Contributoria

Article 2014 The Year in Review

Should we be afraid of TTIP?

It could be the world's biggest-ever free trade treaty, but critics are alarmed at its implications. Jon Card looks into the proposed Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US.

For the business community, the prospect of a free trade deal with the US is an exciting idea. It’s the richest market in the world and “making it in America” is a dream come true for entrepreneurs right across the EU. That’s not to say there isn’t already a substantial amount of cross-Atlantic trade; UK-US trade is currently worth more than £130bn per year. But trade is somewhat inhibited by a range of tariffs, duties, regulations and subsidies which leave a less than even playing field for businesses on either side of the ocean.

The EU says the proposed Transatlantic Trade and Investment Partnership (TTIP) has the potential to add £100bn to its economy. At a time of economic distress across the eurozone, anything that improves trade is seen as a good thing. For British politicians, including Eurosceptic Conservatives, TTIP nonetheless represents a long-held ambition. EU law bars the UK from negotiating such a treaty independently with the US, therefore they see this as a golden opportunity for English-speaking peoples to create even closer ties.

As it stands, the leaders of all the three main political parties - Conservative, Labour and Liberal Democrat - support the ongoing negotiations toward TTIP. Only the Green Party, along with a growing number of non-governmental organisations (NGOs) and private citizens, oppose its creation - but why?

There are some major areas of concern raised by opponents to TTIP, and citizens on both sides of the Atlantic would do well to understand what they are. Whether you come out for or against the proposed treaty, it raises big questions about the future of the entire planet.

Secret talks

Few people had even heard of TTIP until a feature in The Guardian by the columnist George Monbiot was published, which described the treaty as a “full-frontal assault on democracy”. Protests and online petitions were launched and soon the European commission was on the back foot. It had wanted to simply negotiate with the US and then put its work before a vote.

“I think the negotiators have been taken by surprise at the level of public interest”, says Ashley Fox, a Conservative Party MEP. “Generally trade negotiations take place in secret and then the end product emerges, and then we decide yes or no.”

For Green Party MEP Jean Lambert, the lack of scrutiny of TTIP is a big issue and remains so. She is less than impressed by how things have been done thus far. “We were told the negotiating mandate couldn’t be made public, but then it was, then there was the agreement to have a committee to follow this, now we are getting a positioning report on TTIP”, she says. “So it’s interesting that the EU parliament is wanting to follow this more closely and getting different answers from what we were told before.”

But beyond vague agreements on greater transparency, there is little that unites Lambert and Fox on their views of TTIP. They bitterly disagree on the impact of TTIP on trade, the economy, the NHS, the environment and on democracy itself.

ISDS

The big issue raised by the Monbiot feature and others is that TTIP will almost certainly include a legal mechanism known as Investor State Dispute Settlement (ISDS). What this means is that if the government passes a bill that adversely affects a company’s operations or assets, then it could potentially sue that government via a tribunal system. Monbiot raises the case of how cigarette manufacturer Philip Morris suing the Australian government via ISDS after it passed a law ensuring the plain packaging of cigarettes. Other big cases include the German government’s battle with nuclear power operator Vattenfall, after it banned nuclear power.

However, Fox says that campaigners are being alarmist and that businesses need to have protection from over-zealous governments. “Since 1975 the UK government has made 94 bilateral treaties and has never lost a case. It’s a myth that it [ISDS] undermines national sovereignty”, he says. “This is a trade mechanism to resolve the issue of when a government changes the law. Imagine a company had a seven-year rail franchise, but then after two years the government nationalised the railways. The company that had made the investment has effectively had their property confiscated. ISDS gives the company redress against a government.”

But Lambert says ISDS is an abuse of power and at the very least disputes between companies and governments should be in open court: “The big issue with ISDS is that it’s a tribunal system which is closed and not transparent. The US has a robust legal system, most European countries do too. What’s so bad about having these things in open court?”

