Thousands of people recently demonstrated in Brussels against free trade deals negotiated by the EU. This happened just days before a meeting of EU trade ministers in Bratislava last Friday, which was considered the last push to salvage the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the United States. Not only is Europe divided on the deal, but the talks have been extremely secretive.
This placard carried by anti-TTIP protesters in Brussels goes to the heart of the problem, namely the secrecy characterizing the deal.
It appears that the two partners wanted the negotiations process to remain well under the public’s radar, counting on people being distracted by other matters, such as “Brexit”, terrorism, the refugee crisis, and the ongoing economic slump.
It proved impossible though to keep voters and taxpayers on both sides of the Atlantic completely in the dark about the terms of a deal that has the potential to affect their lives, jobs and businesses directly and decisively.
What is the story behind this secret agreement that Obama and Merkel have been pushing for so strongly? Why is there no transparency? Why has information that is of crucial public interest been withheld throughout the process?
Why all the Secrecy?
Public statements and information on official websites about the agreement are rather vague and do not mention, or rather resist going into, the specifics of the deal. This has created an atmosphere of suspicion and mistrust.
The European Commission has maintained the covert nature of the negotiations by introducing a new regulation, allowing only politicians to view the text in a secure ‘reading room’ in Brussels. According to EU Trade Commissioner Cecilia Malmström, this was allegedly necessary because of “important vulnerabilities in the last rounds of negotiations“.
In some cases, members of EU parliaments are allowed to read the documents in their home countries – but the rule that they must do so in a sealed room while security is monitoring their every move applies there as well.
The TTIP reading room for MPs in Germany: prior to using it, a confidentiality agreement must be signed, mobile devices have to be handed in and are locked away, it has room for a maximum of 8 people, the computers are not networked (neither LAN nor internet connection). A handful of reference works are available in printed form (the ring binders with the white spines at the back).
Security has been tightened: the EU leadership didn’t like it when representatives of member states with access to the details started leaking information on the deal and national parliaments came into possession of relevant documents. As the EU Commission put it, this resulted in “hundreds of people actually having uncontrolled access“.
The only logical explanation that suggests itself to account for the extraordinary furtiveness of these talks, is that the deal includes terms that will have critical implications for the average citizen that are likely to be resisted.
In the meantime there have been numerous large demonstrations against TTIP in Europe. Support for these protests is likely to grow. This is particularly so in light of the shifting political mood in many Western countries, where nationalist and populist movements are increasingly gaining favor with voters.
A sizable part of the public is adamantly opposed to the deal by now, as it is widely suspected that will affect people’s social and economic welfare negatively and that is apt to severely restrict national sovereignty.
A recent demonstration against TTPI in Berlin
TTIP promises greater economic growth, more jobs, the harmonization of environmental protection, health and safety regulations, and even improvements in banking and financial services. If the European Commission’s estimates are to be believed, TTIP appears to be the treaty of the century!
The Commission expects it will increase EU economic output by €120 billion per year, U.S. economic output by €90 billion and the global economy by €100 billion, while creating millions of new jobs.
In a report released last year, the World Trade Institute stated that TTIP will lead to GDP growth of up to 1.6% across the EU, exports will soar, and wages will rise. Even income inequality is supposed to decrease somewhat, as an above average improvement in wages for low-skilled workers is expected.
Moreover, prices are supposed to decline by up to -0.9% in the majority of EU member states [ed. note: if this is true, then it will give the ECB a reason to inflate the money supply even further, since according to modern central bank orthodoxy, falling consumer prices are considered “bad”!].
The report specifically identifies manufacturers, water transport, insurance services, processed foods, chemicals and pharmaceuticals as the sectors reaping the greatest potential benefits from the treaty.
It also promises a great deal for SMEs, which are supposed to get better market access for their exports. The list of benefits is long and the numbers look very promising!
Let us take a look at the current state of trade between the U.S. and the EU. The chart below shows that the U.S. trade balance with the EU has been negative over the past several years.
While exports to the EU have increased by 57%, an even greater surge in imports has pushed the trade deficit up. However, even though it has doubled since 2010, it does not appear to be very large overall.
U.S. trade of goods and services with the EU in millions of US Dollars. Source: Bureau of Economic Analysis – U.S. Department of Commerce
The question is: In light of the EU’s stringent trade laws, does it really deem it necessary to loosen its grip on its standards and regulations? In other words, are these standards really the main barrier preventing the trade balance from improving? This seems highly doubtful.
Below are the top 10 EU trade partners in merchandise trade as of 2015:
EU, top 10 merchandise trading partners. Source : European Commission – Directorate General for Trade, Eurostat
The U.S. is already topping the list of the EU’s global trade partners in goods, followed by China. Unlike the U.S., the EU sports a trade surplus. While every country would like to increase its exports, this sudden willingness to compromise on standards and regulations is surprising.
More importantly, one wonders why the EU leadership deems it worth withholding information from the public and jeopardizing the already strained political relationship with its constituents even further.
Public Mistrust, Confusion and Anger
According to Time Magazine, Europeans now perceive TTIP as “an American plot to undermine their democracies and national environmental standards.” Leaks have brought controversial issues to light, particularly with respect to the privatization of public services (the UK’s NHS may be saved after Brexit, but what about the rest of Europe’s welfare systems?), loosening banking restrictions for U.S. banks (which could be quite risky in light of monetary policies that are already subsidizing the financial industry and extracting wealth from the public).
One of the most controversial issues concerns the introduction of Investor-State Dispute Settlements (ISDS) though, which are thought to effectively give unelected transnational corporations the power to dictate the policies of democratically elected governments (to an unknown extent).
