As we consider new trade accords with our biggest commercial partners, Europe calls out for attention. Indeed, the European Union is by far America's largest commercial partner.
Together, the United States and the European Union account for nearly half of global economic output, with each producing approximately $17 trillion in GDP. Total U.S.-EU commerce--including trade in goods and services and sales by foreign affiliates--tops $6.5 trillion annually and employs 15 million Americans and Europeans.
The U.S.-EU investment relationship is even more impressive. Companies headquartered in EU Member States had invested nearly $1.7 trillion in the United States by the end of 2013 and directly employ more than 3.5 million Americans. Similarly, U.S. firms have invested $2.4 trillion in the EU--a sum representing more than half of all U.S. investment abroad. It's also nearly 40 times as much as U.S. companies have invested in China. Because of this unique investment-based relationship, approximately 40% of U.S.-EU trade is intra-industry and intra-firm, which means that removing barriers to this trade will substantially boost the competitiveness of our companies in global markets.
The United States and the Member States of the EU share common values as strong democracies with an enduring commitment to civil liberties and the rule of law. We uphold similar social, labor and environmental standards in our laws and regulations.
For these reasons and more, the United States and the EU in July 2013 launched the TTIP negotiations. The goal is to eliminate tariffs; open up services, investment and procurement; and promote regulatory cooperation to ensure high levels of health, safety and environmental protection while cutting unnecessary costs.
The benefits could be immense. The sheer volume of transatlantic commerce is so large that eliminating today's relatively modest trade barriers could bring big benefits. According to the London-based Centre for Economic Policy Research (CEPR), the TTIP would boost U.S. exports to the EU by $300 billion annually, add $125 billion to U.S. GDP each year and increase the purchasing power of the typical American family by nearly $900--with similar benefits for Europeans.
One key goal in the negotiations is to tackle regulatory barriers to trade. Companies selling their products on both sides of the Atlantic incur high costs complying with both U.S. and European regulations, even when they are very similar.
For example, U.S. automakers run crash tests to comply with U.S. safety regulations but must do so a second time to comply with EU standards--and vice versa. Mutual recognition of these regulations would save consumers up to 7% on each car or truck and enhance the global competitiveness of U.S. and European companies.
TTIP also is an opportunity to raise global standards. With a combined GDP of more than $30 trillion, the sheer size of the transatlantic economy will incentivize other countries to look to standards set in the TTIP. Accordingly, the United States and the EU should establish a high bar in such areas as cultivating the digital economy and combating trade and investment protectionism.
Indeed, refusing to pursue this agreement would exact a price as other countries enter into new trade pacts with the EU. Already, the EU has dozens of FTAs in force with such countries as Mexico, Central America, Colombia, South Africa and South Korea. It has concluded negotiations for additional agreements with Canada, Singapore, Ukraine and others.
The EU is currently in negotiations with India, Japan, Malaysia, Thailand, Vietnam and the Mercosur bloc. Without a trade agreement in place with the EU, U.S. workers and companies could be put at a disadvantage in the giant European marketplace.
Finally, the TTIP would not benefit the United States and the EU at the expense of other nations. In fact, liberalizing transatlantic trade would increase GDP in the rest of the world by as much as $130 billion, according to a CEPR study.
The principal rationale for FTAs is to unleash new flows of mutually beneficial trade between Americans and the citizens of our partner nations--and do so in a way that is fundamentally fair. With regard to the TTIP, the potential benefits are truly significant.