What’s a T-TIP?

“The T-TIP is intended to be an ambitious and comprehensive trade agreement that significantly expands trade and investment between the United States and the EU, increases economic growth, jobs, and international competitiveness, and addresses global issues of common concern,” according to the Office of the United States Trade Representative.

In a Steel Orbis webinar last week, trade attorneys Craig Lewis and Warren Maruyama, from Hogan Lovells, explained the T-TIP agreement. There are few barriers to US-EU trade so T-TIP focuses mainly on regulatory issues and obstacles that drive up costs or keep EU and US products out of each other’s market

Two kinds of disciplines are being discussed. The first is horizontal and focuses on process: rulemaking, cost benefit analysis, independent review by separate agency to draft regulations, as well as talks between regulators before regulations are enforced.

The most controversial discipline, said Maruyama, is ironing out the differences between how the EU and US regulate certain sectors, like auto parts, pharmaceutical, medical equipment, etc. The EU has received major public backlash over provisions regarding investor-state arbitration, genetically modified food and cross border data flows. The U.S. refuses to discuss financial regulation because Treasury sees it as a way of unraveling the Dodd-Frank bill.

T-TPP has not gained momentum over the last several because the U.S. priority has been TPP. If and when this agreement is completed, it will be by the next administration and be a “major, major free trade agreement” said Maruyama.

In regards to the steel industry, many of the issues in T-TIP echo the concerns of TPP, such as the strength and effectiveness of US trade remedy laws. In particular, is the issue of evasion and customs fraud which is actively being considered in a separate customs bill. Regulatory convergence and mutual recognition is a regulatory area that concerns US steel exporters facing inconsistent and conflicting requirements across different EU countries. T-TIP also includes traditional issues of labor and environment.

State-owned enterprises that cause trade distortions has been a controversial issue in TPP and T-TIP. Both the U.S. and EU have their own versions of state-owned enterprises and a complete ban is not desirable for either party. In the U.S., think Tennessee Valley Authority, Amtrak, Fannie Mae and Freddie Mac. The U.S. steel industry concern is on subsidies and regulatory preferences for EU steel companies.

Government procurement is intended to ensure that there is more access to government sponsored projects.  The U.S. would like to see this in Europe but is reluctant to weaken “Buy American” requirements for government infrastructure at home.

Currency manipulation is a T-TIP issue, as is rules of origin that are drafted to keep non-membership countries from taking advantage of benefits of T-TIP.

The Atlantic Council report estimates that U.S. steel exporters to the EU face tariffs of about 1.6 percent. Not very high, said Lewis, but still fairly significant. More importantly, and the focus of T-TIP, he said, are the non-tariff issues. The estimate is that they are equivalent to a 6 percent tariff on U.S. exports. The estimate is that a T-TIP agreement could result in a US metals export increase of $24.1 billion by 2027, a 120 percent rise from 2012 levels. The potential benefits from T-Tip can be quite large said Lewis.

T-TIP is going to take more time than was anticipated when it was launched, said Maruyama. At the time, it was thought it could be done on “one tank of gas,” but that proved to be unrealistic. The EU has talked about an “early harvest” where the provisions that are less controversial are put into an initial package and the tougher issues would be sorted later in a separate package. Maruyama said that would also be unrealistic because the second package may never happen.

Negotiations are incredibly complex, said Maruyama, and it is likely to take 3-5 years of discussions. The EU and U.S. have talked about making a fresh start, he said, but the EU must be willing to stand up to constituencies who want things taken out if an agreement is to be completed.