The United States and the European Union are the world’s two largest economies. Each is the other’s most important trading partner and most important investment partner. Particularly owing to the extent of cross-FDI, the EU and US economies are highly interpenetrated. As a result, the Office of the USTR (USTR 2016: 139) characterizes their relationship as “the largest and most complex economic relationship in the world”.

The transatlantic economy is subject to the rules of the WTO, of which the EU and the US were the principal architects. The transatlantic partners have also engaged in the world’s most ambitious eff orts to mitigate the adverse trade eff ects of regulatory differences. These efforts, however, have left considerable impediments to trade across the Atlantic. Thus, the transatlantic economy is not integrated. The TTIP negotiations were intended to achieve that objective.

This chapter introduces the features of the transatlantic economic relationship that underpinned the substantive focus of the negotiations. These features also help to explain why transatlantic business cooperation was so prevalent, why traditional opposition to TTIP was largely absent, and why new actors have emerged as the principal obstacles to an agreement. The chapter also sets out the multilateral and bilateral arrangements that frame the transatlantic economic relationship. It thus describes the background to, and the point of departure for, the TTIP negotiations.

Economic importance and interpenetration

The transatlantic economy is the most valuable in the world (Hamilton & Quinlen 2016: 10; also see Table 2.1). The US is the EU’s most important export market and second most important source of imports. The EU is the US’s second most important export market and source of imports. Taking imports and exports together, each is the other’s most important trading partner (Commission 2016b: 8–9).

What really distinguishes the transatlantic economy, however, is the depth of the investment relationship. US companies’ investments in the EU accounted for about 40 per cent of their global stock of FDI in 2014.