The Transatlantic Trade and Investment Partnership is about much more than reducing border barriers. In fact, the largest economic gains from a prospective deal are expected to come from “coherence” or “harmonization” of regulations and regulatory processes. Think about the added savings that could be passed on in the form of lower prices, higher R&D expenditures, and more investment if producers didn’t have to comply with two (or more) different sets of regulations implemented to achieve the same health, safety, or environmental outcomes. Regulatory coherence is not a race to the regulatory bottom (as the European Left likes to say) or global government enshrining the growth-strangling regulations preferred by Europeans (as the American Right likes to say). It is, in theory, smarter regulation.

In his Cato Online Forum essay (submitted in conjunction with last week’s Cato TTIP conference), international law professor Alberto Alemanno gets into some of the details of this important part of the negotiations. While he applauds the prospect of regulatory discussions yielding greater awareness of the extraterritorial impact of regulations, and hence opening the door to best practices and restraint, he also worries that the agreement will inevitably entail some limitations on regulatory autonomy.

Harvard University Center for European Studies fellow John Gillingham doesn’t exactly make the case that the European Union is worth saving, but he argues in his Cato Online Forum essay that a successful Transatlantic Trade and Investment Partnership agreement is essential to its survival. Among last week’s Cato conference participants, Dr. Gillingham was perhaps the most skeptical that the EU would be able to get its act together and achieve success, arguing that TTIP’s fate will hinge less on the deal’s specifics and more on the politics of the EU, which are poisonous.

Put quite simply, the adoption of TTIP, as it is presently conceived by the negotiating parties, would put the EU back onto a course of liberalization, from which it swerved in the mid-1990’s, and thereby bring it abreast of the concurrent globalization process being driven by China and the United States. Within Europe, the Single Market, something only half-complete, would become a reality. State interventionism would be sharply reduced and international competitiveness restored. Will this happen?

To help answer that question, check out the collection of essays from Cato’s TTIP conference participants.

David Nakamura of the Washington Post recently described the Trans Pacific Partnership (TPP) as an “expansive free trade and regulatory deal.” That’s a good way of putting it. There will be plenty to say on the regulatory side, particularly after the text of the agreement is released, and the two aspects will have to be weighed and balanced somehow, but for now let me emphasize some of the free trade side. USDA just released some explanations of the liberalization, related to 20 or so agricultural products, that the TPP partners will promise to grant to each other. Here are some randomly selected highlights:

• “Under the TPP agreement, Vietnam will eliminate tariffs on all potatoes and potato products, currently as high as 34 percent, within six years. It will eliminate the 13-percent tariff on frozen French fries in four years.”
• “The United States’ tariffs on peanuts and peanut products, currently as high as 163.8 percent, will be eliminated within 10 years.”
• “Malaysia’s duties for wine, ranging from 7–108.50 Ringgits (approximately $2.08-$25.58) per liter will be eliminated in 16 years. For beer, Malaysia’s duties at 5 Ringgits (approximately $1.18) per liter will be eliminated in 16 years.”
• “Japan’s tariffs on carrot juice, tomato paste, and tomato juice, currently ranging from 7.2–29.8 percent, will be eliminated in six years.”

Again, I don’t know yet how to weigh and balance everything in the TPP. But looked at on its own, the trade liberalization aspect of it could be pretty good (although a little slow to take effect in some cases).

Swedish economist Fredrik Erixon, an authority on international trade policy, who heads up the Brussels-based think tank known as ECIPE (the European Centre for International Political Economy), was a big contributor to the discussions held this week in conjunction with Cato’s TTIP conference. Among many other trade topics, Fredrik has written extensively on TTIP, the WTO, and how the former may impact the latter.

In his conference essay, Erixon agrees with alarmed, “pure” multilateralists that the TTIP will supplant the WTO as “the organising entity of future trade policy,” but explains why that is not necessarily a bad thing. While he dismisses fears that the United States and European Union may be turning toward an arrangement that excludes the rest of the world, and explains how they will “leverage TTIP for global trade liberalisation,” Fredrik does worry that TTIP — if it “succeeds” in the area of regulatory harmonization — will result in the export of failed regulatory policies to the rest of the world.

His concluding remarks on that topic: 

Currently, the differences between EU and U.S. regulations and regulatory approaches are far too wide for the TTIP to be a realistic candidate for setting the global rules in this area. But TTIP will likely push trade agreements further in the direction of prescriptive regulatory conditionality, making it harder for trade agreements in the future to advance global commercial freedom through deregulation and simple, transparent rules.

Read Erixon’s essay here; see him discuss the issues during this conference session; see all the conference essays here.

