Bursting the Bubble

Do We Need TTIP?

10 March 2016 | by

With the start of the 12th round of trade negotiations between the USA and the EU, the stars are shining bright in completing the Free Trade Agreement (FTA) at the end of this year. But that is if we only count the opinion of the policy advisor’s and politicians. Civil society and the unions are against this new sort of FTA which not only lower barriers to trade but also tries to harmonize regulations between the protagonists. This is not new because the World Trade Organization (WTO) tries to do the same, but with the stalling of the multilateral trade talks countries and regions are trying to boost their economies around the multilateral framework. If TTIP is completed and implemented, the EU and the USA will be the greatest free trade area the world has ever seen and will be a benchmark for every future negotiation in trade.

The start of TTIP

The beginning of the Trans-Atlantic Trade and Investment Partnership (TTIP) is situated in the nineties, at the end of the Cold War when both regions signed the Trans-Atlantic Declaration. They did this to broaden the meaning of NATO, that was a defensive structure against the USSR. The Declaration was the start of the negotiations when business interests aligned themselves in the Business Dialogue, to influence the European and American governments to adopt business-friendly regulations (1995) and in 1998 there was the signing of the Trans-Atlantic Economic Partnership. Then, the talks stalled because of the growing prosperity and economic growth at both sides of the Atlantic.

The negotiations were freshened when Angela Merkel came to power in 2007. The Trans-Atlantic Economic Council came to being which had to advise the EU and the USA. In 2011, at the height of the euro zone crisis, the last boundaries had to be diminished, so they could start the negotiations at the highest level. The agreement was hailed by Barosso and Obama that it could boost jobs and economic growth at both sides of the Atlantic, just when the crisis hit hardest. The start of the FTA went against the trend of growing protectionism in the world since 2008.

The troublesome advantages of the TTIP

To make their claim, policy makers on both sides of the Atlantic made studies about the advantages of TTIP, the EU estimatedthat it would: boost economic growth, liberalise services and government procurement, and boost the median income of the average European by 600EUR. But for the Americans, the Trans-Pacific Partnership is more interesting because the economic welfare in the 21th century will be around the Pacific and not around the Atlantic anymore. Then there is the harmonisation of regulation, which will follow the lowest denominator and there is a concession of trade being diverted from intra-European trade towards the USA.

The most clear advantage of TTIP is that it will set the regulation for whole the world to follow in trade. The barriers to trade are the lowest between these two regions in the whole world, so it is not clear what another lowering of tariffs will be doing for the economies at both ends of the Atlantic.

The question marks of TTIP

One of the question marks of TTIP is the strengthening of consumer protection because they will pay lower prices for products, so welfare will rise. Consumer organisations object to this: they say that TTIP will create a race to the bottom, to the detriment of consumer rights because of the difference in regulation and protection. The American are less protected in things like environment and food than the Europeans. Europeans are worried that with TTIP genetically modified crops will enter the European market, things which are approved in America.

Another question mark is the boost to jobs, when TTIP is implemented the whole Atlantic region will go through a phase of restructuring which will have winners and losers. Then there is the protection of genuine European products like the French or Italian film or cheese sector (like mozzarella). These are products which are heavily imitated by the Americans. The high regulation of products of origin in the European market will be questioned.

Disadvantages of the FTA

The main disadvantage of the TTIP is the Investor-State Dispute Settlement. This is a resolution which will infringe on national jurisdiction of the European Member states, because every firm will be able to have the opportunity to make a claim when their interests are harmed by the European state. This can have the meaning that the democracy or civil society like union interest will be infringed. High regulations in environment or consumer protection can be challenged by a firm in court.

Another disadvantage is the end of data protection of the European governments. If harmonisation in data occurs, then intelligence organisations like the NSA or the CIA will have the possibility to know everything about Europeans. Things that already happened when leaders such as Merkel were spied on by the NSA – this is not what allies are supposed to be doing on each other.

Conclusion

The whole setting of the TTIP follows the same logic of all other FTAs, for the Europeans: that is to make Europe the centre of economic globalisation. But what it has with other countries or regions are cancelled out by the strength of the USA. What plays an important role for the EU: identity and geopolitics in trade are at the same level for the USA. Economic power between the two regions are the same and cultural differences are the lowest. The EU cannot impose its will on the USA through TTIP but the same is true for the Americans.

2 Comments

  1. There is no provision that says the lowest common denominator of quality will be enforced, there is a negotiation on just every regulation that will be affected. Geographical indication will likely be upheld. ISDS already exists in every FTA the EU and individual European countries, and the US are currently engaged in. If you look at statistics, by-in-large, States win in the majority of cases that are brought up through the mechanism. The purpose of that mechanism is to give exporting companies an un-nationally biased legal mechanism through which to file legal complaints, it works for the range of businesses from small to large. The TTIP agreement will likely benefit European SMEs the most, and the ISDS will allow them challenge the US government should they feel the US government enacts legislation against their competitiveness in the US. The “safe harbor” agreement has already been signed by both sides of the Atlantic, raising data transatlantic data transfers to those of Europe.

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