Europe Needs the TTIP
When a region is faced with a long-term demographic decline that reduces growth in its domestic markets, it has little choice but to reinforce and expand its access to export markets that provide an opportunity to offset the decline in its domestic market potential. Furthermore, when this region has seen its power and influence over the global economy continuously be eroded by its historical rivals for global economic power as well as by emerging challengers, this region must do what it can to retain its remaining influence before it is too late.
The region in question, is, rather obviously, Europe, and most of the leaders of the European Union are aware of the challenges facing their region and have championed a trade deal with their younger and (sometimes) more dynamic overseas partner (and rival) the United States. This deal, the Trans-Atlantic Trade and Investment Partnership (TTIP) is designed to further enhance access to the growing US market for European exporters, while ensuring that both the US and the EU maintain their current levels of influence and control over the global economy at a time when emerging market rivals are gaining in strength and influence.
Unfortunately for the increasingly export-dependent European Union, many of its voters do not view the TTIP as favorably as their political and business leaders, and support for this trade deal has been falling in most EU member states. In fact, the lowest levels of support for the TTIP in Europe can be found in highly export-dependent countries such as Germany and Austria, while support in countries such as France and Italy has fallen in recent months, despite the poor outlook for both countries’ economic futures.
On the other side of the Atlantic, protectionist sentiment is also rising in the United States, with many political and business leaders rejecting the idea of making any concessions to a trade partner that they view as being in terminal decline. With trade deals being a key focal point of the upcoming elections in the United States, and with Germany, France and a host of other EU member states preparing for national elections over the next 12 months, it is becoming increasingly unlikely that the TTIP trade deal will be approved at any point in the near future.
While the United States would likely only derive small benefits from this trade deal, the European Union stands to gain significantly more. This is due to the fact that most European domestic markets will record very low levels of growth in the years ahead, with purchasing power levels falling increasingly behind those of most other developed economies. As such, improved access to the faster-growing US and Canadian markets (through the equally criticized CETA trade deal with Canada) would allow for European exporters to strengthen their longer-term growth prospects.
As we have seen over the past decade, European countries and individual companies that have relied upon their domestic markets, or upon other export markets within the European Union, for the bulk of their sales have struggled as Europe’s economy has stagnated. In contrast, countries such as Germany and Sweden that have been able to export products outside of Europe have performed significantly better thanks to the higher rates of growth achieved in emerging markets in Asia as well as in “New World” developed economies. This should be a clear signal to European voters that the region desperately needs to strengthen its export competitiveness, and access to export markets is a key component of this.
Europe’s economic future is being severely threatened by the rise of protectionism and isolationism, both within Europe and among many of its key trade and investment partners. As Europe’s demographic decline continues and domestic demand levels stagnate or fall, most European countries will become ever-more dependent upon exports to generate economic growth.
Should the TTIP (and the CETA) trade deal collapse, the United States, Europe’s leading export market, will continue to focus more of its trade and investment activities on Asia, to the detriment of all European economies. Such a development would accelerate Europe’s loss of power and influence over the global economy and leave the region increasingly marginalized, much as it is in terms of global political and security issues today. Worse, the already low growth potentials for most European economies will continue to decline, with the region’s economic outlook resembling more and more the situation that has befallen Japan over the past 25 years. As a result, Europe needs to overcome the resistance of many of its voters and sign the TTIP trade deal with the United States before this opportunity disappears.