TTIP: Friend or Foe for Europe?

TTIP: Friend or Foe for Europe?

Commonly referred to as TTIP, the Transatlantic Trade and Investment Partnership is currently at the center of a major controversy in EU-US relations.

There is increased fear of multinationals among citizens and government officials, who claim that the TTIP would transfer power from elected politicians to unelected corporations. On the other hand, the European Commission promotes the benefits of the partnership, claiming it would bring 100bn (euros) in growth to the Eurozone, and 80bn to the US each year. If that’s the case, how can someone argue against those figures? Unfortunately, the numerous economic benefits resulting from this partnership are balanced, if not outweighed, by a feeling of corporate invasion. Citizens of both Europe and the United States need to start asking their leaders some questions.

In an article for ‘Le Monde Diplomatique’, director and founder of Global Trade Watch, Lori Wallach leads the way by asking a very relevant question: “What would happen if foreign companies could sue governments directly for cash compensation over earnings lost because of strict labor or environmental legislation?”

In fact, under the TTIP agreements, both sides of the Atlantic will have to conform to the free trade norms established by large EU and US corporations. Failure to do so would be punishable by trade sanctions or payment of millions of dollars in compensation to such corporations.

According to Wallach, TTIP’s a “stealthy delivery mechanism for policies that could not survive public scrutiny”, providing a sort of Trojan horse cover for “grandiose new rights and privileges for corporations” and permanent constraints on government regulation.

Increased legislative power by big multinationals could have serious political and economic spillover effects for Europe.

TTIP threatens to divide EU politics

European government’s fear of TTIP emanates predominantly from a clause in the trade pact known as ‘the investor-state-dispute-settlement (ISDS). ISDS would allow investors to take governments to international arbitration tribunals rather than to domestic courts. In other words, it would allow corporations to sue foreign governments for loss of profit.

The Commission responded by launching a civil society consultation process on ISDS. Of the 150,000 respondents, 97% were opposed to the idea, reflecting the publics concern on how this mechanism would impact Europe. Following this consultation, there will be further meetings with EU governments and the European Parliament as well as NGOs, trade unions and businesses with the scope of developing new specific proposals for TTIP negotiations that would address general concerns surrounding the deal.

The Commissions response sparked divisions within the European Parliament. Some political groups have criticized the Commission’s conclusions arguing they were made too quickly and without enough consideration. S&D group trade spokesman David Martin claimed the Commission seemed to be receptive to citizens concerns but was very slow to react. Similarly, Yannick Jadot, vice-chair of the Parliament’s INTA committee, stated that the Commission is getting lost in the detail and that it has a dangerous tendency to dismiss criticism with which it does not agree. Others, including Godelieve Quisthoundt-Rowohl, chairperson of the EPP working group on the TTIP, praised the EU’s executive response pronouncing that the EPP group is in favor of an effective ISDS system that will protect European investors by implementing a well-balanced approach to TTIP.

MEP’s will have to agree to any deal before it can come into force across the EU. Governments, particularly Germany, have also voiced their opinion in light of ISDS negotiations. Despite Germany having the most to gain from the partnership, being Europe’s top exporter, Berlin has taken a strong stance against the implementation of an ISDS clause. The currency crisis, in addition to the NSA surveillance scandals, have eroded popular trust in multinationals and governing elites. Merkel is seen as risk-averse and doesn’t want to risk popular backlash by supporting TTIP negotiations.

TTIP and Europe’s Economy

The Commission’s assessment of the likely benefits of the TTIP is based on analysis carried out by the Centre for Economic Policy Research (CEPR) in September 2013.

The study predicts that the TTIP deal would increase the size of the EU economy around 120 billion Euros (0.5% of GDP) and the US by 95 billion Euros (0.4% of GDP). CEPR also examined individual sectors that are likely to benefit, including metal products (exports up 12%), processed foods (up 9%), chemicals (up 9%), transport equipment (up 6%) and motor vehicles taking the lead with a 40% increase in exports.

The commission believes an increase in trade flows would increase competitive pressure within the EU. Companies will have to work harder to stay efficient, resulting in the whole European economy becoming more productive.

Increased growth should also create more job opportunities. According to the Commission’s own estimates, every billion euros of trade in goods or service supports around 15,000 jobs in the EU.

The deal would unite two of the world’s biggest economies, in a market of 820 million consumers, responsible for 60% of global GDP. Proponents of TTIP claim that given the deadlock of world trade negotiations, TTIP would create a model for global trade that the big economies might feel obliged to follow.

However, issues with TTIP are too costly to be ignored. The ISDS clause poses a serious threat to European democratic legitimacy (something European leaders have been trying to overcome since Europe’s inception). Moreover, opponents argue that reforming and harmonizing different regulations that govern business and industry in the US could threaten consumer protection, social rights, health, the environment and data protection.

European leaders are faced with a major question: Is this deal worthwhile?

Categories: Economics, Europe

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