By Molly Shutt, Transatlantic Economy Analyst
The debate surrounding the proposed Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the EU is heating up once again, and accusations from adversaries and responses from advocates within the EU are increasingly contradictory. EU national leaders sympathize with both sides, and critics repeatedly demand more despite assurances of protection. In order to pare down the rhetoric and reach a viable agreement, it is imperative to recall the bigger picture. The proliferation of free trade agreements reflects the trend toward a more open, global economy that increasingly embeds developing economies. The TTIP can serve as a pillar of this system by setting liberal international standards as these economies grow. To fulfill this role, leaders must be as open and honest about the negotiations as possible, and critics must accept the progression of the international trading system.
Refresher: What is the TTIP?
In response to the global financial crisis of 2007-2008 and the inconclusive Doha Round of international trade negotiations under the World Trade Organization, leaders from the United States and the European Union decided to pursue a transatlantic trade deal in 2011 and negotiations on the TTIP began in 2013. Details of the deal underway include eliminating tariffs, opening restrictive markets, and coordinating regulatory standards. The strongest incentives for the deal are economic, specifically job creation and support for business; however the TTIP carries geopolitical implications, as the magnitude of the economies involved would set precedents for future international trade deals. To succeed, the U.S. Congress and the 28 member states of the EU must ratify the deal. Since its inception, the TTIP has been embroiled in a public debate over the perceived benefits and drawbacks of the deal. With the 2016 presidential election on the horizon, the agreement has returned to the spotlight.
The Proponents and Their Argument
The TTIP is strongly supported by the American government and most EU member states. President Obama has vocally endorsed the deal, as has German Chancellor Merkel and other European leaders. Leaders on both sides advocate the TTIP as a potential contributor to economic recovery, solidified transatlantic relations, and a necessary example of global economic leadership. In terms of public opinion, recent polls conducted by the Pew Research Center and Eurobarometer respectively reported that 53 percent of Americans and 58 percent of Europeans support a free trade agreement with each other. Further, the geopolitical implications of such a deal range from strengthened relations with allies to raising global environmental, labor and consumer protection standards. Major industries, such as pharmaceuticals, automobiles, chemicals and finance express support for the TTIP, as do smaller enterprises that stand to benefit from increased and easier market access. Mid-range estimates project that the agreement would grow the U.S. and EU economies by about 0.4 and 0.5 percent respectively, meaning an additional 120 billion euros annually in the EU, and 100 billion dollars annually in the U.S.
The Opposition and Their Arguments
On the other side, the opposition camp is largely composed of trade unions, activists and charities. The criticisms largely stem from European concerns over compromising high food and privacy standards deeply valued by citizens and, particularly in the UK, concern about the level of power given to corporations over public goods under the investor-state dispute settlement (ISDS) clause of the agreement. Under the controversial ISDS clause, foreign investors have the right to bring governments into a private court over policies that may affect business revenue. Some in the UK are therefore concerned about private investment in public services such as education, transport, water and the National Health Service. As for coordinating regulatory standards, Europeans express concerns over allegedly lower food quality in the U.S. that permits more chemicals and growth hormones. The opposition also points to country-specific public opinion polls within the EU, at least one of which shows that majorities in Austria, Germany and Luxembourg are against the deal.
Why the Confusion?
Yet the debates over these most controversial aspects of the TTIP are muddled by confusion. Due to strong and growing opposition to the ISDS clause of the agreement, last month EU trade commissioner Cecilia Malmström outlined her plan to improve the transparency of arbitration courts, set a strict code of conduct for arbitrators, and exclude publicly-funded health services from the TTIP. Despite Malmström’s clarity on the exclusion of the NHS, the Unite healthcare union contends that without explicit wording, NHS contracts could be challenged under the ISDS mechanism and future healthcare legislation could be suppressed – even though the leaked TTIP text explicitly protects public European health care services. In response to accusations that TTIP will drag down the high and celebrated European food standards, Malmström has assured the public that consumer protection will not be compromised. This confusion is at least partly fuelled by the fact that, despite outward support at meetings in Brussels, national leaders publicly second-guess the TTIP for political gain.
These back and forth contradictory claims from both sides reveal the underlying issue at hand: a lack of clarity. Some level of discretion is required for a groundbreaking international trade deal, however greater openness from leaders is crucial for making a convincing public appeal. Moreover, as one of the goals of the TTIP is to serve as a model framework for ensuing international trade deals, the inclusion of the ISDS mechanism will be crucial when the states involved are less liberal and democratic than those involved in this deal. Multinational corporations will not be interested in investing in more corrupt countries without the protection of the ISDS mechanism. In this way, protecting corporations would ensure the applicability of TTIP’s framework to emerging markets.
The Road Ahead
The next steps for successfully passing the TTIP require: a concerted effort from European leaders to remain unwavering in their support for the deal; further evidence of protections for public goods and an effort to mutually improve, not lower, standards; and a revision of the ISDS clause that ensures transparency. While unreasonable critics will continue ignoring the assurances and compromises made by representatives active in the TTIP negotiations, the public is encouraged to remember that the gains far outweigh any losses. The TTIP is not the only solution to the West’s economic woes, but it can play a major part in its recovery. The U.S. and EU economies would benefit from new export-related jobs and business growth through deeper market access; transatlantic relations would be reinvigorated in the face of Russian aggression; and liberal democratic values would be further cemented via international trade standards. The U.S. and EU have every interest in bringing the deal to fruition.