TTIP: Redistribution of Power, not Free Trade
The TTIP (Transatlantic Trade and Investment Partnership) involves the redistribution of power away from the parliaments and to the executive and its unelected lobbyists. The TTIP does not involve freedom of trade. the greatest barrier to transatlantic trade is not discussed, the extremely fluctuating exchange rate between the dollar and the euro.
TTIP: REDISTRIBUTION OF POWER, NOT FREE TRADE
By Harald Schumann
[This article published on 12/19/2014 is translated from the German on the Internet, www.tagesspiegel.de In the Reuters photo, activists drag a chlorinated chicken at Oktoberfest 2014.]
The TTIP involves the redistribution of power, away from the parliaments and to the executive and its unelected lobbyists. TTIP does not involve freedom of trade. A Commentary
Free trade is a beautiful word. Trade is good in the land of record exports and bargain hunters. Who could be against "free"\? The German chancellor, her economics minister and the EU Commission rely on the sound of this word to sell Europe's greatest legislative project to the voters, the agreement called the TTIP, the Transatlantic Trade and investment Partnership, with the US. This is a "free trade agreement," it is repeated everywhere. Whoever criticizes it must be an enemy of progress.
Ultimately our prosperity rests on the international division of labor and the free exchange of goods and services.
"TRADE BARRIERS" ARE EVERYWHERE
But freedom of trade is not negotiated. Tariffs are hardly still important. All the rules and regulations complicating business on the other side of the Atlantic are up for negotiation. This extends from safety tests to the conditions for public contracts. They are all regarded as "trade barriers" that should be removed irrespective of the medical, ecological or social reasons for these regulations, even the procedures on how the EU and the US should deal with new products or dangers in the future, the methods of the legislation itself.
For example, officials on both sides should agree on their plans in common "regulatory councils" before the general public learns anything about this. Such a "regulatory cooperation" would be a deep incursion in Europe's constitution. The unelected officials of the EU Commission can already propose new laws. Financially strong interest groups increase their already great influence. If another transatlantic authority is added, Europe's legislation would be even more obscure and susceptible to manipulation.
EXCHANGE WITH THE US COULD BE FAR MORE INTENSIVE
The TTIP involves a redistribution of power, away from parliaments to the executive and its unelected lobbyists. Another amazing fact corroborates this suspicion: the greatest barrier to transatlantic trade is not discussed.
Exchange with the US could actually be far more intensive. German businesses export more to Austria and Switzerland than to the United States. Altogether trade with the US amounts to 5.5 percent of the foreign trade volume of the EU. That cannot be explained with transportation costs or legal barriers. Rather the most important reason is the extremely fluctuating exchange rate between the dollar and the euro as the economist Jan Priewe of the Berlin Academy for the Economy and Law explained in a study for the Friedrich-Ebert foundation. Since 2001 the value of the Euro has oscillated between 0.82 and 1.60 US dollar. Since May it has fallen ten percent.
A MONETARY COOPERATION WOULD BE MORE SENSIBLE
These fluctuations have almost nothing to do with development of the purchasing power of the two currencies, Priewe explains. Rather they reflect the mood and computer-driven speculation on the currency markets. This creates great uncertainty for trade. Importers and exporters can gain some time by purchasing currency contracts on the stock exchange. However protecting long-term investments against exchange rate risks is very expensive. Permanent structures must be created first. Therefore the trade between the countries of the Eurozone is much more intensive than with North America. Intra-EU trade does not have this risk.
TTIP: GENERAL ATTACK ON THE SOCIAL STATE
By Ursula Engelen-Kefer
[The following excerpts from an article published on July 8, 2014 are translated from the German on the Internet, www.nachdenkseiten.de/\?p=22297.]
What the dominant neoliberal forces in the EU could not do because of the financial crisis and the state- and bank bailout to the burden of taxpayers could become bitter reality via the free trade agreement with the US (Transatlantic Trade and Investment Partnership TTIP). The social state of the European style could be ended. What the president of the European Central Bank, the Italian Mario Draghi, recently said in several interviews seems confirmed, that the social state has not future in Europe any more. This downward spiral has long been underway. In EU crisis countries, people must accept severe cuts in wages, pensions, health care and other social measures for the financial bailout measures. Even in Germany, restrictions have already been introduced for social security and public benefits.
