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CBI: Why the UK needs TTIP

Even though it is home to many of the world’s leading exporters, the UK as a whole is underperforming when it comes to external trade, particularly amongst small and medium-sized businesses, writes Sean McGuire. The UK’s trade to GDP ratio was 61.6% in 2013, significantly below that of Germany (94.9%) and now also below countries like Canada and South Africa.

The UK’s reputation as a top trader is at risk. And with strong economic headwinds in Europe – responsible for more than half of British exports – there is no more important time to make sure the EU is doing its bit to help boost UK trade. EU free trade agreements can make a real difference to British exporters.

They help tackle the pre-eminent barriers that companies are confronted with. They make it easier for business to get their products into overseas markets. They not only eliminate border barriers like import duties, but they can also tackle more complex ‘behind-the-border’ trade barriers like additional regulatory requirements. All in all, they can be the difference between whether it is worthwhile for a CEO to target an overseas market or not. Ultimately, they bring jobs and growth to the economy. This is why TTIP – a particularly important EU free trade deal – is an entirely sensible initiative.

Without TTIP, the UK is at a systematic disadvantage to the likes of Canada, Australia and South Korea, all of which have FTAs already signed and in force with the United States. And if the Trans-Pacific Partnership is finalised as predicted later this year, the competitive situation for the UK will get even worse. We simply cannot afford to stand back whilst other countries steal a march and negotiate free trade deals with the US without negotiating one of our own.

So what will TTIP mean in practical terms? First, there will be new opportunities for small and mid-sized companies to export. These firms are hit hardest by trade barriers given they often do not have the time, budget or in-house legal expertise to counter trade roadblocks. Cost savings achieved from eradicating duplicate testing procedures would be a real game-changer for small-scale exporters. Measures to reduce customs bureaucracy would help small companies to ship their products more quickly with less form-filling, saving precious time and money that can be better utilised elsewhere. TTIP is not just for manufacturers – the services economy stands to gain too.

TTIP should level the playing field in sectors like air and maritime transport, telecoms and reinsurance, dealing with some of the long-standing restrictions that still exist in the US market. TTIP can make it easier for UK business personnel to temporarily move to and from the States, helping British engineering and consultancy companies to deliver contracts for US clients. And with UK firms already exporting nearly £50 billion of services to the US in 2013, there is a strong platform from which TTIP can support the next generation of exciting UK services companies wanting to succeed in the US.

Consumers will also benefit. Every time something made in the US is bought in the UK, it is likely more expensive because of import duties. On average, these import duties are 5.2% for goods imported to the UK from the US. For goods like cars and jeans, they are higher at 10% and 12% respectively. Some of this tax is inevitably passed on to the consumer. Eliminating import duties would increase competition in the market, putting downward pressure on the prices that consumers pay in the UK. What’s more, tariff elimination would help British exporters to increase their sales in the US, particularly in industries like ceramics and food production where high US import duties of between 20 and 30% often apply. These are just some of the benefits.

Unfortunately, these have too often been lost in the public debate. While public concerns over any deal need to be addressed, the debate must be guided by facts. There has been too much myth-making in recent months and a more balanced perspective is needed, particularly on issues like the NHS and Investor-State Dispute Settlement (ISDS) – two of the main factors to opposition in the UK.

Firstly, the future of the NHS is not under threat in this deal. The European Commission has been very clear that public services are fully protected, as has been the case in previous trade deals. Decisions on the future of healthcare delivery in the UK will continue to lie solely with the UK government. As for ISDS, this is critical to upholding basic rules on investor protection throughout the world. EU countries are currently party to 1,400 investment treaties with ISDS provisions, and without ISDS, there is no way of effectively providing adequate protection to foreign investors. A model ISDS in TTIP, including some reforms to further clarify the right of states to regulate in the public interest, would help set a precedent for EU investment negotiations with other strategic trading partners like China.

Over the last 20 years, a large part of the EU Single Market’s success has been its ability to break down cross-border regulation barriers in Europe. We must now use the EU as a launch-pad to break down those remaining barriers to trade not only with the US but beyond, to Japan, India and elsewhere. Negotiations will remain tough – as they should be – but it is in everybody’s interests to get TTIP concluded as soon as possible for the long-term benefit of both the EU and US economies. The rewards for all of our citizens will be well worth the hard graft.

Sean McGuire is the CBI (Confederation of British Industry) Brussels Director

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