Trade deal fightback marks sea change
WHILE the people of Ireland were preparing themselves for the emotional rollercoaster of the Ireland-France clash at the Rugby World Cup, about 250,000 Germans were taking to the streets of Berlin to protest the prospect of their government signing the Transatlantic Trade and Investment Partnership, TTIP, a trade agreement being negotiated between the EU and the US.
The demonstration in Berlin was one of the biggest ever in the German capital, but aside from a few newspaper columns it barely received any attention in the rest of Europe. Trade treaties are not exactly racy news, so demonstrations about them, no matter how big, are easy to ignore.
The protesting Germans had a point, however. TTIP is something to worry about.
The final terms of the treaty have not yet been reached, but what we do know about the treaty should have us as worried as the Berlin protesters.
TTIP is about deepening trade liberalisation.
Trade liberalisation involves removing the barriers that exist between countries that block the free flow of goods and services.
The hope of trade liberalisation is that when barriers to trade are removed we gain as producers because we get access to new markets, and gain as consumers as our access to imported goods improves and their prices fall. Economists going back to David Ricardo 300 years ago have argued that more free trade makes us all wealthier. If trade is free between countries then every country will specialise in what they are best at producing, trade for the goods that they are not so good at making, and all countries become richer as a result. Or so goes the theory.
This economic argument has a lot of traction in an age of austerity. If governments are cutting spending at home to balance budgets, economic growth has to come from trade and exports, and from attracting investment from abroad.
TTIP has therefore been heralded by governments on both sides of the Atlantic as a way out of the economic malaise that has afflicted us since 2008.
Ferdi De Ville and Gabriel Siles-Brügge argue that claims made about TTIP and its ability to promote growth don’t stand up. When political rhetoric is set aside, the economic gains that TTIP will bring are probably going to be very small and are far from guaranteed.
The potential gains that TTIP will bring don’t look small at first glance. Reports commissioned by the European Commission to support the case for TTIP promise an extra €119bn in GDP for the EU. This sounds great, but broken down it only amounts to €545 per family a year, or as one critic has put it, “an extra cup of coffee per person per week”.
Wouldn’t an extra €119bn GDP in the EU be a good thing even if we only gained a small amount extra personally?
Yes, but TTIP probably won’t deliver this extra €119bn. De Ville and Siles- Brügge show that the modelling that produces forecasts of extra GDP from TTIP are not scientific forecasts. Economic modelling is political. If you make positive assumptions about what trade liberalisation will produce you’ll get positive answers when you crunch the numbers.
The same is true in reverse, of course. Critics of TTIP who have argued that it will cost jobs in some EU countries also make assumptions about the impact of trade liberalisation that lead them to prophesise economic doom rather than economic boom.
This doesn’t mean that we should throw our hands in the air and say no one knows what will happen with TTIP, so let’s do it anyway; nothing ventured, nothing gained.
Previous free trade deals like the North American Free Trade Agreement have tended to produce results that are closer to negative predictions about their effects rather than to positive ones. Critics of trade liberalisation’s benefits have history on their side: In other words, their calls for caution about the benefits of trade liberalisation should be taken seriously.
Moreover, some assumptions are just better than others.
The optimists’ assumptions are particularly flawed. Optimists’ forecasts of big benefits from TTIP assume trade liberalisation will happen smoothly across all sectors of the economy and positive effects from liberalisation will spill over from one sector of the economy to another. In effect, big benefits from TTIP require the adoption of a perfect policy and its perfect implementation. This is a big ask.
No one in recorded human history has designed a perfect policy or managed to implement any kind of policy perfectly. It might be a good idea to hold off on ordering that extra coffee for a while.
Scepticism about TTIP’s economic benefits has forced its proponents to find other arguments for its adoption.
One of trade liberalisation’s benefits should be the removal of red tape and the adoption of common standards of product regulation. TTIP’s proponents argue that the agreement will allow the US and EU to set standards for products globally. If we agree what standards products have to meet to enter our markets, the argument goes, it’s better than having those standards set by China.
For its opponents, getting rid of regulation means that TTIP is undermining democracy. Democratically elected governments regulate industry to keep their citizens safe and to protect them from things that they are concerned about such as genetically modified food.
There are different standards in the EU and US on things like genetically modified food and drugs. If TTIP means we have to accept US standards, even if they are lower than ours, this might mean that in effect we see a dropping of safeguards that we value. Our governments will have bartered away our protections and our wishes will no longer determine what policies regulate what is on sale in our shops.
This potential threat from TTIP has led to some wild claims about European markets being flooded with bad American food and the demise of valued institutions like the British NHS.
De Ville and Siles-Brügge are sceptical of the wilder claims made about the damage that TTIP will do, but are also dismissive of the idea that it will empower the EU and the US to set global trading standards or cut red tape.
It does not look possible for the EU and US to agree to harmonise their product standards at the highest possible levels. Instead, what is emerging is agreement to mutually recognise each other’s standards. This means we will admit US goods to our markets even if they do not meet safety standards that we have in place, and vice versa.
This won’t force the rest of the world to adopt our standards except at the lowest possible level. It will also potentially limit future regulation of products. What will be the point of Europe setting high standards if those are undercut by the US? Worse, it potentially limits governments’ ability to regulate in the future.
Again, what is the point of spending time devising regulation if your TTIP partner whose standards you have to accept undercuts your rules?
These dangers mean that TTIP is shifting power over our lives away from our democratically elected governments towards business and for little economic return.
However, the picture is not all doom and gloom.
TTIP is provoking protest like those in Berlin and stimulating opposition from a range of consumer rights groups and NGOs. These protests need to be better co-ordinated, but they might herald the start of a fightback against the unfettered liberalisation of economic life that had transformed our societies over the last few decades, and frequently not for the better.
De Ville and Siles-Brügge’s book is a part of this burgeoning movement for change and a model of what popular explanation of complex economic and political issues should be: Clear, concise, cogent, even handed, and a call to action.
Neil Robinson is professor of politics at the University of Limerick *TTIP: The truth about the Transatlantic Trade and Investment Partnership by Ferdi De Ville and Gabriel Siles-Brügge is out on Polity Press
