FEPS Fresh Thinking

During the weekend I received some emails and comments on the proposal to establish the transatlantic trade and investment partnership (TTIP/TAFTA).

Talks between the EU and US started this summer. In the public debate taking place in Europe over the TTIP negotiation, it seems that we Europeans have to accept US standards and law and to adapt our system to the US system. An agreement in its proper definition is a negotiation achievable between two partners on an equal basis.

Just by coincidence I read an article today in the Financial Times that warns that Brussels’ stance could hit the trade deal and that Germany is pushing for tough data protection controls to be included in a proposed EU-US trade pact. This is fair enough in the aftermath of the NSA scandal. An agreement between the US and Europe cannot be only an agreement to implement US rules and follow the US business model. Europe guarantees the personal data of its citizens. TTIP has to consider this as a precondition before starting negotiating on any other technical trade item!

There are obviously a lot of differences in approaches and thoughts on TTIP. Even Americans are critical towards the current state of negotiations. For example, in a conference in Washington at the beginning of October, which was organised by FEPS in cooperation with Nobel Laureate Joseph Stiglitz and the Center for American Progress on macroeconomic cooperation and the international monetary system it turned out that not all of the Americans are supporting the argument that a single transatlantic market is a powerful vehicle for boosting economic growth.

This argument was also brought into the debate by the very critical study published in October 2013 by the Seattle to Brussels Network (S2B). It stipulates that a more realistic boost of the growth rate would be only 0.1% instead of the promised 1% of EU commissioner Karel de Gucht. If the reality is 0.1%, unfounded promises of increased trade and job creation can even reverse social and environmental regulatory protections. We all know that this could also be very risky for social cohesion and finally for democracy.

If that is the danger we as Europeans should simply not accept any TTIP agreement. We should then continue with our traditional trade relations. But ambitious proposals are often not so bad as foreseen. The best example is the EU as such!

With over one third of global trade such an agreement could create the world’s largest free trading bloc with all the implications, which will go far beyond the Atlantic. Trade and a different “form” of capital mobility create economic growth and jobs. This is not only economic theory in the pure Ricardian sense, but also an economic reality of globalisation. TTIP could be an example to establish decent work and it must prove that it is possible – even in times of ruthless globalisation and rising inequalities due to the race to the bottom – that decent work and social standards become a basis of a trade system based on the respect for citizens’ rights and their overall working and living conditions.

In the international system, we have rules and conventions signed by governments to protect citizens, consumers and workers. Regrettably they are not binding and hence not implemented at all. But if these basic rules are accepted and if in addition to that the EU and the US agree to go further, TTIP can foster social dialogue, create more decent employment, and increase respect to worker’s rights and social protection.

This is then not only a contribution to social peace but could stabilise the economy, fight inequality, stimulate aggregated demand and boost growth. If this will be the approach TTIP is a real opportunity to establish a model of trade based on respect and solidarity for the benefit of growth and jobs. Additionally the question that remains open is whether TTIP will reduce the role of the state in supporting innovation and economic development.

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  1. I am not at as positive as Ernst about the impact of TTIP on the EU.
    First, the estimated increase of GDP is anything but reliable.
    Where should it come from? From more division of labour, which implies closure of companies on one side of the sea and losses of jobs.
    Second, the abolition of regulatory obstacles will oblige both sides to abandon their sovereignty in this sensitive area. The EU is likely to be worse off because it will have to face a two-stage negotiations, among the 28 member states and with the USA. And big business is likely to obtain a dominant lobbying influence.
    There EU negotiators will have to be extremely prudent.

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