation on SME issues, negotiators are putting in place a mechanism for the two sides to work together and exchange information on best practices to enhance SMEs competitiveness. Second, the chapter aims at committing each side to develop comprehensive, web-based information and resources to help SMEs using the TTIP and understand what they need to do to expand or start transatlantic business. In this context, the Commission’s negotiators are arguing for an online tool that would allow SMEs to retrieve free on-line information about all the necessary requirements for exporting its product to the other party with just a few mouse clicks. Third, the TTIP should have an SME Committee that would engage with the small business community and monitor the implementation of the agreement to make sure that it lives up to the promises for SMEs.
European SMEs have a major role to play in advising the European Commission how TTIP can be brought to a success when it comes to bringing down the trade barriers they face. To this end, two representatives of associations representing SMEs are in the advisory board to the EU chief negotiator. Negotiators also keep regular contact with SME representatives in bilateral meetings, conferences and other public events on SMEs and TTIP, as well as the regular TTIP specific Civil Society Dialogues. Through a common effort involving negotiators and stakeholders on the EU side we can make sure that TTIP is a success for European citizens and businesses of all sizes.
This post is an extract from an article published in issue 3 of UNITEE’s magazine, The New European, entitled “Divercities”. The complete online version can be read for free here.