Burying TTIP: Why a rapid deal is improbable

Burying TTIP: Why a rapid deal is improbable

The chance for a Transatlantic Trade and Investment Partnership (TTIP) is drifting away with the economic recovery and upcoming political deadlines.

When Obama and Merkel met in Hannover for what will probably be Obama’s last visit in Europe, they both insisted on their countries’ special relationship as two leading figures of the western world. They also repeated their commitment to reaching a US-EU trade deal before Obama leaves the White House at the end of the year.

The Transatlantic Trade and Investment Partnership (TTIP) — which has just gone through its 13th round of negotiations since those started in July 2013 — would eliminate trade tariffs on goods (currently averaging 3%), reduce non-tariffs barriers by harmonizing legislation and standards, enlarge services markets, and open public procurement. The intended effect of TTIP is to create a harmonized market for 850 million people, boosting growth and creating jobs on both sides of the Atlantic.

While the pledge to complete negotiations quickly is probably genuine, it is unlikely that either both leaders really consider it likely for a deal to be brokered in the short-term. Multiple technicalities still necessitate several rounds of negotiations, and political sentiments on both sides of the Atlantic are far from ideal as popular concern remains high on details of the plan.

Battle on standards

Worries are of a different nature in the United States and Europe. The main concerns in the latter are the threat of poorer standards that a deal with the US could introduce.

In Germany, where protests have gathered the highest numbers, the concern is that American multinationals would be able to sue European states and force them to lower agricultural and environmental standards (see chart below). On the whole, Europeans fear their markets being flooded with genetically modified crops, or the use of antibiotics and hormones in beef.

While such concerns arise from public perceptions, some fundamental national interests are also threatened by the deal as negotiated in its current form. In the UK, opponents fret the National Health System would suffer, as private firms running NHS services could technically sue the government if it chose to return the services to the public sector. France also worries that standard harmonization could lower labor rights, and insists on safeguarding geographical indications for agricultural products.

The debate over ISDS (Investor-state dispute settlement) has long been at the center of those concerns, since it would allow investors to sue national governments in private tribunals. The measure is highly unpopular in Europe, although it is a standard in most trade deals passed in the last decades and the US deems it indispensable.

Rising protectionism in the United States

In the United States, trade has been at the center of the presidential campaign, with anti-establishment candidates on both sides voicing their opposition to the Trans-Pacific Partnership (TPP) — a deal passed last year between the US, Japan, and 10 other Pacific countries that has yet to be ratified by Congress.

Hillary Clinton, the only candidate who publicly supports free trade, will probably stick to her position on this, and give up some ground on other social policies her anti-trade rival for the Democratic nomination Bernie Sanders has called for, including on minimum wage and college tuition fees. Republicans seem united in their opposition to trade, and will block any attempt to pass a deal before the elections in November.

Americans fear opening markets with Asia would hurt jobs at home, and concerns over standards are also present. But on TTIP, the main concern comes from giving European companies equal access to the US government procurement market, a measure that has little chance to pass through the US Congress even if Clinton is to be the next President of the United States.

Disputed elections in Europe

Campaigns are also looming in Europe’s most influential states. Both Germany and France will elect new governments in 2017, and the recent rise of nationalist and anti-establishment parties won’t help negotiations advance. In France, the National Front is strictly opposed to trade deals, and the French president Hollande — who has been mostly silent on the negotiations — fears embracing trade would further alienate part of the Socialist Party’s traditional electorate.

The trade deal is as divisive in Germany, and Merkel is already under pressure on her refugee policy. Thus the Chancellor is unlikely to use political capital on reaching a deal with the U.S. (according to a recent poll, just 17% of Germans support it), especially as Germans have grown increasingly anti-American following the Snowden revelations.

The Brexit vote could also have an immediate impact. If Britons choose to leave, British MPs claim it would take more than two years to negotiate a new trade deal with the EU. The UK would have to negotiate separately with the US, a prospect Obama’s comments during his visit on 22 April have already obscured. With a Brexit, Brussels would lose a major trade deal backer when an eventual deal is discussed at the European Council.

Marketing trade

In addition to popular concerns and toxic political agendas, the process used for negotiations and selling a potential deal has also been unpopular in Europe. The lack of transparency made citizens feel the agreement would be the result of back-door deals between multinationals and governments at the expense of consumers. As long as national governments won’t join European bureaucrats in selling a deal, it is unlikely that it could become popular as EU citizens grow wearier of the Brussels bubble and its liberal medicine.

Additionally, backers of TTIP have failed to capitalize on its potential economic benefits in public opinion. Back in 2013, the Centre for Economic Policy Research, a think tank, predicted that TTIP could increase the size of the EU economy by €120 billion (or 0.5% of GDP) and the US by €95 billion (or 0.4% of GDP) by 2027. However, studies have shown different results, and the incomplete picture of the actual effect on jobs has weakened the economic argument.

The window is closing

Moreover, the economic argument could be dispelled by the return of growth and a sense of stability both in America and in Europe. Most economies have now returned to pre-crisis level, and governments hope growth figures will keep improving, and with them job markets and public confidence.












Altogether, these prospects will likely remove the sentiment of urgency for a deal in the short run.

The negotiation and ratification process for TTIP could accelerate after election season ends and once political transitions are assured, for a potential final adoption by early 2018. However, that is the most optimistic prospect, building on liberal, pro-free trade leaders succeeding in retaining power on both sides of the Atlantic.

Categories: Economics, Europe

About Author

Julien Freund

Julien is an analyst with a focus on Europe. He has worked as a lobbyist in Paris and Brussels and has written extensively on the rise of nationalist parties. He holds two master's degrees in geopolitics and international relations and in European relations, and received his BA in economics and social sciences from the Catholic Institute of Paris.