The consequences are a record unemployment with hopelessness and lack of perspectives for young persons above all and not only in the crisis countries. In Germany, the economy and employment can remain at a relatively high level. The bitter price for 7 million employees with low wages and poverty and for taxpayers is a gigantic combined wage sector through Hartz IV at around 50 billion Euros a year.
This dissolution of socialism on the national and European planes should now be continued by an investment-protection agreement (Investor-State-Dispute settlement ISDS) in the framework of the TTIP to the benefit of European and US corporations. An enormous trade volume is involved corresponding to 15 percent of world trade. In 2012 the EU with 1.686 trillion Euros was the largest exporter of goods and at 1.791 trillion Euros the second largest importer of goods after the US. As a negotiating partner with the US for the free trade agreement, the European Commission promises a growth of jobs and prosperity but ignores the fact that the economy is given even more power over national governments, parliaments, unions and other civil organizations. The regulatory areas of the financial world and the economy, environmental- and consumer protection, education and culture, collective bargaining and labor law and social legislation would be exposed to lawsuits by corporations out of commercial interests before arbitration courts that are neither democratically legitimated nor controllable.
The expected increase in economic growth and employment through the TTIP is minimal as different analyses show. The average annual economic growth in the EU projected for 15 years is estimated at 0.034 percent of the gross domestic product and 0.028 percent in the US. The estimate for created jobs fluctuates between 13,000 (Bertelsmann foundation) and 1800 (Ifo) per year in Germany.
INVESTMENT PROTECTION - SUSPENSION OF DEMOCRATIC REGULATION
There are already many examples of massive attacks on national policy with gigantic sums by these kinds of investment protection agreements with lawsuits in private arbitration courts. Today more than half of direct foreign investments come from the other side of the Atlantic. The lawsuits are fueled by American and European law offices that are promised tremendous profits from these arbitration procedures - with hourly wages of $1000 legal costs and an average $8 million per procedure. Since May 2012 the Swedish energy conglomerate Vattenfall has sued the German government for 3.7 billion Euros compensation on account of the nuclear exit. The threat of lawsuits is often enou9gh to prevent important regulations of governments.
The dangers to governments and parliaments are clear in the 3000 international agreements and 514 investor-state lawsuits by the end of 2012. Arbitration courts of three private persons called litigating parties often meet behind closed doors in hotel rooms of the world metropolises London, Washington and Paris. The arbitral awards are binding and appeals are not allowed. NAFTA, the free trade agreement between Mexico, Canada and the US, is a prominent negative example.
1. Lone Pine Resources Inc. started an arbitration proceeding against the government of Quebec that passed a moratorium on fracking in 2013 because of environmental- and health dangers.
2. The oil multinational Chevron was ordered by an Ecuadorian court to remedy the environmental pollution from its oil production. Chevron has contested the judgment through an international arbitration proceeding.
3. According to reports, a French corporation (Veolia, operating a waste disposal firm in Egypt)) filed a lawsuit in an international arbitration proceeding against raising the minimum wage in Egypt.
SOCIAL SECURITY - CONFLICTS BETWEEN THE EU AND THE US
The systems of social security play an existential role for people in Germany. Differences in philosophy, principles and practical policy between the US and Germany are very significant in this area. The embittered conflicts in the US over introduction of a legal health insurance are an impressive example.
Traditionally, private and company insurance through capital-covered security systems have a predominant role in health insurance and old age security in the US. In addition, there are different programs of health insurance for seniors and the socially weak as well as for unemployment and poverty that are financed together by the federal government and individual states. A general legal financial solidarity between different groups on the federal level and their common financing from contributions of employers and employees does not exist.
As European and international comparisons show, the share of the social security contributions in the labor costs in Germany is considerably higher than in the US and the larger part of their social security system is financed through taxes. The US has the lowest tax rate at 25.1 percent (Germany at 37.1 percent is in the middle of EU countries)... Thus the state system of social security in the US is clearly inferior to continental Europe.
The rate of social security taxes in Germany rose to 38.4 percent in Germany and will rise again...
