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TTIP: The Next Generation of Trade Agreements

The Transatlantic Trade and Investment Partnership, also known as TTIP, is a proposed free trade agreement between the European Union and the United States. The aim is to promote multilateral economic growth between the two zones. According to the Office of the United States Trade Representative, TTIP “will help unlock opportunity for American families, workers, businesses, farmers and ranchers through increased access to European markets for Made-in-America goods and services.”

If successfully negotiated, TTIP would create the largest regional free trade agreement in history; together the United States and the European Union account for 60% of global GDP, 33% of world trade in goods, and 42% of world trade in services. In addition to this, the European Commission estimates that TTIP could increase the overall trade between the two zones by as much as 50%. However, the primary focus of TTIP would be regulating non-tariff barriers between the two regions. According to the European Commission, the basis of the partnership is divided into three broad areas: market access; trade rules; and cooperation between EU and US regulators.

Who, How, and When? A Look-In on TTIP Negotiations

In Europe, trade talks are always negotiated by the European Commission on behalf of the 28 member state governments. TTIP agreement texts are currently being developed by 24 EU-US groups, with each one focusing on a separate topic. The agreements must pass through several phases before a final document is concluded. First, position papers are exchanged between the sides representing the EU and the US outlining each group’s targets and concerns. These are then accompanied by textual proposals. The position papers and textual proposals can change or be amended at any time during the TTIP negotiations. Once these have been agreed upon, consolidated texts can be drawn up – these represent the most recent negotiations and are still provisional in nature. All negotiations for the Transatlantic Trade and Investment Partnership are held behind closed doors, and only select people may access the consolidated texts.

Rule Makers vs. Takers: The Scope of TTIP

The expected benefits of the TTIP are broad and would affect some 800 million people. The European Commission hopes that TTIP would strengthen both the US and EU economies by creating jobs, lowering prices, and increasing market diversity. It has been estimated that it could increase the EU’s economy by €120 billion, the US economy by €90 billion, and the rest of the world by €100 billion. Furthermore, it is hoped that it would put European firms on an equal footing with US government tenders, whilst providing European firms with access to American imports.

Although the European Commission has forecasted a dramatic increase in the amount of trade, tariffs between the two regions are at an all-time low. As a bi-lateral trade agreement, TTIP is primarily focused on reducing the non-tariff or regulatory barriers to trade, such as food safety standards, environmental legislation, and banking and finance codes. It is estimated that up to 80% of the economic gains to be made from TTIP are dependent on reducing the conflict between the two zones. However, in addition to facilitating trade between the US and the EU, TTIP would put majority regulation on a level playing field, reducing duplication, but also fostering the creation of wide-ranging global norms and standards, increasing competitiveness on the global market.

Beyond this, TTIP could also have further reaching effects with existing partnerships, particularly members of NAFTA. Mexico already has a free trade agreement with EFTA and the EU, Canada also has one with EFTA and has negotiated one with the EU. If TTIP was successfully negotiated, it could have an impact on these agreements, and may potentially form a wider free trade area. Speaking at the European Forum Alpbach, Juan José Gomez Camacho, the Permanent Representation of Mexico to the EU, discusses his views on how TTIP could impact Mexico. You can watch the video here.

Is the TTIP a Bad Deal for Democracy?

The proposed agreement has drawn criticism from a wide variety of NGOs and activists, and has resulted in several large anti-TTIP protests, particularly in Europe where the Stop TTIP petition gathered over 3.5 million signatures in under a year. But what’s the cause for concern? According to critics of TTIP, there are several reasons for citizens and countries to be wary, not just of TTIP, but of the various mega-regional trade agreements.

At the centre of TTIP criticism is Investor-State Dispute Settlements (ISDS). This procedure permits companies to bring a claim directly against a foreign country where it is carrying out business, regardless of that company’s country of origin. This means that if a country passes legislation, or performs an action that disadvantages an investor, that investor can then sue for unfair treatment, damages, and loss of projected profits.

Since the 1980s, ISDS claims have been increasing, with a number of high-profile cases receiving extensive media coverage. Notably, tobacco company Philip Morris took legal action against Uruguay and Australia for passing anti-smoking legislation, and the Pacific Rim mining arm of the company recently filed a case against El Salvador for $2.6 billion. The latter lawsuit occurred when the government passed a law forbidding companies from mining gold in a bid to protect one of the country’s primary sources of fresh water following a similar environmental hazard several years before.

Critics say ISDS provisions can undermine the power of national governments to act in the interests of their citizens, and endanger the sovereignty of states by shifting power to corporations. This could also have an impact on countries with a national health service. Opponents in the UK suggest that by including the NHS in TTIP it would open the doors to privatization, with ISDS procedures making it difficult or impossible to reverse. To explore this further, GED sat down with the Nobel Laureate Joseph Stiglitz to examine major multi-lateral agreements like TTIP, and discuss who really benefits from them. You can find out his views on the roles Big Pharma and corporate interest play in ‘TTIP & TPP – A Good Agreement for Who?

A second concern about TTIP is food safety. By aligning EU and US standards, this could mean introducing standards that were previously deemed capable of having a negative impact on the health of citizens. American food and agriculture standards differ markedly from Europe. In particular, there are over 100 types of pesticides that are banned in the EU that the US continues to use, as well as the sale of hormone-fed beef and the production of GMO crops. There is concern that if TTIP aligned imports and exports, rather than raising standards, that it could result in a downward harmonization.

Lastly, many economists have noted that with the consolidation of these two zones, many countries not party to TTIP, particularly developing nations, will be affected. In our in-depth TTIP Study ‘How to make TTIP inclusive for all? Potential economic impacts of the Transatlantic Trade and Investment Partnership on developing countries’ the GED team focuses on the far reaching effects, both good and bad, of the TTIP, and explores the potential preference erosion effects of the largest multilateral free trade agreement in history.