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Dublin: 18 °C Friday 20 July, 2018

We believe fears about the TTIP are unfounded – we need to break down barriers to business

Much of the focus about the trade deal has been on big business, but little attention has been paid to SMEs and how they would benefit from it.

Mark O’Mahoney Policy Director, Chambers Ireland


There has been a lot of discussion in recent months about what the Transatlantic Trade and Investment Partnership (TTIP) is and what it means for Ireland.

TTIP is a free-trade agreement currently being negotiated between the EU and the US. The agreement has three main strands: improved market access, improved regulatory coherence and improved co-operation when it comes to setting international standards. Should the trade negotiations be successfully concluded, the European economy is predicted to grow by about €119 billion per year.

TTIP represents an unprecedented opportunity for two of the world’s largest economies to cooperate in order to remove barriers to trade and commerce, increase growth, and create jobs across two continents. A transatlantic trade agreement will cut unnecessary red tape and bureaucracy, reduce customs duties, and lower the costs of trade for businesses. This will be of particular benefit to SMEs who often struggle with the burden of the customs bureaucracy and cost of trading internationally.

Breaking down barriers to trade

The core aim of the trade deal, and one strongly supported by the business community, will be to reduce unnecessary costs and delays associated with trading, while maintaining the highest standards of health, safety, and environmental protection regulation.

Although tariffs for European companies exporting to the US are relatively low, non-tariff barriers remain a significant obstacle, particularly for small businesses. SMEs face a range of trade barriers including unnecessarily complex regulations, licensing processes, product labelling requirements and inspection procedures.

As an example, Ireland is home to a large number of pharmaceutical and medical devices companies. Currently, the EU and the US use different criteria when it comes to factory inspections at pharmaceutical and medical devices firms. Neither territory recognises each other’s inspections, meaning any Irish firm wanting to export to the US has to go through an expensive inspection process twice. A trade deal between the EU and US would aim to eradicate these duplicate procedures, making trade more cost and time efficient.

Benefits for Ireland

TTIP is promised to be huge opportunity for Ireland. A report commissioned by the Department for Jobs, Enterprise and Innovation has projected that given the strong existing relationship between the Irish and US markets, Ireland is set to benefit by more than double the European average.

The main sectors predicted to benefit include; pharmaceuticals and chemicals, manufacturing industries, agri-food (notably dairy and processed food) and services. The trade deal is predicted to increase Ireland’s GDP by 1.1%, which would lead to more jobs and an increase in wages.

The trade agreement is also predicted to go a long way to reducing the cost of exporting to Irish businesses and open up US markets to a new cohort of Irish exporters.

SMEs and trade

To date, much of the conversation has focused on how big business will be the only winner if a trade deal is agreed. Little attention has been paid to SMEs and how they will benefit from these negotiations.

Although tariffs are generally low, Irish exporters still pay in excess of $300 million per year in tariffs to the US Treasury. TTIP is expected to provide substantial reductions in tariff barriers, and this will increase trade in both directions. This move should have a particularly positive impact on SMEs, where even low tariffs are a barrier to trade.

In addition, regulatory divergence, such as complex certification procedures and duplicate standards, can be particularly burdensome to smaller firms. Large firms are able to cover the high fixed costs of dealing with regulatory complexities by exporting large volumes. For smaller firms, the regulatory burdens can prevent smaller Irish exporters from expanding into new markets. The agreement will lower fixed exporting costs and eradicate unnecessary administrative red tape, meaning Irish SMEs should feel a significant benefit.

Investment protection

Lastly, one of the more controversial aspects of the trade deal so far has been the proposed inclusion of an Investor State Dispute Settlement (ISDS) mechanism. Opponents of the trade deal have suggested that the inclusion of an ISDS clause will result in large multinationals blocking governments from making decisions in the public interest should there be a risk to an investor’s profits. This is simply not the case.

An ISDS clause does not give corporations the power to change public policy. Every agreement, whether it is a contract or a trade treaty, requires a mechanism to ensure that the terms of the agreement can be enforced. Very simply, ISDS ensures that where a right is given, a remedy is provided. It permits foreign investors to hold states accountable to commitments that were made in their treaties.

Conversely, ISDS also gives states the right to defend and uphold decisions they have made in the public interest. In addition, a lesser known fact, published by the OECD, is that investment protection has to a large degree been sought by SMEs with large multinationals representing only about 8% of the total caseload.

We have the right to question – but also to investigate the facts

Increased coherence and co-operation between the two largest markets in the world presents an enormous economic opportunity for Ireland, with benefits for consumers and businesses alike.

It is right and proper that there is an open and informed public debate about the merits, opportunities and even the potential risks of TTIP. As the negotiations continue, we do have a right to question, but we should not have the right to say no at the outset.

There is an obligation on all of us to investigate the facts. With the tenth round of talks scheduled to take place in Brussels next month, it is vital that people engage with the debate.

Mark O’Mahoney, Director of Policy and Communications, Chambers Ireland.

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About the author:

Mark O’Mahoney  / Policy Director, Chambers Ireland

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