US UNION-FREE ZONES
The permanent refusal of the US to ratify the international labor standards of the International Labor Organization (ILO) is characteristic. More is involved than the so-called core labor norms on adhering to union rights, collective bargaining, non-discrimination and prohibition of forced labor and child labor. Even if it cannot be assumed that the US violates the prohibition of slave- and child labor and non-discrimination, there are many examples of the prevention of unions in individual states of the US. Union-free zones are used by German corporations to keep labor costs as low as possible and avoid German labor law and social legislation, particularly joint-determination, industrial relations projects, industrial safety and health protection.
The failed attempt of Volkswagen to introduce a works' council at its branch in Chattanooga, Tennessee casts a light on the difficult situation. The majority of the workforce voted against this - obviously because of great public pressure from the political ranks of conservative Republicans. In any case, wanting to circumvent German labor law with this investment in the US should not be imputed to VW. The question of the investments of a huge German corporation in a union-free southern city is raised...
TWO-FACEDNESS OF THE EUROPEAN COMMISSION
The European Commission as one of the two negotiating partners of the TTIP is now attacked under the constant reproach of deficient transparency...
WHO PROFITS IN THE EU-US "TTIP" AGREEMENT\?
By Oliver Prausmueller
[This editorial in the Austrian Kurswechsel 2/2014 is translated abridged from the German on the Internet, www.kurswechsel.at.]
The debates over the reformability of the neoliberal European Union gain new explosiveness with the EU-US agreement "TTIP." Since the summer of 2013, The "Transatlantic Trade- and Investment Partnership" has been officially negotiated. Public criticism has grown in the course of the past six rounds of negotiations - and the pressure of democratically correcting the complex of negotiating executives and business-centered lobby networks. A newly germinating debate focuses on the political-economic state of the EU trade- and investment protection policy. With the "TTIP," the public perception threshold for a central shift in EU globalization policy has been crossed. A net of individual treaties with non-EU member countries should help in the acceptance of a new stage of the liberalization project, not the World Trade organization. The strengthened proliferation of this kind of agreement is not only an expression of an eroded "multilateral consensus" on progressive liberalization within the WTO...
In his article, Werner Raza first emphasizes the place of the TTIP project for European foreign trade policy and the trap of the continued export-oriented economic strategy "inside" and "outside" the EU... The TTIP agenda does not aim at dismantling the tariff levels between the largest trading blocs of the world that are already very low. So-called "trade barriers behind the border" and forcing "regulatory convergence" in norms, standards and legal conditions are underlined. The explosiveness of TTIP is manifest in how regulations on food security, health, vital necessities, consumer-, data-, environmental- and worker protection are treated in the agreement. As a "living agreement," it should contain institutional mechanisms and procedures that allow"effective" and "accelerated" revision of existing and future regulatory measures. These plans for a "rolling" TTIP agenda run the risk of undermining the democratic privileges of parliaments in determining the direction and contents of public regulations (cf. Soukup 2014). A form of negotiation leads to the dubious economic effects of the TTIP at the expense of democracy and the public interest. In her article, Pia Eberhardt takes up the debate on the extent of investor rights in the TTIP. First, the very controversial negotiations on anchoring special investor-state rights of action in the TTIP are criticized. The European Commission carried out a public consultation that represents a success of past protests. What lessons can be drawn for further resistance against the agreement\? In November 2014 the European Commission published its complete analysis and answer to the consultation. Eberhardt's "Five Theses" should be read before the next round of the discussion. The way from the 1st thesis "resistance against the corporate rights to sue bears fruits" to the 5th thesis "TTIP resistance needs a long breath and must be broader" shows how the European Commission will use the reform discourse to re-legitimate protecting foreign investments in the framework of TTIP.
In this debate forum, the question "Is another EU possible\?" led to the diagnosis that EU institutions are effectively screened "against the pressure from below" and their executive cumbersomeness favors "mammoth capital groups with a privileged access to the executive and its expert-bureaucracy" (Becker 2014). Is the neoliberal economic policy plagued by inertia or is the EU a bulwark of a constitutional agenda independent of the balance of power\? (Weber 2004) ... In the regime of international economic law and not only in the EU, a remarkable continuity of a constitutional agenda appears that limits the actions of politicians in a market-conforming way and aims at disciplining democratically legitimated regulations in favor of offensive business- and investor interests (Krajewski 2010; Gill/ Cutler 2014). TTIP can be understood as a crystallization point for the further development of this constitutionalist agenda. A striking test case occurs on political immunization. Does the intense public criticism of the TTIP project have an effect\? Can the negotiated documents be treated as classified documents\? Is there a focus on the "low hanging fruits" as the neoliberal Cato Institute (Ikenson 2013) recommends so the negotiations will gradually lead to success with a kind of "lose to win" strategy\? Can criticism be split up in "single issues," selective consultations and the targeted coopting of individual groups\? Can TTIP be a starting point for a more far-reaching discussion about a necessary change of course in European and global trade investment protection policy\?