Protections

Environmentalists are concerned that hard-fought-for EU standards and regulations could be overturned or lowered in order to accommodate US business. Trade deals often involve compromises and acceptance of practices. For Thomas McDonagh, of campaign group The Democracy Center, such compromises will undermine environmental protections and place the public at risk. “Europe has higher standards on food safety, GMOs and chemicals - the EU REACH regulations for chemicals is a good example. It is based on the precautionary principle – this requires that industry proves a chemical is safe before it is approved”, he says. “In the US the public regulator must prove that the chemical is unsafe before it can be restricted. They are completely conflicting systems approaches.”

Fox disagrees, saying that standards don’t need to be lowered, arguing that the principle of “mutual recognition” would suffice in many cases. “It’s a myth that TTIP will lower food standards and that we will be forced to eat GM food. What is illegal will remain illegal and what is EU law will remain EU law. You don’t necessarily need harmonisation; you can have the principle of mutual recognition, where one standard is seen as an equivalent to the other.”

Tariffs

The stated intention of TTIP is to boost trade, economic growth and increase jobs. But the opponents of TTIP are sceptical. “Tariff barriers to trade and investment between the EU and the US are already extremely low”, says McDonagh. “The goal of the TTIP is to harmonise the existing non-tariff barriers. This is trade-speak for our social and environmental regulations and standards.”

Lambert also questions which businesses are set to gain most. “There’s a whole lot of stuff on the benefits to business in general but it’s clear that it’s been the big businesses sat at the table. Whether small businesses will benefit remains to be seen.”

But on this Fox is scathing and he suggests that opponents of TTIP are simply opposed to free trade and anti-American. Also, along with the majority of his colleagues, he argues that tariffs are a big issue. “I don’t accept that tariffs aren’t an issue. If you want to export sports gear into the US you pay 32%, if you want to sell slippers it’s 26% - it’s effectively a tax. Some of the tariffs are low, some are not. If it was insignificant then we wouldn’t bother.”

The NHS

In the UK, the question of the NHS and TTIP is likely to gain a lot of attention as it is a highly emotive issue among the British public. Fox says bluntly that TTIP will make no difference to the NHS or any other European health system. “First of all, the health services are the prerogative of the national state. All the major political parties are committed to an NHS free at the point of use.”

However, he does admit that if a contract is granted to a private company that could stall attempts by later administrations to renationalise services. “If you are going to open up a contract for a number of years then you will have to honour that agreement. So if it is for 10 years you would have to wait for that period before it comes back into the public sector”, he says.

Lambert, however, argues that TTIP will lead to more private deals being made and ever greater liberalisation. “It’s not true that TTIP will demand the privatisation of the NHS, the question is whether the starting point of the agreement becomes a baseline”, she says “Therefore are we only going to have further liberalisation? Can we ever take back into public sector control things which have entered the private sector?”

Conclusions

The fierce debate over TTIP is welcome as it shines light on issues of key importance that electorates should be concerned about. The full details of the treaty are yet to emerge and politicians on both sides of the Atlantic will have their hands full when they do. However, those in the debate would do well to know when they are fighting on solid ground.

There are few in the business community who would not welcome easier and cheaper trade with the US or EU. When businesses are competing with one another just a few dollars per unit can make the difference between a sale or no sale. Those arguing that this is only in the interests of big business also forget that larger companies always have supply chains including many smaller firms. Therefore, to argue against the business benefits of TTIP is a losing battle.

But if this feature should do one thing it is to ensure that no one believes that the ISDS mechanism is some kind of left-wing paranoia. ISDS is a very real and potent mechanism that can indeed overrule the wishes of a democratically elected government if a company has made a deal with a previous administration. As the UK and other countries consider major infrastructure projects and the creation of new power stations, long-term deals with major companies look all the more troublesome in the context of a closed tribunal system. As Fox says the UK has never lost a case, perhaps he should include the word “yet”?

Image by twobee, courtesy of FreeDigitalPhotos.net

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