The Transatlantic Trade and Investment Partnership has met with opposition from FrenchPresident Franois Hollande and from the public. Can it be salvaged? Simon Wilson reports.
What's happened?
The future of the Transatlantic Trade and Investment Partnership (TTIP) a huge US-European Union free-trade deal looks shakier by the day. Talks began three years ago, with high hopes for a relatively straightforward negotiation that would create an "economic Nato" to strengthen the bond between America and the EU. But talks have dragged on and the public mood has turned against TTIP.
Last month in Hanover, President Barack Obama joined German Chancellor Angela Merkel in urging the completion of TTIP talks this year, while also freely conceding that no such thing was remotely likely, given the political climate and forthcoming elections in both the US and key European countries (including Germany and France). Then this month TTIP was hit by a double whammy, adding to the sense that this deal may well never happen.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
What are they?
First, a trove of documents on the talks leaked to Greenpeace seemed to confirm the fears of TTIP's European opponents, who say the deal would put European standards on issues such as environmental protection and consumer rights at risk.
Second, just as the latest round of talks was due to start, France's President Franois Hollande abruptly announced he would reject TTIP "at this stage" because France was opposed to unregulated free trade, and he would never accept "the undermining of the essential principles of our agriculture, our culture, or mutual access to public markets". France's lead negotiator, Matthias Fekl, said the current draft was a "bad deal Europe is offering a lot and we are getting very little in return".
What does TTIP cover?
The deal would cover a vast range of trade and investment in goods and services between the world's biggest national economy and the world's largest single market, making it the biggest bilateral trade deal ever, covering countries that between them generate 45% of global GDP.
Sectors covered include telecommunications, agricultural products, textiles, intellectual property and financial services. The aim is to lower trade tariffs and regulatory barriers by removing "non-tariff barriers" for example, by harmonising standards on a range of regulations. The idea, as with all free-trade deals, is that lower barriers to trade mean more takes place, boosting growth.
How much of a boost?
The UK government claims that Britain's GDP would get an annual 0.35% lift by 2027 as a direct result of TTIP. That's around £10bn. The figure for the EU as a whole has been put at £100bn. However, such claims should be treated with caution. First, the upside from lower tariffs is limited by the fact that the US and EU are already among the world's most open markets the average EU external tariff is just 3%.
Second, the Centre for Economic Policy Research, which came up with the government estimate, bases its calculation on the assumption that in some sectors IT, chemicals and cars some 37.5% of regulations can be harmonised, an aspiration seen by many as optimistic.
Why is TTIP so controversial?
In part, it's because removing regulatory barriers the meat of TTIP is harder to do, more contentious, more opaque and less obviously a win-win than cutting tariffs. Reconciling the different regulatory philosophies is especially hard, says Simon Nixon in The Times. "In a nutshell, the EU tends to regulate more broadly, but when the US regulates, it tends to do so more deeply."
Opponents are particularly rattled by the use of special tribunals to resolve disputes between investors and governments, even though these are now standard in free-trade deals, including those forged by the EU. To TTIP's opponents, these tribunals and the conditions of strict secrecy in which the talks are being conducted confirm the fear that TTIP is a plot by the forces of global capitalism to hand power to megacorporations at the expense of governments, consumers and voters.
Are these fears justified?
It's seen that way by many, and not just hard-left conspiracy theorists. Free trade, of course, was once a position embraced by dissenters and radicals the likes of the Anti-Corn Law League and the Manchester school of economists. Some left-liberals still understand that global trade has taken billions of people in China, India and elsewhere out of poverty (see box). But in Europe and America, public opinion has swung sharply against free trade in reaction to the tensions of the economic crisis, and a renewed focus on inequality.
"There is nothing populist," says Philip Stephens in the FT, "about noticing that globalisation has seen the top 1% grab an ever-larger share of national wealth." Karl Marx argued that capitalism was a system of institutionalised exploitation of the workers by the bourgeoisie. Today, though, it is the middle classes who most fear its consequences. Until politicians come to terms with that, deals like TTIP will be ever harder to pull off.
Free trade falls into disrepute
The last prominent figure on the left truly to graspand defend the case for free trade as the best route toprosperity for the disadvantaged of the world was GordonBrown, says Philip Collins in The Times.
Today, everyonefrom Labour's John McDonnell (who calls TTIP "modern-dayserfdom") to David Owen (for whom avoiding the ogreof TTIP is the best argument for Brexit) to Hillary Clinton(who has switched from backing TTIP to opposing it likeher hardline left-protectionist rival Bernie Sanders) appearsto have moved ever closer to the view of Marx, who wrote:"The bourgeoisie... has set up that single, unconscionablefreedom free trade. In one word, for exploitation, veiledby religious and political illusions, it has substituted naked,shameless, direct, brutal exploitation."
-
Ofgem proposes new energy tariffs with low or no standing changesStanding charges have invited public backlash as households battle high energy bills
-
Google shares bounce on Gemini 2.0 launchGoogle has launched the latest version of its Gemini AI platform, and markets have responded positively. Is it time to buy Google shares?