TTIP: TRIFLING ECONOMIC ADVANTAGES AT THE EXPENSE OF DEMOCRACY AND THE PUBLIC INTEREST
By Werner Raza
EU-TRADE POLICY: IS GREATER INTERNATIONAL COMPETITIVENESS THE SOLUTION TO THE EU-ECONOMIC CRISIS\?
[This article published in: Kurswechsel 2/2014 is translated abridged from the German on the Internet, www.kurswechsel.at.]
The forced competition-orientation of EU economic policy is not a new phenomenon but was raised to the rank of a strategic goal with the Lisbon Agenda from 2000...
The outbreak of the global financial- and economic crisis did not change this political-economic-orientation. The answer of the EU to the economic crisis was marked by the firm belief that Europe can only overcome the crisis by improving its competitiveness. With its export surpluses, Germany is regarded as a model for the crisis-ridden countries of the European periphery. Behind that is the notion that a decline of the domestic demand through strict austerity measures together with a strong reduction of nominal wages would improve the cost-position of the European export industry and thus positively influence net exports. In fact, EU imports from the rest of the world collapsed in 2008-2009 as a result of the global crisis and only slowly recovered while EU exports to the rest of the world quickly picked up steam. Consequently the EU's balance of trade surplus rose eightfold since 2008 and amounted to 255 billion E (trade of goods and services) in 2012. A further increase of the surplus is predicted for 2013 and the following years.
This development is very remarkable amid stagnating worldwide growth rates. Firstly, it is based on the stagnating import demand in the EU, above all in the EU crisis countries. Secondly and more importantly, it is based on the strong export-growth of crisis-ridden cou9ntries like Spain and Greece, not only traditionally export-oriented countries like Germany. In 2012, Germany showed a balance of trade surplus of nearly 140 billion E and has more than doubled its surpluses with the rest of the world since 2008. Between 2008 and 2012, the exports of Spain to countries outside the EU rose around 43\% and the exports of Greece around 146\%.
On first view, these developments seem to confirm the EU strategies for overcoming crises.. Economically it is nothing but a beggar thy neighbor strategy to the burden of third parties...
TTIP aims primarily at extensive de-regulation, dismantling or harmonizing norms, standards and legal conditions, for example in the areas of agriculture, food security, the service sector or in awarding public contracts, liberalization and protection of investments and investors will play a central role. TTIP must be seen as a project with geo-political ambitions. TTIP is both a reaction to the growing economic and political influence of the BRIC-states, above all China, as an attempt to set a new global benchmark in regulating trade and investments.
UNDERMINING DEMOCRATIC POLICY - A CRITICISM OF THE TTIP NEGOTIATION MANDATE
The European Commission recently tried very hard to show the political and economic advantages that the TTP would provide the EU. Several studies were commissioned to corroborate the economic advantages from the agreement. The study of the London Centre for Economic Policy Research (CEPR 2013) quoted most frequently claims the annual income growth for the EU will amount to approximately 120 billion E. This is only 0.5\% of the GDP of the EU (2012). Moreover these advantages will first appear after a transition time of 10 years or more. Thus TTIP is by no means a short-term turbo growth as claimed by proponents of the agreement. Around 80\% of these welfare gains will result from the dismantling or simplification of regulations (standards, norms, approval procedures and others) and from the liberalization of trade in the service sector and publically commissioned works. The (temporary) loss of jobs is estimated at 0.2-0.5\% of EU workers. The methods for estimating consequences have serious shortcomings. They ignore adjustment costs, especially for public budgets and the labor market. A recent OFSE study estimates these adjustment costs at 30-60 billion E for the transitional time of 10 years.
