The United States is a rich market but navigating its regulations can be expensive and difficult. The Transatlantic Trade and Investment Partnership (TTIP) will simplify the whole process of exporting, making it cost-effective to do business in the US no matter what the size of your company
The EU and the USA are the two biggest economies in the world: between them they account for almost half of global GDP. However, despite Britain’s ‘special relationship’ with the US, trade between the two countries is not always straightforward. Unnecessary red tape and differences in trade regulations has led to exporting being complicated and costly. While larger companies can absorb these costs, it has meant that SMEs with good products have found it difficult, if not impossible, to get a toehold in the market. This is not just the case for the UK: all European countries have been affected by this. The Transatlantic Trade and Investment Partnership is being introduced as a way of reconciling these differences.
TTIP has the potential to have a positive economic impact on both sides of the Atlantic. It is expected to boost the British economy by up to £10 billion annually, and the effect on the EU as a whole will be worth an estimated £100 billion. The USA will also benefit, with the initiative expected to add around £80 billion to its
How will TTIP work?
At the moment, the US and Europe have two different systems when it comes to regulating various aspects of products and services. TTIP aims to achieve regulatory coherence so that businesses will be able to avoid having a number of different product lines purely to meet differing standards in Europe and the US. This will not impact on quality, as both jurisdictions have high standards and a cohesive policy will aim to preserve this.
It also focuses on inclusive regulation when it comes to professional bodies. Many UK qualifications such as those from the Royal Institute of British Architects aren’t recognised in the US, preventing the free movement of services. Standardisation of qualifications will open up a myriad of different opportunities for British businesses to tender for contracts in the USA, including those offered by the Federal Government. Without TTIP, the degree to which UK businesses can compete for these contracts is limited. It’s hoped that the new agreement will increase the opportunities available for tender to UK companies.
TTIP and small businesses
Small businesses are the hardest hit by the current doubling of regulations. Duplication
of product lines to meet regulations is an expensive endeavour, and those costs are harder for a small firm to absorb than a larger one. This means that small and medium enterprises stand to gain the most by TTIP implementation. TTIP will make it easier than ever before for small and medium-sized British businesses to compete and win market share in the US.
Enabling European SMEs to trade with the US is one of the major priorities of this agreement. It is the first EU free trade agreement that has an entire chapter devoted to helping SMEs maximise their benefits from an initiative. As part of the process, stakeholders hope that TTIP will put in place a resolution mechanism for SMEs, so that companies can raise issues related to transatlantic business and process that issue through to settlement. Again, larger companies may have entire departments related to issue reconciliation, but this is not the case for SMEs. TTIP aims to equip smaller businesses with the tools they need to compete for market share within the US.
Not only is meeting contradictory regulations an expensive endeavour, it’s often a confusing one. It can be difficult and time-consuming to find out exactly what is required of you when it comes to exporting to the US, especially as there can be differences at state and federal level. TTIP aims to give businesses better access to information by putting all of the key information on regulatory and customs requirements in one place, making it easier to understand the requirement in both the EU and the US.
When there is a similar standard in both the EU and the US, TTIP aims to avoid duplication of procedures. In other words, if a product is deemed to have reached a safety standard in the EU, then that will also satisfy US regulations.
The current situation of conflicting regulations is hampering free trade. Even meeting international industry standards doesn’t mean that exports to the US will be straightforward.
Mark Marsh is Finance Director at Seaward Electronic, a company based in County Durham that produces electrical safety test instrumentation. “We manufacture products which comply to the IEC standards (International Electrotechnical Commission) which the USA actively participates in,” says Marsh. “However, the USA often ‘modifies’ these standards into Underwriters Laboratory (UL) standards which have become a barrier to entry due to cost, admin, and technical changes,” he explains.
Regulatory coherence will reduce these costs, making it easier for companies such as Seaward Electronic, to bring their high quality products to US consumers.
TTIP will also put in place procedures to streamline the customs process, meaning quicker shipments. UKTI are pushing for data requirements to be streamlined in an effort to reduce the administrative burden on small businesses.
David Brimelow, Managing Director of Manchester polythene packaging producer Duo UK, believes that a streamlined customs process would help his company to deliver a better service to their consumer base. “Duo’s products have already proved to be competitively priced in the US, so improving transport fees and delivery lead times would enable us to improve our service to our customers even further,” he notes.
Tariff reduction is one of the key pillars of the policy, making it possible for products from both jurisdictions to compete effectively with domestic profits in each area. The reduction in import and export costs will apply equally to materials which originate or pass through the US.
“There is a lot of red tape and cost associated with the USA,” says Rob Palfreyman, CEO of Edinburgh company Sensewhere. “TTIP can help our business by reducing cross-border tariffs and decreasing red tape when transferring resources and data.”