TTIP OF THE ICEBERG
International trade negotiations have traditionally been a subject for policy anoraks: complex, long-winded and largely devoid of major controversy. That is certainly true of the UK. In the USA, there has traditionally been stronger resistance to trade liberalisation and powerful vested interests have made it difficult to pass legislation through Congress. Within the EU, the positive, outward-looking approach of the British, Germans, Dutch and Swedes is not so readily embraced in France, which has a long intellectual tradition of scepticism about trade. The British preoccupation has been to ensure that the European Commission, which negotiates on behalf of member states, has a broadly liberalising agenda. And that approach has, until recently, prevailed. Fears that the EU would become an inward looking “fortress Europe” have been largely allayed at least in relation to trade and investment (immigration has proved more difficult to manage in a consensus let alone a liberal manner).
In recent years, the consensus about trade has started to fray. The World Trade Organisation has largely ground to a halt as the big emerging market economies have proved difficult to assimilate; India and Brazil have proved particularly resistant to global liberalisation initiatives. The 2008 crisis and its aftermath of recession also created a reversion to trade restrictions as governments sought to defend jobs; there is some evidence that the process of post-war global economic integration could be going into reverse.
These factors have increased the interest in regional liberalisation agreements among limited numbers of like-minded governments. These include bilateral agreements of the kind the EU has signed with Korea and Canada and is negotiating with Japan and India. More ambitious is the Trans-Pacific Partnership agreement, recently negotiated between the USA, Japan and other Pacific Basin countries, but not China. The agreement now awaits the approval of legislatures, notably the US Congress.
The European Commission has prioritised a bilateral agreement with the USA: TTIP, which is proving a source of unexpected controversy, although negotiations are still at an early stage. The underlying objective is to apply, on a transatlantic basis, the same approach that helped to create the EU Single Market. Since, as within the EU, tariffs and quotas are no longer a major issue the emphasis has been on preventing differences in standards, mainly technical, acting as a barrier to trade. There are, for example, different specifications for seatbelt design and testing that make it difficult to export in both directions. In effect, a different production line is required to sell into the USA, which can be prohibitive, especially for low volume manufacturers.
The EU Single Market has involved a laborious process of negotiating a harmonisation or mutual recognition of standards. Since the EU Single Market has been seen as a great success story, good for consumers and producers across Europe, and a particular achievement for the UK, which took the initiative in launching it, there was a reasonable assumption that its extension to the US would be straightforward. It is proving anything but. There are various complaints, which have been magnified by a vigorous social media campaign. There is also some overlap with a wider campaign against ‘global capitalism’ and economic integration of all kinds.
One particular theme has been that standards are bound to be ‘levelled down’, be it standards for labour protection, food quality, consumer safety or the environment. However, the EU Single Market has never been stopped on these grounds although disparities between members are often far greater than between the EU as a group and the US. Where harmonisation is not appropriate or has a levelling effect the option of mutual recognition is available. Nor is it self-evident that harmonisation will be down rather than up. And many standards are not necessarily ‘better’ or ‘worse’ but simply different: three pin or two pin plugs, right-hand or left-hand drive.
There is also a degree of national conceit, which has little basis in reality. EU and US lobbyists have often campaigned on mutually inconsistent grounds: that their standards are higher than on the other side of the Atlantic. The recent storm over vehicle emissions is instructive. European consumer and environmental groups, as well as car companies, have long argued that European standards in relation to vehicle emissions are higher than in the US (which Americans contest). In the event, a leading German company was found to have falsified emission performance and it was American, not EU, regulators who first identified the scandal and sought remedies. In any event, the Commission has been quite explicit that there are EU red lines governing sensitive issues such as GM foods (however unscientific the European position).
THE FAMILY SILVER
A second, and even less plausible, controversy has been over public services. The EU negotiators have made it clear that public policy is not a matter for negotiation. If a European country chooses to provide healthcare free at the point of use that is a matter for the country concerned. The reason why healthcare features in the negotiations is that providers should be able to compete without discriminatory barriers. If a US company tenders to build or supply an NHS hospital it should be treated on an equal basis to European suppliers (and conversely European companies should be allowed to compete in the US which is currently full of ‘Buy America’ provisions). Given the assault on British public services being mounted by the British Conservative government, I would have thought that the Left would have had more immediate domestic targets than a hypothetical world in which US companies somehow manage to subvert an agreement, which gives them no role in policy.
A third issue is the attempt led by the US to negotiate an investment protection agreement, with new dispute settlement bodies that can potentially bypass national courts. The US government is seeking stronger protection for US companies overseas in countries where courts are seen as lacking judicial independence in the event of commercial disputes. This may be an issue in the Balkans for example and will certainly be in China when agreements are sought there, hence the argument that a good template is needed. The issue has little direct relevance for the UK since there are already numerous investment protection agreements and when disputes have arisen they have been resolved in UK courts and will continue to be (as with the threatened action by the tobacco companies against the government over plain paper packaging). In these many agreements the UK government has never lost on a matter of public policy. That said, there are important details around the proposed dispute settlement bodies, which should be negotiable. And, since there is little of direct benefit to the UK, there is no reason to go to the wire over the issue.
Underlying these specific points there is a generalised suspicion that negotiations are being conducted in deep secrecy, fuelling the conspiracy theories, which are growing like topsy. In fact, there is a vast amount of publicly available documentation around the Commission’s negotiating positions and the controversial, proposed investment protection agreement has been subject to extensive public consultation. The eventual agreement has to be agreed by national and the European parliaments, let alone a suspicious US Congress.
The greater risk by far is not that a bad agreement will be smuggled through but that the forces of disintegration and nationalism will gain ascendancy, undermining the interconnected world of trade and investment on which our prosperity rests.
“Nations cannot be governed by the obligations of friendship which prevail among individuals in private life... There can be, in the eyes of a philosophical statesman neither national enmities, nor national friendships.”
Dead Guest Editor, Charles, 2nd Earl Grey