At the beginning of his term as US Secretary of State, John Kerry wanted to emphasize the shift in the way international relations were being done stating that in today's global world, the international work needs to start at home. The economy, trade and new stakeholders, including public opinion, have gained weight in today's political world with work that needs to be done by the State itself first, in order to have an impact abroad. Each country has to work hard on the national level, in order to grow on the international.
In this sense, the Transatlantic Trade and Investment Partnership agreement (TTIP) between the United States and the European Union is a fundamental agreement. It is, and will continue to be, a reference point for negotiations and the way international politics are conducted in the coming years.
An agreement which started just over a year ago amid great enthusiasm has seen that enthusiasm decline recently due to increasingly critical public opinion. However, before the last round of negotiations, we are aware of the considerable impact this agreement can have on all areas of global relationships, in addition to its strong economic and commercial implications. Along these lines, my goal is to try to clear up some of the doubts that have been raised about TTIP and to highlight its benefits.
TTIP has as a main objective to favour the development of SMEs and their activities, as they are the most affected by tariff and nontariff barriers
We are faced with the opportunity to stimulate economic growth and job creation at a time when we have seen the necessary conditions to reach an agreement that also will build on the benefits of the welfare state and remedy some of its flaws. We are talking about creating the largest free trade area in the world, worth around 800 billion euro, between the two main democratic blocks and free markets; this market comprises over 800 million people who we are trying to involve in the negotiations as far as possible.
Transparency is fundamental to the spirit of the TTIP negotiations faced with a critical public. However, any negotiation is like a card game where you can talk about your hand, but don't show it until the end of the game. Information on the progress of the talks can be found on the websites of both blocs and each round of negotiations was properly documented. A number of stakeholder consultation groups have been set up. In the case of the European Union, these consultations have raised the possibility of a public enquiry on the more contentious issues.
One of the issues that has attracted criticism from civil society and some Member States is the Investor-State Dispute Settlement (ISDS) instrument. In this case, the European Commission launched a public consultation in March of this year, which closed on July 14 and which is currently being analysed. Critics of this system argue that ISDS would result in the loss of credibility for the legal system and fear of big business. This in turn, could put more pressure on the future decision to the detriment of small and medium-sized enterprises (SMEs). However, ISDS is an instrument that has been used successfully for years and is embodied in many trade agreements.
In fact, the recent agreement between the EU and Canada includes the section on ISDS that intended to set the tone for the EU's position in future agreements, such as the one with the United States. Indeed, this arbitration system can only be used if it does not conflict with judicial proceedings and meets the requirements that the states involved in the negotiation establish for its application. Furthermore, arbitration offers a more economical solution for SMEs in comparison to those very expensive legal systems with which they could not cope.
TTIP has as a main objective to favour the development of SMEs and their activities, as they are the most affected by tariff and non-tariff barriers. While large companies have the ability to relocate, small and medium-sized enterprises cannot and so they must cope with higher costs of trade. Moreover, with TTIP, SMEs will have easier access to funding and investment sources available in the EU and the US and the bureaucracy will be made easier for them to deal with.
For this reason, the Transatlantic agreement aims to bring about regulatory harmonisation, facilitate trade, remove barriers and encourage competitiveness increasing the variety of choice for consumers. Increasing competition would stimulate innovation and reduce prices, which in turn would lead to better and more efficient allocation of resources.
In this regulatory section of the agreement, one of the greatest fears is that TTIP will reduce the degree of protection in sensitive areas such as the environment. However, nothing could be further from the spirit of this agreement between two regions with the highest safety and protection standards on the planet. The goal is to work towards the best standards, which may be compatible with existing ones, by learning the advantages and disadvantages that each region has to offer. Examples of this can be taken from two important sectors - automotive and pharmaceutical - who have a long list of standards and requirements and who decided to collaborate in the negotiations from the beginning to achieve the best balance between the interests of consumers and industry. These standards will become a point of reference worldwide.
Another key sector for the development of the United States and the EU is the energy sector, especially given the current geostrategic situation. The EU still has a long way to go in creating a Single Energy Market, which is one of the main objectives in this Commission's mandate. However, a part of its success lies in improving trade flows of energy with our American partner. To achieve this, the EU hopes that the United States will ensure compliance with the WTO rules on free trade once TTIP enters into force, especially since its energy is a heavily protected subject on matters of national security since 1938. The US Ambassador to the EU confirmed to the European Parliament the commitment of his country to enforce such legislation in September. With that, TTIP would help the EU to secure and diversify its energy sources in a geopolitical framework of stability.
The European Union is aware of the importance of ensuring its economic development in order to maintain its social welfare state, a system which is going through one of the most difficult times in its history. Therefore, the two major challenges for the next five years are to achieve economic recovery and job creation, and to become both sustainable and sustained. In this sense, TTIP should lead to an estimated annual GDP growth of around 0.5% and create over 750,000 new jobs. The cost of not signing TTIP would be too high and would not be limited only to the economic sphere. Politically we would lose the opportunity to continue to be the world's leading trading power. We would also lose the ability to influence the establishment of international standards. A separate debate would be whether we know how to take advantage of the quality of our commercial power.
From the European Parliament, we will encourage the progress of these negotiations, aware of the role the EU plays in them at all levels. We will try to ensure the highest possible level of transparency and representation of the interests of the whole European society.