How will the controversial Transatlantic Trade and Investment Partnership (TTIP), designed to reduce trade restrictions between the US and EU, affect UK retail?
What is TTIP?
TTIP is a trade agreement set out by the US and EU to ease access to each other’s markets and encourage competition among businesses by reducing barriers to trade. If approved, it could boost the UK economy by as much as £10bn, according to a Government report, and benefit the average household by up to £400 a year.
The agreement is regulated by the Trade Policy Committee, made up of representatives from every EU member state. At present, the committee plans to finalise the agreement in 2016. It will then be passed on for approval by each of the 28 EU member states before it can be brought into action.
Why has it attracted so much controversy?
Proponents say TTIP will open new markets to retailers, generate jobs and enable greater consumer choice. The EU already trades £1.6bn worth of goods and services with the US, so removing tariffs to increase this by even a few per cent could have a significant impact.
However, those against it fear the influx of low-price US goods will threaten businesses in Europe. And, outside of retail, TTIP has staunch opposers – some have claimed it is an ‘assault on democracy’ and could encourage lax food safety laws in Europe and even threaten the future of the NHS ( there are discussions about opening up health services to US companies). There are also complaints over the apparently clandestine nature of the talks – so far there has been little communication about the talks from each side.
Which regulations will be eased under TTIP?
The agreement aims to remove the majority of customs duties on EU-US trade. These include regulations that make European goods more expensive when sold in the US. European Commission figures show prices can be as much as 30% higher for items such as clothes and shoes.
TTIP would also end technical regulations, such as for textiles and food nutrition labels, that require products to be registered under different names in the US and EU. Some also fear data privacy laws and employee rights could be under threat.
What are the advantages for UK retailers – will some benefit more than others?
A range of retail sectors will be affected by TTIP, particularly core exports such as textiles, electrical items and food.
DWF’s head of food group Dominic Watkins thinks TTIP will benefit Asda a great deal. Owned by US giant Walmart, the supermarket would incur no additional costs to sell its products in the US if TTIP were approved. Asda would also benefit from being able to more easily import Walmart goods to sell in its own stores, broadening the choice for its customers.
Watkins says Boots, part of US giant Walgreen Boots Alliance, would also benefit for similar reasons.
In an increasingly open trading environment, Watkins envisions a global future for retailers. The US already has a TTIP-style agreement in progress with several Asian countries. He predicts a series of similar bilateral agreements will be forged to unify trade flows between the East and West.
What are the downsides?
The main point of contention is how to balance high EU production standards with a lower benchmark in the US, and maintain a competitive price. This is particularly prevalent in the food sector. Both GM and hormone techniques are commonplace in the US, but tightly regulated in Europe.
For supermarkets selling own-brand produce in the UK, this would mean competing with cheaper US equivalents. To combat this, Watkins says retailers such as Tesco would have to re-evaluate their price points in order to compete. And it’s not just grocers – any retailer selling any own-brand product would face stiffer competition under the TTIP agreement.
But ultimately Watkins believes a market offering consumers greater choice will generate opportunities for retailers. He acknowledges that while some smaller companies may be squeezed out by global businesses, the consumer base opened up by TTIP outweighs the disadvantages.