The time has come for a progressive TTIP

25 April 2016

Ferdi De Ville - Assistant Professor in the Centre for EU Studies, Ghent University

Gabriel Siles-Brügge - Lecturer in Politics, the University of Manchester

With mounting concern on both sides of the Atlantic that trade politics only serves the interests of the elite, the time has come to use the Transatlantic Trade and Investment Partnership to refashion the global trading regime

In the final pages of our book on the Transatlantic Trade and Investment Partnership (TTIP), written in spring of last year, we offered three possible scenarios for the EU-US free trade deal.

One scenario was that the negotiations between the EU and US would be successfully concluded by offering piecemeal concessions to TTIP’s critics. Some have already been made since we penned those words, most notably in the European Commission’s proposal to replace the controversial investor-state dispute settlement (ISDS) mechanism with a supposedly new Investment Court System, which many have criticised for keeping the fundamentals of ISDS in place under a new name.

The second scenario we wrote about was that TTIP would fail because of irreconcilable differences of opinion between the EU and the US at the negotiating table, or between negotiators and domestic critics. This remains a plausible outcome presently.

Our final scenario, which we considered the least likely, was that the unrest and mobilisation over TTIP would lead to a progressive overhaul of the agreement. We argued that for this to happen there would need to be a debate in the US on TTIP conducted with the same degree of intensity as the European discussion.

Since we sent our manuscript off to the publisher, this third scenario of a progressive re-envisioning of TTIP seems a little less utopian than we imagined a year ago. Trade policy has become one of the main issues in the American presidential primaries, in the wake of some far-fetched proposals by Donald Trump to pull the US out of some of the trade agreements it has signed and to erect high tariffs on imports from China and Mexico. Bernie Sanders also likely owes part of his popularity to his critical (if less bombastic and xenophobic) stance against recent trade agreements. None of the key contenders in both parties support the ratification of the Trans-Pacific Partnership agreement between the US and several countries in the Pacific Rim, which is trumpeted as a key policy achievement by the Obama administration.

That criticism of the current trading system resonates with the public in industrialised countries is not surprising. Recent research has shown that academics’ and pundits’ opinions about the consequences of trade liberalisation have long underestimated its social costs. The losers from market-opening in the developing world – mainly blue-collar workers in advanced industrialised countries that have seen their well-paid jobs outsourced to low-cost economies – have much more trouble in finding new jobs than was long assumed by economists who merely speak of ‘job displacement’ in the wake of trade opening, as though workers moved seamlessly from one job to the next.  Moreover, they often lose significant spending power for the rest of their lifetime.  Trade agreements also make it more difficult for government to use a number of other instruments to redistribute income, to promote their own industrial strategy or to improve social, health and environmental standards – constraining the policy space available to them by outlawing all manner of measures seen to unduly restrict trade.

Taken together, the attention given to trade policy in the US primaries and these new findings on the social costs of trade liberalisation have provoked an intense debate amongst pundits. Usually confined to the odd story in the business pages, trade policy now features on a daily basis in the op-eds of major newspapers and on countless policy blogs.  Even on the conservative side, opinion-makers recognise that recent trade agreements have gone too far in promoting the vested interests of industry instead of genuinely liberalising trade, for example through its ISDS mechanism or provisions on intellectual property rights. On the more progressive side, commentators and scholars like Larry Summers and Dani Rodrik have argued that the general public perceives, rightly, that the current trading system is ‘a project carried out by elites for elites’ and should be ‘remade from the bottom up’.

Trade policy has been in the public eye in the past in a North American context thanks to the controversy surrounding NAFTA, which third party Presidential hopeful and millionaire Ross Perot famously said would lead to a ‘giant sucking sound’ as jobs were outsourced to Mexico. And the current US debate about trade is much more focused on distributive questions – who wins and loses economically from trade agreements – than the EU debate on TTIP – which is focused on the impact that the agreement has on levels of social, environmental and public health protection.

But what we do have now is a lively debate on trade policy across the Atlantic, with EU citizens part of a chorus of voices concerned about trade’s effects on broader social well-being.  What better opportunity to start rebuilding the global trading system than through TTIP?

We offered some ideas in our book as to how this might be achieved, while in the meantime many others have also been put forward. The bottom line of many of these proposals is that politicians should finally start to practice what they preach when they proclaim that trade is an instrument, not a goal.  Trade agreements should be negotiated on the basis that they should contribute to the real ends of our societies (fighting climate change, inequality, tax evasion, etc.) rather than simply maximising trade and investment.  This can be done through explicit positive integration commitments in agreements (e.g. by committing both sides to adopt the highest possible levels of social or environmental protection) or through provisions that provide sufficient real policy space for governments to pursue such policies domestically.

Today the thirteenth round of TTIP negotiations begins in New York. Let’s hope policymakers respond to the debate on both sides of the Atlantic and ensure that this is Round 1 of the new TTIP and the beginning of a refashioned global trading regime.

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