EU US Free TradeMany Americans were surprised to hear President Obama in his recent State of the Union address identify a major new free trade agreement as one of his administration’s second term priorities. He was referring to the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union. And while Americans may have been hearing the name for the first time, it is an agreement long in the making – and with a long ways still to go.

The idea began with the 2011 Working Group on Jobs and Growth, appointed by EU-US Summit process. This Working Group was tasked with exploring ways to boost growth and employment between the two blocs, and it identified a laundry list of areas in which closer cooperation and integration could boost trade, streamline commerce, and create jobs.

But the Group’s conclusions were only introductory, tentative steps. Even with the public commitment of President Obama, the US and the EU have a big task in front of them in order to seal an agreement that will satisfy the diverse industries and interests of fifty US states and twenty-seven European countries. While the Working Group’s recommendations may seem straightforward, getting those recommendations through the bureaucratic procedures of the US and the EU can mean that implementation of the trade partnership could take years.

This is true despite the fact that US companies are the single most desired investors in Europe, European companies are the largest foreign investors in the US, and that the US attracts the most foreign direct investment (FDI) in the world. Given that both blocs have always relied on mutual trade cooperation and increasingly open economies, it is no surprise that they represent the strongest and most inter-connected economies in the world today. But both sides also face significant institutional resistance to change.

The major industries on both continents have been pushing hard for this agreement, while the process has been held up due to technical issues. TTIP represents one of the most complex economic negotiations attempted given the structure of the EU and the size of the United States, and thus top level engagement from the White House, Congress, the European Commission, and the European Parliament will be crucial to get this process moving forward.

TTIP will raise many concerns, particularly in Congress, as cutting the tariffs can affect smaller local businesses in Congressional districts. In addition, there will be challenges on both sides in harmonizing regulations and standards, given oftentimes very different cultures and approaches to regulation. As President Obama is starting his second term, it is likely that the White House will be pushing to sign the new TTIP by the end of 2015 so engaging the Members on TTIP must be done sooner rather than later.

On the European side, getting the agreement through will likely be easier than achieving the super-majority needed in US Senate, as the party and voting systems of the European Parliament are structured more favorably for deals such as this. Nonetheless, all twenty seven nations have some hard work ahead as ironing out details on agreements covering a vast array of economic sectors from chemicals to steel, and agriculture to intellectual property.

An eventual TTIP agreement will mean that the two global economic powerhouses will be able to trade and exchange goods more cheaply than they do today. This will boost both economies as demand for goods from each side will increase, along with competitiveness. While the shift of manufacturing industries like textiles and electronics to the Far East is largely permanent, this increase in competitiveness will lower costs and in conjunction with new cheaper energy sources mitigate the decline of skilled manufacturing in the west. In any case, to achieve any of these benefits, the US and the EU need to get working now.