In a pitch clearly aimed at Republicans, the Obama Administration has begun advertising that the Trans-Pacific Partnership includes 18,000 tax cuts. This is welcome rhetoric—tariffs are taxes and taxes are bad. Lowering tariffs is the core function of trade agreements, and the positive impact of the TPP will depend in large measure on how deeply and quickly it eliminates these artificial barriers to trade. 

But they’re actually praising the wrong tax cuts. 

The administration’s new “guide” to the TPP notes that the agreement “will cut over 18,000 taxes that other countries impose on American exports,” and claims this is good because it’s “18,000 ways TPP helps American workers, farmers, and businesses win.” 

There’s nothing wrong with touting the elimination of 18,000 foreign tariffs. It will help U.S. exporters who want to sell more cherries in Vietnam, and it will help foreign consumers, who will benefit from lower prices and greater variety. 

By limiting the number to 18,000 however, the president gave up a genuine opportunity to advocate free trade, choosing instead to rely on mercantilist rhetoric about level playing fields and winning. 

In addition to cutting 18,000 foreign tariffs, the TPP will also eliminate thousands of U.S. tariffs on goods from TPP countries. Those tariffs are taxes that the U.S. government imposes directly on American consumers and businesses who buy imported products. The losers from American protectionism are a much larger group than the winners from increased access to foreign markets.

It’s a shame, but not surprising, that the President didn’t include U.S. tariffs in his list of TPP tax cuts. Lauding the elimination of thousands of U.S. tariffs would require the administration to admit that American protectionism exists and that it harms the U.S. economy. Unwilling to recognize the true benefits of free trade, the President is forced to sell the TPP to the American public by talking about how good it is for business.

One of the best presentations at the Cato TTIP conference on Monday was given by Michelle Egan, a professor at the American University’s School of International Service. Professor Egan managed to explain (in about 15 minutes) one of the most complex and possibly intractable subjects under negotiation in the Transatlantic trade talks: Standards-related trade barriers.

A major objective of the TTIP (as well as the TPP and other modern trade agreements) is to reduce “non-tariff barriers” (NTBs) of which so-called “technical barriers to trade” (TBTs) are an important subset. It turns out that differing product standards, which can act as TBTs, are more common than any other kind of NTB. According to Egan, “Governments, on average, impose TBTs on 30 percent of products. For firms active in international markets, different national requirements from conformity assessment measures can impede access to foreign markets.”

In her essay, Professor Egan describes the problem and offers some sensible ideas for moving forward. She concludes:

The United States and European Union have an opportunity to improve the TBT regime through TTIP. In conjunction with trade association, government regulators, and international standards forums, negotiators should focus on how to achieve equivalency. TTIP affords the United States and Europe the opportunity to assert global leadership in setting rules for market access. This can happen only if both sides stop arguing over whose regime is better. 

If the TTIP negotiators fail, other trade and regulatory architecture, authored and agreed in other parts of the world, could emerge to fill the void, putting U.S. and EU producers on the outside looking in.

Other essays related to the conference can be found here.

By all accounts (well, at least those conveyed to me), this week’s TTIP conference at the Cato Institute was a resounding success. It featured a diversity of excellent speakers from across the political, ideological, geographic, and professional spectra, and it covered a broad swath of economic, political, geopolitical, and technical issues. Though opinions varied over the numerous substantive issues discussed by the conferees, there was fairly strong agreement that TTIP (at least the TTIP envisioned at the outset of the negotiations) will require an enormous amount of effort, political will, and flexibility to deviate from script to have any chance of coming to fruition.

As if the road to success weren’t daunting enough, many observers worry that success, if not too elusive, might be too costly. That is, as a large exclusive club, TTIP would hasten the demise of the World Trade Organization and the multilateral trading rules under its auspices, and that it would put third countries–especially developing ones–at disadvantages that reduce their economic prospects.

One of the panel discussions was devoted to consideration of the impact of TTIP on the multilateral trading system, including the impact on developing countries. Two of the speakers in that session were former WTO heavyweights: Joakim Reiter (former Swedish Ambassador to the WTO) and Harsha Singh (former Deputy Director General of the WTO), who are now, respectively, Deputy Secretary-General of the United Nations Conference on Trade and Development and Senior Associate at the International Centre for Trade and Sustainable Development. In their conference essays, each explains how a successful TTIP can be formulated to ensure that it doesn’t subvert the WTO or hurt developing countries. 

Harsha’s essay is TTIP: A Bridge or Gulf for Multilateralizing Plurilaterals.

Joakim’s essay is The Effects of TTIP on Developing Countries.

All of the essays published in conjunction with the conference can be found here.