Long gone are the days the American economy by itself producing almost the 50% of the total world economic output immediately following the Second World War. Gone, together with the predominance in the global economic output is the cheap energy prices that sustained the American economy and its new role back in the post war world as the workshop of the world following the British political and economic decline. The United States' share of global economic output standing at around 30% in early 1980s steadily declined in to 20% at the turn of the millennia.
The story is not different for the European economies now forming the largest single market in the world as members of the European Union. 28 member union can only muster as much as the United States' economic output despite the inclusion of new member states during the last decade in to the union. By some estimates, when combined EU-US economic block only produces 37% of the world total economic output. This represents a monumental shift in the world economy where the focus has been shifting towards the Asia-Pacific region and the countries like China are making their presence felt in the world economy.
TTIP As a Response to Global Economic Shift
Transatlantic Trade and Investment Partnership (TTIP) is basically a Free Trade Agreement proposal between the United States and the European Union. Given the ever increasing competition in the world economy, such an initiative is a plausible answer to the ongoing shift of global economic balances. The conventional wisdom behind the free trade agreements lists benefits like better market access, reduction of the inflation rates and multilateral economic growth for the signatories. Even though there were efforts on both sides of the Atlantic since the early 1990s for a free trade agreement, protectionism prevailed in a global economic environment where the aforementioned shift has not yet taken place and the pressure for such a close cooperation between these two economic powers were not felt, at least not as intense as it is being felt today.
The agreement is expect to focus on the issues like removing the obstacles for bilateral investments, enhancing the opportunities for e-commerce, introducing market value compensation for the corporations in cases of expropriation, free movement of business managers and employees that fell short of a general right of free movement and cross border subsidies. The agreement is expected not only to further ease the trade between two important global economic players but also generate millions of jobs that both markets direly need. The agreement is also expected to provide an additional advantage of reducing duplication rules and regulations. Moreover the agreement will inevitably lead to a closer collaboration between the American and the European companies especially with regard to R&D to redefine these two economic power blocks as pioneers in new technologies. The estimate provided by Center for Economic Policy Research in 2013 includes an economic growth prediction of around 100 billion Euros for each economic player.
Implications for the Legal Community
The proposed content of the agreement clearly demonstrates a trend towards further harmonization of law between two economic giants. The efforts to boost e-commerce and the proposed measures to be taken to prevent duplicate rules and regulations point a need for further compliance between the American law and the EU Acquis with regard to the specific areas of law regulating the economic activities that will be part of the agreement. Especially problematic are the areas where, what the economists call the negative externalities can occur such as the environment. European Union has already set stringent standards for its environmental policy. How such ambitious standards will be made to reconcile with the American standards on environment are yet to be seen. The compliance might also be problematic for the areas like food safety and pharmaceuticals which are well regulated with high standards attached by the European Union. For instance given the EU's unwelcoming attitude vis-à-vis the genetically modified foods, it remains to be seen how the compliance will be attained in the business sectors related with food.
Conclusion
TTIP is a logical outcome of a world economy increasingly marked by stiff competition and shifting of economic balances further to the East; to the Asia-Pacific region. Even though the benefits are there to be reaped in the form of higher economic growth, lower rates of unemployment, a certain degree of free movement for the business professionals and the reductions of duplicate regulations, the challenges remain as well especially with regard to the sectors that the two economic powers have not only diverging standards but also different views.
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