Populist parties in Germany and France are opposed to the agreement, which they regard as a risk to society and social welfare, as well as an abrogation of national sovereignty. According to recent data, a mere 17% of Germans still consider the trade deal a good thing.
According to a survey conducted by German broadcaster ARD in May 2016, 70% of Germans are against TTIP, compared to 55% in the early stages of negotiations back in 2014. Also, 79% see the agreement as a risk to consumer protection, and 83% disagree with the secretive nature of the negotiations.
ARD survey from early May 2016 – public opposition to TTIP in Germany has increased to 70% from 55% in 2014. Evidently, TTIP is not exactly a vote-getter, which makes its enactment less likely the closer nation-wide elections in important European countries come. Source: Der Spiegel
This suggests that as more information was leaked to the public, the more aware and wary it became of the deal and the risks it involves. Even in the U.S. public support has in the meantime plunged to 18% from 53% in 2014.
It also seems that Ms. Merkel is by now almost alone in pushing for the pact: Last spring, French trade minister Matthias Fekl said that the EU had offered more than it would receive in return, stating: “There cannot be an agreement without France and much less against France.” On several occasions French officials have called on the bloc to suspend the deal altogether.
Environmentalist groups are major opponents of TTIP as well, particularly Greenpeace. In May this year, the organization released an extensive report, exposing confidential information pertaining to the agreement.
Daniel Mittler, the political director of Greenpeace International said to the press: “Our impression is that this is indeed, as we had feared, a document that puts large corporations, corporate power at the center of policy making.” Jorgo Riss, the director of Greenpeace EU, was quoted as saying: “The way is being cleared for a race to the bottom in environmental, consumer protection and public health standards.”
The challenge is to reconcile differences between two often strongly opposed mentalities, particularly on matters like banking, the environment and health services. In areas such as cosmetics, the EU e.g. bans animal testing, an issue on which the two sides seem to be worlds apart.
Leaks from EU negotiators inter alia indicate that “the US expressed that it would have to consult with its chemical industry on how to position itself” (this was in reference to potential interference by chemical and fossil fuel companies).
TTIP seems to be making it quite easy for big corporations to influence legislation, which is widely seen as a threat to the high environmental protection standards currently in place in Europe.
French trade minister Matthias Fekl – France (the original home of Mercantilism) has expressed reservations about the treaty at a fairly early stage already. However, the French are probably not so much worried about corporate influence per se, but rather the possibility that it may fall short of sufficiently “entrenching the interventionist mixed economy”, to paraphrase Murray Rothbard (see also further below for more by MR).
Will TTIP go Through?
Currently the main obstacle is to actually finalize the negotiations. President Obama is personally strongly motivated to sign the “largest trade agreement to date” before he leaves office, which would add a historic trans-Atlantic trade partnership to his list of presidential achievements.
Neither party can really afford for the negotiations to drag on until 2017, which is an election year in both France and Germany. Following the EU trade ministers’ recent talks in Bratislava, Slovakia’s minister of trade Peter Ziga remarked though: “[T]he debate showed that a conclusion of the TTIP negotiations by the end of the year is unrealistic”.
Several factors support this conclusion, such as growing frustration with U.S. demands and the increase in anti-establishment and anti-globalization sentiment manifesting itself in the protests, which have taken aim at the almost finalized free trade agreement with Canada as well.
Even though the anti-free trade Austrian government is divided over the Canadian deal and two regional parliaments in Belgium have rejected it as well, it appears the deal has a better chance at getting signed than TTIP.
Negotiators of both parties said they will address the concerns of critics through joint declarations. It remains quite a challenge though, as the deal has to be approved by 38 national and regional parliaments, a process that could take a long time.
Conclusion – Trade Treaties do not Represent Genuine Free Trade
TTIP is not a free trade agreement – rather, it is yet another example of “managed trade”. Keeping the negotiations secret has certainly cast a pall over the intentions behind the deal and whether it will actually be in the best interests of American and EU citizens.
Murray Rothbard was highly critical of trade treaties such as NAFTA. In reality, free trade requires no treaties – as Rothbard pointed out, genuine free trade is a unilateral policy. There is no need to ask anyone’s permission to remove one’s trade barriers. Here is Rothbard on NAFTA: “The folks who have brought us Nafta and presume to call it “free trade” are the same people who call government spending “investment,” taxes “contributions,” and raising taxes “deficit reduction.” Let us not forget that the Communists, too, used to call their system “freedom.” In the first place, genuine free trade doesn’t require a treaty (or its deformed cousin, a “trade agreement”; Nafta is called a trade agreement so it can avoid the constitutional requirement of approval by two-thirds of the Senate). If the establishment truly wants free trade, all it has to do is to repeal our numerous tariffs, import quotas, anti-“dumping” laws, and other American-imposed restrictions on trade. No foreign policy or foreign maneuvering is needed.
If authentic free trade ever looms on the policy horizon, there’ll be one sure way to tell. The government/media/big-business complex will oppose it tooth and nail. We’ll see a string of op-eds “warning” about the imminent return of the 19th century. Media pundits and academics will raise all the old canards against the free market, that it’s exploitative and anarchic without government “coordination.” The establishment would react to instituting true free trade about as enthusiastically as it would to repealing the income tax.
It appears to be primarily an agreement written by big business and its lobbyists for the purpose of better positioning large corporations in the European and US markets at the expense of the quality of products offered to the public.
With secrecy comes mistrust and TTIP, which is championed as the biggest trade deal in modern history by unelected officials holding countless meetings behind closed doors with powerful special interests, could well turn out to be the most “undemocratic” one as well.
Charts and tables by U.S. Department of Commerce, Eurostat, Der Spiegel
Chart and image captions by PT