This article is part of our special report EU-US trade talks: moving forward?.

The budding Transatlantic Trade and Investment Partnership (TTIP) has been wrongly portrayed as a Western conspiracy against China when it would positively impact world trade, says a key MEP ahead of a second round of trade negotiations in Brussels between 7-11 October.

“TTIP is no monster,” said Portuguese MEP Vital Moreira (Socialists and Democrats), chair of the European Parliament's international trade committee.

“Not only are there positive externalities, but indirectly it could break down the vicious circle of WTO negotiating capacity,” he told EURACTIV.

Fears about TTIP boil down to what trade experts call trade diversion, but also the impact that such a massive agreement could have on the world's power structures.

When countries or blocs tear down trade barriers, there is net trade creation that helps support welfare in those countries, but at the same time, trade with third parties has been thought to be diverted. For example, if Europe begins importing more US beef, it will cut down on meat imports from South American countries such as Brazil and Argentina, the argument goes.

But such fears are unfounded, according to Fredrik Erixon, of the European Centre for International Political Economy think-tank.

“You are probably going to create more trade than you divert, and lots of non-participating countries will benefit from TTIP, simply because if GDP (Gross Domestic Product) expands in America and Europe they are going to import more from other countries as well,” he said.

Peer pressure

World trade would thus benefit, and other countries would be pushed to negotiate similar agreements to prevent their isolation, Erixon said.

In Brazil, businesses are becoming more vocal in pushing for a trade liberalisation deal with the EU. The powerful manufacturers lobby, Sao Paulo’s Industry Federation Fiesp, said yesterday (26 September) that a free trade agreement between Mercosur and the European Union was badly needed so that Latin America’s largest economy could breaks away from its current “commercial isolation”.

“Dealing with the EU is not going to be easy, it will take time. But it will mean climbing out from the isolation we have been in for the last twelve months,” said Rubens Barbosa, the head of Fiesp's Foreign Trade Superior Council following a meeting with EU ambassadors in Brasilia.

He pointed out that unlike Mexico and Chile, which have a long list of international trade agreements, Brazil had only signed three in over a decade – with Israel, Egypt and Palestine.

Ana Paula Zacarias, the EU's ambassador to Brazil, said taht both sides were going through "the most sensitive of negotiations" and trusted that improved trade proposals would be presented before 2014.

Zacarias also referred to internal differences in Mercosur (a body that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela) and underlined that “they must find their own path and verify the best proposal they can come up with.”

Stepping stone towards Doha?

International trade rules are widely thought to be out of step with a fast-changing global economy.

Both the TTIP and Trans-Pacific Partnership (TPP) negotiations are being followed closely by the international community for hints of what might be possible in the multilateral arena, João Vale de Almeida, the EU's ambassador in Washington, said in a recent interview.

TTIP's supporters argue that it could allow the advancement of rules-based liberalisation in the absence of progress in the World Trade Organisation (WTO)'s Doha Round. Finding a consensus on thorny issues like agriculture could even break the WTO impasse.

“Governments do have regional or bilateral trade negotiating options,” said the newly-appointed director general of the WTO, Roberto Azevêdo, during his inaugural speech. “But I have never heard a trade negotiator from any country say that these options were preferable to a global deal through the WTO. A global deal encompasses more countries and more segments of economic activity than any regional accord could possibly deliver.”

Speaking to EURACTIV, Wu Hailong, the Chinese Ambasssador to the EU, said Beijing was not opposed to the EU-US trade talks. “China is open to new regional cooperation and free trade negotiations which are transparent and inclusive,” he said.

“Both the EU and the US are major economies and key players in the global trading system. I hope to see them proceed with the talks in an open and transparent manner and reach an agreement that helps move forward the current Doha round of WTO talks and the multilateral trading system. The agreement should facilitate the universal growth of the world economy rather than affecting or even undermining other regional and multilateral cooperation,” Hailong added.

Rule-takers vs rule-makers

To soothe fears that have built up around the TTIP, experts encourage negotiators to be as open as possible, especially with countries that are directly impacted, such as Canada and Mexico, which are members of the North-Atlantic Free Trade Agreement (NAFTA).

Similarly, Europe has to keep in the loop countries that are part of the single market or with whom it has a customs union, like Turkey.

Kemal Kiri?ci, a Brookings Institute fellow, argued in favour of Turkey’s inclusion in the agreement.

“Countries left outside TTIP and TPP would either have to accept less favorable access to these markets, or would have to adopt the standards laid down by these two partnerships,” he wrote in a recent report.

“Geo-strategically, this means that emerging economies would be left at a disadvantage. Ironically, Turkey, a long standing member of this Western-led international economic order, would also be disadvantaged if not included in TTIP,” he added.

Speaking to EURACTIV, Erixon spelt out the risk of shifting power structures in the future global trade order.

“China and Japan are not rule-takers in the way other countries are,” he insisted. “You need to find a way to coordinate what you are doing with Japan and to some extent with China. You have to make sure that whatever you do is compatible with their system,” he said, referring to cooperation on regulatory coherence and standards.