How important is TTIP for Romania?

Studiu-TTIP-Lucian-Cernat-1.1-page-001-212x300CRPE Policy Memo 69, Lucian Cernat.

The Romanian Centre for European Policies launches the report ‘How important is TTIP for Romania?’. This contributes slightly differently to the analysis of the principal macro- and micro-economic elements of the Romanian economy linked to the negotiation of the free trade agreement (TTIP) between the European Union (EU) and the United States of America (USA).

The first thing that can be noted based on the prospective macroeconomic estimations (Cernat and Lakatos, 2015) is that the TTIP agreement will have a positive net impact on Romania. At the same time however, these estimations suggest that this positive impact on Romania will be inferior to the average beneficial impact at a European level, given these current conditions. This can be mostly explained through the fact that commercial relations between the USA and Romania are less important than the shares in the global commercial structure compared to those of other European countries. Nevertheless, the transatlantic negotiations are not yet finalized and the future TTIP agreement will need a couple of years until it is fully implemented. As a result, the ‘initial data’ of the existing estimators can be changed if Romania clearly identifies its priorities within the following time period.

Beyond these macroeconomic predictions, it is important to analyze (particularly in a qualitative way) Romania’s different economic sectors such as agriculture, industry and services that will benefit as a result of increased commercial trade with the USA. Due to this, the report details a series of key factors on a microeconomic level: the characteristics of the exporting Romanian companies, the role of the exporting infrastructure (logistic services) and last, but not least, the role of foreign investors.

 A national strategy ‘Be prepared for TTIP’ based on a detailed analysis of tipTrade Policy 2.0 with concrete data and targets could considerably improve TTIP’s effects on the Romanian economy.

What could these priorities be?

  1. Firstly, those 1,000 or more direct exporters towards the USA need to be identified in order to determine the main non-tariff barriers that prevent them from exporting further, more often and with a larger range of products. Alongside this, there is an urgent need to create a regular electronic consultation platform for those 600 SMEs. This could be done before and after each round of TTIP negotiations for instance.
  1. Equally, other Romanian firms with similar or identical products to those of the existing USA-exporting firms need to be identified. This is especially needed in the sectors where Romania has only one or two current exporters towards the USA.
  1. Similarly, of those 6,500 Romanian firms that export to non-European countries, the ones that already export to similar geographic destinations to the USA (e.g. Canada and Mexico) need to be identified in order to determine the reasons that have prevented them to export to the USA up until now.
  1. A different type of strategy is needed to promote the development of Romanian firms which provide services and to encourage foreign investors specialized in international trade, distribution and mediation. These types of firms can rapidly and considerably widen the exporting markets of the Romanian economy, especially for those SMEs that do not have the capacity for international marketing.
  1. There is a need to identify and eliminate the factors which maintain the logistic maritime export costs above the level of the European average. This is because, currently, the costs of exporting containers from Romania are higher than those of other European countries.
  1. In order to widen the market and increase the number of exporting Romanian firms, it is necessary to identify the characteristics that enable those current 6,500 firms to successfully export their produce. In particular there is a need to identify the conditions that allow SMEs to export from the outset of their creation.
  1. The re-launch of the agency promoting Romanian exports with a new strategy founded upon clear objectives and close links with other financial institutions such as Exim Bank, Camere de Comert etc.
  1. Using the existing exporting firms as catalysts to create ‘export clusters’ or chains of local production in order to generate a bigger number of exporters, either directly or indirectly.
  1. The use of different European finance programmes for various sectors such as agriculture, transport and professional development to cover those elements that are less significant in Romania’s commercial infrastructure.
  1. Finally, establishing some key commercial indicators for each of the central and local public administrations with competencies in the area. Once the current level of these performance indicators is set, the creation of concrete annual targets in the area is advised. For example, targets could be set for increasing the number of exporting Romanian firms, decreasing logistic costs, increasing the number of diplomatic trade initiatives and so on and so forth.

Overall, these recommendations may seem too minor or lacking in strategic importance to appear on the ‘radars’ of decision making in Romania. Nonetheless, the benefits of a new trade agreement do not materialize over night. Bearing in mind that nearly 40,000 jobs currently depend on this country’s exports towards the USA and that over 40,000 people work for American companies based here in Romania, TTIP provides the opportunity to generate even more thousands of jobs. In this way, a national strategy pre-TTIP is an important asset that would be irresponsible to overlook.

 The report is available, only in Romanian, here.