TTIP Of The Iceberg

TTIP Of The Iceberg

Admin at 10:02 am May 18, 2015

Members of Uplift outside Leinster House, Dublin last month (top) and Dr Julien Mercille (above)

If passed The Transatlantic Trade and Investment Partnership will introduce a new wave of regulation-free trade between America and Europe. But is it good news for Ireland? If only we had a smouldering French-Canadian egghead to explain it all….

Dr Julien Mercille writes:

TTIP (pronounced “Tee-tip”) is the Transatlantic Trade and Investment Partnership, a US-EU trade deal that political leaders have been attempting to implement for the last two years. It hasn’t been discussed a lot in the media. One reason is surely that if more people knew about it, popular opposition would rise, although there have already been protests against it.

President Obama is currently attempting to obtain from the US Congress the authority to deliver trade deals faster, including TTIP, but negotiations have been animated as a number of Democrats are opposed. Some in Congress have said an arrangement could be passed this week.

At the same time, the European Parliament will soon vote on TTIP, on June 9th. It will then debate many issues, principles and red lines related to the proposed pact. So the next few days will be interesting.

One of the most important points about TTIP is that although it is often referred to as a ‘trade deal’, in fact, it’s much better to think of it as a deal that seeks to alter regulations to benefit corporations.

Secondly, there has been a big push from politicians to present TTIP as key to revive Europe’s stagnating economies, implying that if we can only pass it, an economic bonanza awaits us and jobs will be created. However, as economist Dean Baker said, this is ‘complete nonsense, unless we define down bonanza to mean finding a quarter on the street’. Therefore, ‘as growth policy, this trade deal doesn’t pass the laugh test’.

An analysis by the UK-based Centre for Economic Policy Research is regularly quoted in support of the deal. What it says is that TTIP would increase the EU’s GDP by €119 billion and US GDP by €95 billion. This represents a 0.5% increase in EU GDP and a 0.4% increase in US GDP.

But this is not at all as fantastic as it might sound, for the following reasons. To start with, it’s based on economic modeling, forecasting and estimating, what some would call guessing. Also, the think tank that produced the study is overall very favourable to the deal.

But let’s say we put all that aside and look at their numbers. The study says that the above GDP increases will be achieved only in 12 years, when TTIP is fully in place. This means that by 2027, EU GDP will have grown by 0.5% due to TTIP. This translates into a very small boost to EU GDP of less than 0.05% annually until 2027. Imagine if a leftist politician presented a growth plan that would boost GDP by 0.5% in 10 years—that would be laughed at in the mass media.

And this is under what the study calls their ‘ambitious’ scenario, in which TTIP could be implemented as fully as possible. Under their ‘less ambitious’ scenario, which presumably means ‘more realistic’, growth would be even smaller.

Finally, the study does not say anything about job creation due to the pact.

Therefore, if the deal is not really about growth, what is it about? Conventional trade barriers between the EU and the US are already very low, and thus there is not much room for improvement here. So, what’s at stake is really non-conventional barriers, i.e., regulations. All the big players in various industrial sectors face some regulations that they wish could be removed, amended or made more flexible so they can maximize profits. And that’s what TTIP is about.

The problem is that in many cases, regulations are good and important to protect customers, the environment, health, and a range of other areas to maintain our quality of life.

The difference between Europe and US regulations is well illustrated in the case of chemicals. In general, Europe uses a precautionary principle that requires companies to demonstrate that new chemicals are safe before they can be sold on the market. But the US approach puts the burden of proof on regulators to establish that there is evidence of danger before action is taken against the chemicals.

Therefore, many chemicals are tightly restricted or simply banned in the EU, but are allowed in the US. A recent analysis found 82 pesticides allowed in the US but restricted or barred in Europe.

From a consumer perspective, those regulations are essential protections. But from the industry’s viewpoint, they’re barriers to trade that if removed could open up markets for more profits.

In this respect, investor-state dispute settlement (ISDS) mechanism that is part of TTIP has attracted much criticism from progressives. ISDS essentially creates special panels that decide on issues that arise in disputes between transatlantic investors and governments. They’re outside the control of governments.

For instance, if a US company claims that a regulation imposed by a European country deprives it of profits by imposing costs on its business, the firm could decide to take its complaint to the special panel, rather than to the government’s legal system. The worry, of course, is that those panels will be pro-business, otherwise, why would corporations want to bypass the regular court system?

One relevant example that illustrates the potentially negative consequences of ISDS is the ongoing action by Big Tobacco firm Philip Morris, which is suing the Australian government. The reason is that in 2011, the government implemented a range of public health measures such as plain packaging for cigarettes. Philip Morris is unhappy because such measures reduce smoking and thus cut into its profits. So it’s using an ISDS mechanism to try to force the government to overturn the public health legislation.

Other similar cases have occurred with other countries and in different industries. It is the kind of legal actions that would now be supported in Europe if TTIP comes to pass. Clearly, ISDS puts profits and the interests of corporations before that of ordinary people.

Do you still want this TTIP?


@JulienMercille is lecturer at UCD and the author of The Political Economy and Media Coverage of the European Economic Crisis: The Case of Ireland (2015, Routledge). His new book, Europe’s Treasure Ireland (Palgrave), will be out in July 2015.

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