The Transatlantic Trade and Investment Partnership (TTIP) is a big deal. So big, the odds you heard anything about it in the mass media that would be more than the usual commonsensical pros and cons of free-trade are puny. As it is being secretly negotiated, we hardly know anything about it, except that it is an unusually large regional free-trade agreement. But the European commission went as far as to claim that it “would increase the size of the EU economy around €120 billion (or 0.5% of GDP) and the US by €95 billion (or 0.4% of GDP).” If so, that’s great news! Why are they not more outspoken about their plan for prosperity?
Unsuprisingly, the reason is the usual neoliberal technocratic fear of governance by majority rule as a threat to individual liberties (Harvey, 2007). This fear is not irrational: people usually rejected such projects. The Multilateral Agreement on Investment (MAI) and Anti-Counterfeiting Trade Agreement (ACTA) were both given up by governments after their leaks triggered civil society mobilizations. However, this post’s purpose is not to guess whether the TTIP will be averted, but rather to understand why people may not welcome it…
Such growth has a price. The agenda of free trade agreements always follows the same pattern: as written in the commission’s mandate, it’s about increasing trade and investments by abolishing tariffs, eliminating unecessary regulations and harmonising norms. This can be very constraining on a bilateral or regional level: the more deeply integrated a developing economy is, the less able it is to implement industrial or development strategies. (Shadlen, 2005). Let’s find examples.
If your comparatively disadvantaged country overspecialise its economy because of tough international competition (think Arab countries with oil or even Spain with real estate), it will lose its autonomy and/or be reluctant to regulate it properly for the sake of competitiveness. If this leads to crisis (prices fall or bubble bursts), lack of opportunities will scare foreign investors. Attractiveness will only be achieved through: equal treatments with domestic companies, compensations for any policy crippling their profit, and absolute capital mobility.
Redistribution will get you sued and lose investors. It does not work the opposite way, though: unless they take part in illegal activities, companies will not be charged. This is comfortable, because they already lobbied their best to define “legal” advantages. Subsidies, patenting genes or forbidding digital piracy are usually more profitable than sustainable development; expect trade agreements to reflect that.
This investment protection may also turn into old-fashionned protectionism. Its most spectacular aspect was the management of the collapse of 2008 (Stiglitz, 2009). Just as Spain and Greece are still obligated to repay the most of their French and German creditors instead of default, countries like Argentina or Egypt were literally strafed by Investor-State Dispute Settlement (ISDS) from northern companies after radical policy changes.
This new market’s gigantic size (45% of world GDP) is also a rule-changing parameter: its set of norms will indirectly apply to all the divided southern emerging rivals with whom we shall negotiate later. The resulting hindrance on global demand is likely to weaken the recovery. Stiglitz thus concluded that the only reasonable policy after 2008 was a global redistribution. If only we could at least do it on a european level, that is…
By: Aymeric Vassas
- European Commission, 2013. ‘Transatlantic Trade and Investment Partnership: The Economic Analysis Explained’ [Accessed 07/11/2014].
- Harvey, D., 2007. ‘The Neoliberal State’ in A Brief History of Neoliberalism (Oxford University Press), pp. 64 – 86.
- Crisp, J., 2014, on Euractiv.com. ‘TTIP negotiating mandate finally declassified’ [Accessed 07/11/2014].
- New York Times’ Editorial Board, 2014. ‘This time, get global trade right’ [Accessed 07/11/2014]
- Shadlen, K., 2005. ‘Exchanging development for market access? Deep integration and industrial policy under multilateral and regional-bilateral trade agreements’, in Review of International Political Economy Vol. 12, No. 5, pp. 750-775.
- Stiglitz, J., 2009. ‘The global crisis, social protection and jobs’, in International Labour Review 148 (1-2) pp. 1 – 13.