Karl Kaiser’s quote on the left is from 2016; now, eight years and numerous geoeconomic upheavals later, it is more relevant than ever. Yes, the world’s economic center of gravity has continued to shift toward Asia, with the large emerging markets of China and India. But still, North America and the EU remain a key conduit for the global economy. To this day, the transatlantic partners have the most integrated economic, trade, and investment relationship in the world. As Karl Kaiser points out, “nowhere is the interdependence through internal trade, investment, and the exchange of know-how as intense as here.”
This not only applies to the EU as a whole but also to relations between the United States and Germany: Although China is the top import country for Germany, the United States has been the most important market for German exports since 2015. The United States also remains the most important target region for German foreign investment abroad. It must therefore be a central concern of Germany and the EU to build on and further expand cooperation with the United States, develop a transatlantic marketplace in the long-term, and avoid trade conflicts.
Karl Kaiser strongly supported the Transatlantic Trade and Investment Partnership (TTIP), whose negotiations from 2013 to 2016 led to no conclusion, and which is now in a deep freeze. It ran aground on both sides: In the EU, particularly in Germany, this was due to the public rejecting the idea of chlorinated chicken and the investor-state dispute settlement (ISDS), coupled with a fear of a dominant United States. On the US side, the negotiations failed due to the insufficient concessions of agricultural markets and, ultimately, the election of President Donald Trump – to name just a few key points.
A TTIP 2.0, whatever form it might take, is now a distant prospect with a second Trump presidency looming on the horizon, even though the goal remains desirable: such a first step towards a transatlantic marketplace would have set standards (within the framework of the “Atlantic democracies”) that, given the economic strength of both partners, would easily have become global standards. At the same time, opening up the industrial and agricultural sector, services, and public procurement, as well as joint research, would have significantly improved the competitiveness of both regions – also with regard to China.
In addition, many of the current conflicts in transatlantic relations could have been avoided with TTIP. Sure, even with an agreement in place, the effects of Trump’s “America First” strategy would certainly have been felt. Thus, the steel and aluminum tariffs that Trump imposed on numerous trading partners in March 2018 on the grounds of national security (Section 232 of the Trade Expansion Act of 1962) were also imposed on the free trade (FTA) partners Canada and Mexico. However, a successful TTIP would have led to less tension and a closer partnership under President Biden. With the EU as a partner, he would have had significantly more influence and a stronger negotiating position vis-à-vis China due to existing transatlantic standards and a transatlantic marketplace. It would have been much more difficult for China to play the transatlantic partners against each other.
In addition, the Inflation Reduction Act (IRA) passed by President Biden in 2022 would have been less discriminatory against the EU, had it been a free trade partner. For example, the $738 billion investment program, which aims to promote investment in green and clean energy and environment-friendly goods in the United States, includes tax credits for electronic vehicles (EVs) that only benefit American or FTA partners. This means that the EU could have claimed the tax credit for critical minerals for EVs under a potential TTIP. The United States and the European Commission have been negotiating a “Critical Minerals Agreement” since March 2023 to close this gap, but so far without success. And a conclusion now seems even more unlikely.
TTIP Remains a Distant Prospect
A TTIP 2.0 is no longer conceivable in the context of current US trade policy, which has undergone a fundamental transformation since Donald Trump’s 2016 presidency. And even though his present successor Joe Biden regularly emphasizes the importance of partners like Germany and the EU, the US-centric trade policy has persisted – albeit in friendlier language. Aside from the major focus on China, there is no interest in comprehensive trade agreements at the bilateral level. Under Trump, there were deals in favor of the United States; under Biden, we saw informal dialog formats such as the US-EU Trade and Technology Council (TTC) or the Indo-Pacific Economic Framework for Prosperity (IPEF).
But despite reforms in trade policy (stakeholder outreach, abolition of the ISDS), it remains unclear whether the European population could be won over to such an agreement, even if the United States was interested. In addition, large member states such as France are increasingly opposed to FTAs and a further opening of markets (primarily due to their agricultural interests). This rejection could easily flare up again as a result of an agreement with the United States. The shift away from market opening and FTAs towards economic security and trade defense mechanisms is also evident in the new EU Commission: For example, the new Trade Commissioner Maroš Šefčovič is responsible not only for trade but also for economic security. And the latter will certainly take up more of his time than controversial FTA negotiations.
TTIP 2.0 or the Search for a Second-Best Deal
The United States remains our natural partner, even under a President Trump. Without TTIP, the EU must therefore seek cooperation and strengthen the partnership through transactional deals.
During Donald Trump’s second term in office, transatlantic trade relations will be more protectionist. The EU and especially Germany will no longer be seen as partners and the imposition of tariffs is very likely. However, Trump has shown that he is interested in short-term “deals.” Germany and the EU must use this kind of “transactional” trade policy to counter protectionist tendencies. This does not mean a TTIP 2.0, but it could, for instance, include tariff reductions on industrial products. The EU and Germany must also offer themselves as partners with regard to China. For example, they can suggest greater coordination in investment screening and export controls. However, despite the current setbacks, TTIP and a transatlantic market must remain our vision for the future, as Karl Kaiser advocated back in 2016.
This text is a chapter from the book “Paths to the Future: Perspectives on Foreign Policy: On the 90th Birthday of Karl Kaiser” and contains no footnotes. You can access the full version including footnotes in the PDF above or via the e-book.
