Transatlantic Trade and Investment Partnership: is free trade really the way forward?

For almost a year, the EU and the US have been negotiating what could be the most extensive bilateral trade agreement in history. The Transatlantic Trade and Investment Partnership (TTIP) aims at making it easier to trade goods and services across the Atlantic. However, as public awareness – and objections – have increased, a question has arisen: is freer trade what is best for Europeans and Americans? King’s College London International Politics student, Claire Dale, investigates.

 

The UK government promotes the TTIP to an American audience. © Foreign and Commonwealth Office / Creative Commons license

The UK government promotes the TTIP to an American audience. © Foreign and Commonwealth Office / Creative Commons license

The European Commission’s (EC) economic assessment states that the TTIP could increase the size of the EU’s economy by €120 billion and the US’s by €90 billion per year. The EC also claims that the treaty would make ‘a positive contribution to the global economy’, creating jobs and increasing the EU’s economic output by as much as 0.5 per cent by 2027. With already very low tariffs on trade between the US and EU, about 3 per cent on average, this predicted growth would come from reducing other types of barriers to trade, i.e. regulations.

While the EC argues that ‘progress in improving conditions for trade and investment will not be at the expense of our basic [European] values’, there is good reason to fear that the ‘harmonising’ of regulations may lead to a race to the bottom in terms of health and safety, environmental and labour standards. Indeed, the more regulations that are in place in a given country, the higher the operating costs for businesses, which is contrary to the aims and predicted success of the TTIP.

Further, the EC’s report downplays the disparities that exist between EU and US standards in certain domains. For example, the EU applies its ‘precautionary principle’ to legislate against the use of Genetically Modified Organisms (GMOs) and other controversial practices that the US, applying its ‘science-based assessments of risk’, agrees to. The EC insists that the EU ban on GMOs is off the table, and this may well remain the case. However, other controversial products such as chlorine-washed chicken could make their way on to the European market under the TTIP.

A research field of genetically modified maize in Ohio, US. © Lindsay Eyink/Creative Commons license

A research field of genetically modified maize in Ohio, US. © Lindsay Eyink/Creative Commons license

Indeed, the agreement would allow corporations to sue national governments that have banned one of their products, even if that ban took place before the agreement was implemented. Sued governments would then have the option to either compensate the corporation or allow the product into the marketplace. This could compel states to sacrifice the levels of protection of their population and environment for the benefit of corporate profit.

Labour standards may also be driven down. Freer trade implies less protection for workers and firms, the least well equipped of which are likely to be unable to compete in the new market and hence suffer the costs of the ‘adjustment process’. In the eyes of the EC, this would only be a temporary pain, and one worth suffering in the long run. Its report concedes that 0.2 to 0.5 per cent of the European labour force will be ‘de-located’ from one sector to another as a result of the changing market dynamics. Yet, despite the new job opportunities that the TTIP is expected to help create elsewhere, there is still a risk that de-located workers will end up unemployed.

However, the most controversial aspect of the TTIP is the aforementioned provision for an Investor State Dispute Settlement (ISDS), which would allow corporations to sue national states for ‘alleged diminution of their potential profits’ as a result of government regulation. Such mechanisms are present in other trade agreements and have allowed, for example, Veolia to sue the Egyptian government for raising the minimum wage. The hearings under the ISDS are held in secret, the judges are corporate lawyers and citizens of the sued state cannot be heard or represented in this arbitral court. The ISDS, gives corporations great political leverage, and represents a real danger for democratic decision-making and sovereignty.

How low can you go? The Green Party protests against TTIP outside the European Parliament at the EU-US Summit in 2013. © greenefa/Creative Commons license

How low can you go? The Green Party protests against TTIP outside the European Parliament at the EU-US Summit in 2013. © greenefa/Creative Commons license

The EC argues that an increase of 0.5 per cent in the EU’s GDP will lead to an average €545 increase in extra annual disposable income per household. This predicted success of the TTIP is based on the flawed premise that enriching corporations means that there will be a general and even rise in the average household income across all member countries. Wealth, more often than not, does not trickle down to the average household and the TTIP in its present form is likely to benefit big corporations on both sides of the Atlantic at the expense of the ordinary citizen.

So what can we do?

If you disagree with the TTIP, you can ask your MEP to take a stance against part or all of it. The bulk of the negotiations is taking place this year so now is the time to act.

Alternatively, you can support or get involved with NGOs such as the World Development Movement, which are actively campaigning against the TTIP.

 


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

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