PKF attends to a presentation of TTIP benefits

At a packed hall hosted at the Chamber of Commerce the subject of the Transatlantic Trade and Investment Partnership (TTIP) was discussed by various speakers including three MEPs. PKF was represented on the panel and spoke on the merits of TTIP if this finally incorporated the financial services sector. Readers may ask, what is TTIP? The answer is that this is a trade and investment treaty that is being negotiated between the EU and the US at present. The TTIP emerged from a summit in November 2011 where the US and EU officials set up a High-Level Working Group (HLWG) in an attempt to enhance the transatlantic economic partnership.  

These two economies make up almost half of the global Gross Domestic Product and nearly a third of the world trade and the main targets behind this partnership are to boost the trade and investment between the two by cutting on tariffs, harmonizing standards and regulations where needed, and eliminating them when not needed, increasing access to public procurement by foreign sources and increasing and improving the protection for overseas investors and also a dispute system to resolve any investment issues between the two. This agreement is thus very important for Malta and will open more opportunities for trade. 

One of the goals of this treaty is to remove custom duties (already low) to make trade in goods cheaper. Custom duties between the EU and the US vary widely, basic goods duties range from 1% to 3% and 30% for goods such as clothing and shoes. The US-Malta trade amounts to around €300 million per year. Malta relies heavily on its imports and has a very open economy, thus it stands to gain with more free trade partners. Malta will have a wider choice of goods and commodities to choose for importation and thus can import at lower cost and also offering a vaster selection. The cheaper cost of the imports will lead to lower customer prices and therefore this is very beneficial to the Maltese economy.

Malta relies heavily on foreign direct investment. TTIP shall offer very good opportunities for Malta in this area. The US businesses employ over 2,000 people in Malta, excluding the ones who work in franchises. These businesses manufacture products which need vast technical capability, thus efficiency and fewer barriers to trade will be an advantage. 

TTIP will increase commercial activities between Malta and the US for large and small businesses as well as paving the way for the harmonisation of regulation, that is rather than having two separate approval processes due to different regulations. This is particularly important for new pharmaceutical products as it will reduce the costs of developing new products. Consumers will also have a wider selection to choose from at lower prices. This is also important for innovation, as regulations will be set up in a manner that will encourage the EU and US to work closer together, swap information and also consult each other. 

‘Mobility of services’ is another beneficial point for Malta. The TTIP agreement will make qualifications related to professional services, such as engineers or architects, recognizable on both sides of the Atlantic and therefore we shall have more mobility of labour. Readers may ask how can the plethora of small firms in EU ever manage to export direct to US? The answer is approximately 600 thousand European SMES export outside the EU annually which represents a third of the volume of EU exports, in the case of Malta, the share is even bigger as SMEs make up for 50% of the Maltese international trade. 

The removal of the custom duties, which is the main obstacle for these small companies to export to the US, and ease of custom procedures will very much benefit these small companies. This will remove the costs in a vast range of sectors where the SMEs operate, such as textiles and ceramics. A free online helpdesk where smaller firms can find all the information they need to export, import or invest from the US will be available. The negotiations from the two shall lead to economic growth and job creation in Europe. The EU is constantly on the lookout as to how to help the small businesses strengthen the cooperation between them in order to have access to finance. The TTIP agreement will also set up a committee to coordinate the community of small businesses and also express their main priorities and matters to EU and US trade authorities.

The benefits go both ways. Chief US negotiator Mullaney described small businesses in the US as “engines of growth, job creation and innovation” and further claimed that this is the case for the European SMEs. One disadvantage that this can have on our economy is related to agriculture. The Farmer’s Market, Friends of Earth Malta and Front Against TTIP have stated their worries in a press conference earlier on this year. US agri-businesses have been lobbying to eliminate ‘trade restrictions’ from European farming policies through the TTIP.  This agreement shall have a high impact in the manner of which foods and goods are produced, traded and regulated. This will clearly lead to more competition, which has already affected the Maltese farmers when Malta entered the EU. US products are cheaper than EU products because they require fewer criterions for production and therefore this agreement will put the local and EU producers at a major disadvantage as more imports from the US will be brought to the EU. 

This may lead to the EU taking the same standards as the US on practices such as animal farming which are currently banned in the EU, such as growth-promoting hormones in dairy so as to reduce the costs and become more competitive. Another concern in this area is the Genetically Modified Organisms (GMOs) which are controlled in the EU, however the US agribusiness are lobbying for the imports of and productions of products including GM such as soya, in Europe which raises issues over human health and also farmers’ rights. The US have disagreed on these bans, saying that they are ‘unscientific’. The Malta Organic Agricultural Movement have expressed that the GMOs cannot be on the Maltese fields and will ruin our beautiful natural landscapes which are looked after by our local farmers. 

Another major concern of this is the Investment State Dispute Settlement (ISDS), which is a private arbitration system. The socialists and democrats want this to be a public arbitration system and is a concern among the Maltese MEPs. ISDS allows the investors to take proceedings against foreign governments that are party to the treaty. The major worry is that ISDS provision may influence government’s ability to establish public policy as they may have concerns that businesses might sue them. 

Privatisation of public services is one of the worries. A correct balance needs to be met between defending the investors and the host nation’s right to determine and regulate policy which would reduce the concerns in this area. 

In conclusion, in the opinion of the PKF delegate projections regarding the future impact of the TTIP showed that this agreement could bring 0.5% annual growth in the EU and also create 1.3 million European jobs within the next ten years. TTIP may succeed to reduce bureaucracy and improve the harmonic standards and regulations while Maltese consumer shall benefit from more choice and better value across a large number of sectors. 

TTIP – as was the case with NAFTA, GATT and WTO – will help bring long-term economic growth and more jobs and a stronger partnership between the EU and US. It has also come at a very right time as competition from other continents is proving to be a potential threat. The TTIP rules should be ones that other countries may want to follow as it shall be based on transparency, clear rules and one that benefits the citizens of the EU, US and other countries as well.

The writer is a Senior Economist with PKF Malta an audit and business advisory firm