The EU-US trade accounts for 45% of global GDP and one third of world trade, according to the European Commission. It is estimated that the US has invested in the EU 3 times as much as in Asia. The EU investment in the US is 8 times higher than its total investment in China and India. It is predicted that the Transatlantic Trade and Investment Partnership (TTIP) between the EU and US, negotiated since 2013, will increase EU GDP by €120 billion and US GDP by €95 billion a year. German foundation Bertelsmann Stiftung reports that the deal will mainly boost European economies which already have strong ties with the US such as Great Britain (a 9.78% increase of GDP per capita), Ireland (6.93%), Italy (4.92%) and Germany (4.68%). Central European economies will benefit less: Poland’s GDP per capita will increase by 3.73%, followed by Slovenia (3.31%), Austria (2.71%) and the Czech Republic (2.58%). As a result, these countries are more inclined to criticize the TTIP, as is the case with Poland.
Prof. Leokadia Oręziak of the Warsaw School of Economics (SGH) draws attention to the fact that it will not be a regular free trade deal. In a typical case, tariff barriers are either reduced or completely abolished. Average customs charges between the EU and US are already lower than 2% so they are no longer an obstacle. The main aim of the TTIP is to lift non-tariff trade barriers such as ecological, sanitary, food safety and toxic substance use regulations as well as technical requirements for products. It is massive trade liberalization which will result in an increase of US import to the EU at the expense of local production, consumers and the environment, Oręziak says. Many European companies will not endure intense competition with American corporates. Others will be trying to compensate losses by reducing wages or moving their operations to lower-wage regions, which in addition will be pushing down the wages across the EU. In order to compete effectively with American production, European countries might have to drastically cut social spending and restrict employee rights, she concludes.
Maciej Wojtalik of the Institute of Global Responsibility (IGO) believes that the EU-US free trade deal can do more harm than good. In his opinion, it will benefit better developed economies but harm weaker ones like Poland. There is a risk that the European market will be flooded with cheaper American food products, which can push local farmers out of business as they have to conform to higher food quality standards. On the other hand, the deal can increase the number of jobs in Poland: increased export can boost a demand for Polish semi-finished products. However, more research needs to be done to assess the possible impact. Wojtalik also points out that a better flow of products will benefit consumers, but at the same time it can push developing countries deeper into poverty.
Maria Świetlik, another IGO representative, criticizes the investor-state dispute settlement (ISDS), lobbied by international corporations. In her opinion, this arbitration procedure has 2 significant limitations. First, it works only in one direction: only international investors can sue a state. Second, it leaves room for groundless financial claims. For example, a company can seek compensation just by claiming that new regulations threaten its expected profits. It does not need to prove that it has actually lost some investment. It is enough to say that it expected to earn some vague profits, Świetlik explains.
Bogusław Liberadzki, Member of the European Parliament (MEP), thinks that once the TTIP is signed, the higher competitiveness of the US will hinder the economic growth of the EU. The US has a competitive advantage because it has its own energy resources, which reduces energy costs. Liberadzki also claims that the agreement will serve the interests of international corporates. Small and medium-sized enterprises (SMEs) will not be capable of mass-production. However, he admits that there will be more business opportunities in a bigger economic area.
Bolesław Piecha, another MEP, observes that the Polish energy-intensive and chemical industries are especially vulnerable. The chemical industry – the fertilizer industry in particular – are well-developed. However, large differences between the EU and US energy prices can make it uncompetitive. Piecha proposes a solution: to include a list of industries which need protection in the agreement. Finally, he mentions one positive aspect of the deal: new export opportunities for Poland. Once the barriers that protect the US market are lifted, Polish producers of generic drugs, cosmetics and tobacco will be able to export their products .
Jacek Brzozowski, an expert of the Employers of Poland, warns that the Polish sector of SMEs might not be able to ‘consume the potential of the US market’, and might be harmed by the expansion of American companies. He also highlights a controversy over public procurement procedures in the US. Although the Buy American Act has been criticized for imposing preference for American distributors both at the federal and state level, no commitments have been made to withdraw it. The federal government also cannot assure that European suppliers will be treated on equal terms in the US public procurement market because each state has some legal autonomy.
References: [1] Bartłomiej Telejko, Forbes / [2] Lidia Raś, Gazeta Prawna / [3] newseria/mm, Forbes / [4] Newseria Biznes via Interia Biznes / [5] PolskieRadio.pl / [6] Office of Public Communication, Poland’s Ministry of Treasury