The transatlantic trade pact that risks more harm than good

The British electorate rebelled against membership of the EU. The Italians may rebel against constitutional reforms in a referendum in November. The Germans, French, Austrians and Belgians among others are rebelling against the Transatlantic Trade and Investment Partnership, otherwise known as TTIP.

President François Hollande of France said last week that he no longer sees an agreement on TTIP in time for ratification before President Barack Obama leaves the White House in January. Since neither of the candidates to succeed him – Hillary Clinton or Donald Trump – support TTIP, there is a strong probability that it will fail.

One obvious reason for this is the electoral timetable. France and Germany hold elections next year. In quieter times this would not matter. But like no other trade agreement before, TTIP has managed to become one of the top campaign issues in both countries.

In Germany Angela Merkel is still defending the deal in principle. But her deputy Sigmar Gabriel, leader of the Social Democrats, has turned against TTIP, and is exploiting its unpopularity as one of his party's main policies. Since the two opposition parties, the Greens and the Left party, are also against TTIP, Merkel has no parliamentary majority on this issue.

Given these political difficulties I cannot see how EU negotiators can accept even a modest compromise on the outstanding controversial issues around TTIP.

Agriculture markets

These include access to Europe’s agriculture markets and the proposed investor tribunals – dispute settlement procedures that take place outside existing legal systems and that are accountable to no one.

The truth is that the Europeans are politically not ready for a deal. It is not clear that the US is either. The US would have to open procurement markets to EU bidders and liberalise their visa regime.

TTIP is not a classic free trade agreement. It is largely about investment and the reduction of regulatory barriers. As such it is similar to the single European market though not nearly as comprehensive. It also constitutes an intrusion into national sovereignty over economic policy. While UK voters rebelled against the single European market, continental voters reject the single transatlantic market. This is no coincidence.

Proponents of TTIP are making the same mistake as the Remain supporters did ahead of the UK referendum on EU membership in June. They are exaggerating the economic impact of their case and running the equivalent of a Project Fear campaign.

The Austrian government's growing rejection of TTIP and a similar EU-Canada trade deal drew an angry response from Elmar Brok, head of the foreign affairs committee of the European Parliament and member of Merkel's Christian Democrats. Brok attacked Christian Kern, Austria's chancellor, as irresponsible and said his actions were not compatible with "serious politics". A transatlantic free trade deal would, he says, bring economic advantages to Austria and Germany.

Economic gains

That may be so. But would the average voter benefit? Have TTIP’s supporters learnt nothing from the Remain campaign’s defeat in the UK? Macro-economic numbers matter much less in the political discourse than they used to. Since average real incomes have been stagnating in many parts of Europe, voters have quite rationally concluded that supposed economic gains benefit others, not them.

Of course, the TTIP opponents are also exaggerating, if not lying, as the Brexit supporters did in the UK.

In France, TTIP is widely seen as synonymous with the forced introduction of genetically modified organisms into the food chain. Marine Le Pen, leader of the National Front, calls TTIP "an ultra-liberal, anti-democratic, anti-business, antisocial war machine". Meanwhile, Jean-Luc Mélenchon, a leading politician of the left, seeks to turn the presidential elections into a vote on TTIP.

A more convincing argument is the one used by Kern who says that TTIP would strengthen the power of multinational companies at the expense of elected politicians. Given some multinationals’ reputation as tax avoiders, we should not be surprised if voters deny them an opportunity to increase their lightly taxed profits further.

Perceived threat

In continental Europe TTIP has become one of the most politically charged subjects of our time. This point may not be well understood in the US. Many Europeans see TTIP as an infringement into their way of life, and the political system is now reacting to that perceived threat.

Given the state of mind of European electorates, it would be extremely unwise for their politicians to double down on policies to liberalise global trade and finance even further. Otherwise they risk inciting a wider insurrection against the global liberal economic order. –

The Financial Times Limited