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TTIP – the trade deal at the heart of Europe’s democratic deficit

Submitted by on 23 Feb 2015 – 14:47

The February-March issue of the Government Gazette features a balanced and evidence-based overview of the Transatlantic Trade and Investment Partnership (TTIP) negotiations, with opinion and analysis from both sides of the debate. Here, Polly Jones from Global Justice Now argues that TTIP holds negligible economic benefit for EU citizens and could lead to further privatisation of public services across Europe from outside existing democratic political channels.

The eighth round of negotiations on the Transatlantic Trade and Investment Partnership (TTIP) concluded at the start of February 2015. There is little sign of progress, despite the ambition of political leaders including Barack Obama and David Cameron, who heralded the trade talks as setting standards for the 21st century and establishing a blueprint for future trade.

TTIP is to be a key tool in improving growth and increasing jobs in Europe and the USA, at a time when the two largest economies are struggling to maintain, let alone increase, their GDP. But the case for TTIP is weakened by the lack of credible evidence to substantiate the claims of growth and jobs gains. The European Commission’s own studies suggest up to 1.3 million European workers could lose their jobs, which is one of the reasons that UK trade unions are unanimous in their opposition to TTIP. The growth claims are based on clumsy models which even in the best case scenario, predict that each person will only benefit by £2 per week and not until 2027.

© Jess Hurd/NoTTIP

© Jess Hurd

However, there are three ways TTIP aims to boost growth. The smallest and least controversial part of the deal is to reduce tariffs between the EU and USA. By reducing costs for exporters there could be new opportunities to trade and, if the reductions are passed on to consumers, lower prices for goods and services at the end.

However 80 per cent of the deal is concerned with minimising non-tariff barriers. These are the rules and regulations which goods and services must meet in order to be traded between the EU and USA. The idea is to find a common standard between the two trading blocks to make bilateral trade simpler.

The example most commonly used is of the regulations surrounding seat belts. Currently the EU and US have different standards, which are arguably no less safe but because they are different they generate unnecessary red tape and delays as standards are double checked and seat belts adjusted. In this sense, the different regulations are a barrier to trade between EU and US exporters.

Much of the controversy surrounding TTIP is about its impact on a wide range of standards very different from seat belt safety. For example, the EU applies the precautionary principle whereby something must be proven to be safe to be used in Europe. In the USA, the test is the opposite, something must be proven to do harm if it is to be banned. At the start of TTIP negotiations, 60 US agricultural export and food marketing organisations asked the US trade representative for US food standards to be secured in Europe through TTIP, instead of the EU’s more stringent precautionary principle. Food and farming groups in the EU and US are deeply concerned that TTIP is a backdoor to lower standards which are not in the best interests of consumers, farmers, animals or the environment.

There are many areas of everyday life which could be affected by a race to the bottom in standards between the two economies, including labour standards, health and safety rules, public procurement, digital rights and regulation of financial services. In most cases the EU sets higher standards, which could only mean a levelling down.

There is considerable concern about the impact of TTIP on public services. For the first time in a European trade deal, governments must explicitly exclude their public services if they do not want them to be liberalised by the deal. This is difficult because there is not a clear definition of what constitutes a public service. There are many services, further education in the UK for one, which are perceived as a public service but do not fit the criteria. Furthermore, as waves of austerity measures have swept Europe, many governments have chosen to cut public services and open them up to greater liberalisation.

In the same vein, these governments are not choosing to protect public services from the impact of TTIP, even though they could. According to YouGov, more than two thirds of people in the UK do not want public services run by private companies, which is why this is so controversial.

The third arm of TTIP is a set of new protections for investors, known as Investor State Dispute Settlement (ISDS). These rules have increasingly been included in bilateral trade agreements to give companies an extrajudicial avenue, outside of national law, to pursue damages against a government as a result of government decisions, but never before on the scale of TTIP. The tobacco giant, Philip Morris, used these rules to sue the Australian government for the likely reduction in its profits as a result of the plain packaging introduced on tobacco products. Veolia sued the Egyptian government for raising the minimum wage. Energy companies sued Argentina for freezing energy prices for consumers. A major concern in the UK is that ISDS could make the cost of renationalising public services prohibitive, thereby locking in privatisation.

Molly Scott Cato MEP speaking at TTIP negotiations in February 2015. © Jess Hurd/NoTTIP

Molly Scott Cato MEP addressing TTIP negotiations in  Brussels, February 2015
© Jess Hurd

While it is true that the UK is already party to many investment rules of this nature with many countries and has not yet lost a case, the UK has not signed an investment treaty with the USA before. UKTI argues that “Americans are, in general, inclined to start litigation or to threaten it – probably more so than the British”. Given that the Department for Business Innovation and Skills’ own study also found that an “EU-US investment treaty that does contain ISDS is likely to have few or no benefits to the UK, while having meaningful economic and political costs”, it is hard to make a case for ISDS in TTIP. This is why 150 000 citizens across Europe participated in a consultation on the inclusion of ISDS in TTIP, with 97 per cent of them arguing it should be removed from the deal because it takes power from governments and hands it to corporations.

Negotiators claim that many of the concerns about the impact of TTIP are exaggerated. Yet without public scrutiny of the negotiating texts and the positions of national governments, this cannot be substantiated. Furthermore, elected representatives, from MEPs to MPs, will not be able to amend the deal but will only be able to vote to accept or reject it in its entirety once the negotiations are complete. There is a democratic deficit, with European citizens being asked to simply trust that the unelected negotiators strike a ‘good deal’, whatever that signifies.

It is possible that TTIP may never get agreed beyond a deal on harmonised seat belt regulation. But its impact outside of the negotiations has been much greater. The scale of these bilateral trade negotiations has exposed the dysfunctionality of the multilateral trade system nominally governed through the World Trade Organisation. The absence of scrutiny by MPs during the negotiation process has renewed questions about the proper relationship between the European Parliament and national parliaments and the transparency of the negotiating process. The opposition to TTIP has also brought more than a million citizens across Europe together. At the very least we are scrutinising European decision-making and engaging with our MEPs for the first time. Wider still, there are signs that the foundations of a European movement challenging neoliberal orthodoxy and austerity is being built.

Polly Jones is Head of Campaigns and Policy at Global Justice Now, a third sector organisation campaigning against social and economic inequalities around the world.