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How the TTIP deadlock endangers the future of free trade

Christian Bluth / May 2016

Photo: Wikimedia Commons

The TTIP negotiations are not only deadlocked, they are on the verge of failure. A failure will however not only be costly in terms of foregone increased trade, it will also be costly because it endangers the future of free trade. As a survey by the Bertelsmann Stiftung shows, not only support for TTIP has been declining drastically over the last two years – from 55% to 17% in Germany and 53% to 15% in the US – but also support for free trade in general (almost halved in Germany). The TTIP project as it presently stands is giving free trade a bad name.

The basic idea behind TTIP is actually a good one. Not only would it have united the largest economic areas in the world, together accounting for almost half of world trade, and thus creating substantial growth and welfare potential. It would also have been a chance to establish high western product and labour standards as examples to be emulated worldwide. Thus, it would have potentially changed the nature of trade in the future, making products safer and working conditions fairer. The populations in the US and Germany realise this potential, both are in favour of increased transatlantic trade in principle and believe TTIP would increase their country’s influence in the world.

Yet the people are sceptical about TTIP – and they are right to be. Germans are concerned about consumer protection, agricultural and environmental standards and the functioning of democracy. Americans are also concerned about consumer protection but even more about a potential weakening of employment and labour market conditions. These are precisely the areas in which the negotiations are deadlocked. Since the leaking of negotiation documents by Greenpeace on May 2, it has become clear that the US delegation is blocking EU demands in these areas, from establishing the precautionary principle in alimentary regulation to an Investment Court System. It is the perfect right of the US delegation to have a tough negotiation line. But in this case it might not be in their own strategic interest: First, they are likely to end up with no trade deal at all and second, because they are failing to take their own population’s concerns and the public mood in the US into account as well.

In the past, trade deals were mostly about lowering tariffs. For the public that meant that in the case of a deal they could buy cheaper products and companies could export less expensively. The result was either status quo or some improvement. The new generation of trade deals – such as TTIP and CETA – are much more about harmonising regulation. This makes a huge difference for public attention. Now, the possible outcome is not only either status quo or some improvement – it is conceivable that standards will be watered down. While consumer will hardly get excited about the price of cucumbers dropping a few cents, they are much more likely to protest if they believe eating cucumbers – or any other product – is no longer safe because of a drop in the safety standards. Also lower labour standards for cucumber farm hands would be likely spark protests.

TTIP will only have a chance if the people feel that they benefit from it. Economic benefits, through access to cheaper products and larger markets, are not enough to convince a sceptical public. Not if they fear a lower quality of products and labour market conditions. It is not only in Europe that the public opinion is increasingly hostile towards TTIP – the American primaries have shown that people demand that free trade serves them first and not only big businesses. TTIP can be such a trade deal – through establishing strong norms for labour conditions and consumer protection worldwide. Those preventing the negotiations from moving into this direction have not understood that they need not only convince a small epistemic community of technical experts, they need to win over the people if they want a trade deal.

If TTIP fails, the costs will not only be the opportunity costs of foregone trade. If TTIP fails, a chance to establish high western standards on the world market is lost. Trade will still happen, but on different terms. On such terms, it will be even harder to obtain the public’s support for free trade. Most industrialised economies rely heavily on trade and exports, a hostile public opinion to trade deals can endanger this economic model. It is therefore crucial that the public’s concerns are taken seriously and that trade deals aim at producing not only economic benefits but take other aspects of welfare into account as well. The people – on both sides of the Atlantic – are right to demand that a trade deal serves their interests. The TTIP negotiators should take this to heart.

Christian Bluth

Christian Bluth

May 2016

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