TTIP will probably have a negative effect on intra-EU trade, that is on the domestic market and on the trade of the EU with non-EU member states, e.g. on countries of sub-Sahara Africa. Still the official numbers for TTIP are not impressive from an economic perspective. No appreciable economic advantages will be gained from the traditional trade liberalization - since the average tariff barrier between the EU and the US is already very low (around 3\%). TTIP proponents hope for advantages from dismantling so-called non-tariff trade measures, that is the huge number of technical norms, standards and legal regulations. Therefore the negotiations will concentrate on the so-called non-tariff trade measures and cooperation in the regulatory realm. According to the statement of EU Trade Commissioner De Gucht, this cooperation includes the following points: (i) formation of a process for cooperation in regulatory questions, (ii) harmonization of existing regulations and (iii) cooperation of regulatory authorities in the two economic blocs.
What may sound like a good idea on first view proves extremely problematic on second view. Firstly, the regulatory norms between the EU and the US are very different in areas of highly sensitive social-political significance like food security, health, animal- and plant protection and worker- and environmental protection. Secondly, the regulatory philosophies in dealing with high risk technologies are fundamentally different. The precautionary principle is in effect in the EU so genetically-altered food is not allowed. In contrast, the cost-benefit principle of the US led to the business-friendly cultivation of genetically-modified plants, utilization of hormones in meat production and application of chlorine-dioxide disinfecting animals for slaughter. The US has clearly signaled that it demands an abolition of EU regulations in these areas or a mutual acknowledgment of regulations. Thirdly, there are great differences in policy as to protection of privacy and exchange of data. There are diverging approaches which are expressions of unequivocal basic social convictions firmly anchored in legal norms and rules. Fourthly, a necessary democratic debate on all these questions with TTP is vital. Thus it is very worrying that both sides intend to call into existence "an institutional basis for further progress" with the rules... "An accelerated procedure" is proposed for changing sectoral supplements of TTIP and for adding new supplements through a simplified instrument that does not need any national ratification (European Commission 2013). The strengthened cooperation between the regulatory authorities for the TTIP undermines the democratic rights of parliaments in defining the direction and substance of public regulations.
That investors are granted special rights in the framework of TTIP is problematic. Besides granting rights of access to previously protected economic sections and limiting measures that once earmarked a discrimination of foreign businesses or protection of strategically important industrial areas, the Commission seems willing to allow an out-of-court international process for settling disputes between investors of the state (ISDS) in the framework of TTIP (cf. Eberhardt). While this procedure already exists in many treaties for bilateral and regional projects, it was not a theme of EU trade agreements up to CETA (EU-Canada free trade agreement). The ISDS enables investors to sue for their rights in international civil law tribunals. This will lead to civil law lawyers attempting to enforce the interests of their clients with lawsuits that could cost the states enormous amounts in compensation. States have no possibility of appealing decisions of these tribunals (ICSID - International Center for Settlement of Investment Disputes).
Experiences show clearly that the danger of compensation demands by multinational corporations intensely restricts the readiness of governments to act in the public interest (so-called chill-effect). The ISDS was originally intended for international investment agreements to safeguard a fair treatment of investors in countries whose legal systems were deficient in many regards. This argument cannot hold up for the relations between the EU and the US where a fair treatment and fair procedures before courts are generally guaranteed.
The attractiveness of ISDS for transnational businesses is due to the comprehensive and co0mpletely exaggerated term expropriation which covered missed profits through investments for the originally planned running time and not only all damages arising from investment costs that accrued in the past (for example, through construction of a nuclear power plant). Thus an investor is presently justified in demanding compensation for missed profits when a government decides to exit from nuclear emerges and a nuclear reactor is closed 20 years before the expiration of the operating time. This happened in Germany when the Swedish energy supplier Vattenfall sued the German government in 2012 for 3.7 billion E compensation . As a result, more and more ISDS procedures were attempted in the last 20 years. According to data of the UN Trade and Development conference, 514 such cases were known at the end of 2012. Hardly surprisingly 123 of these procedures were initiated by US investors, followed by 50 cases by EU investors in the Netherlands, 30 from Great Britain and 27 from Germany (Seattle to Brussels Network 2013). Given the great range of bilateral investments between the EU and the US, the ISDS offers investors a welcome possibility for putting pressure on governments on both sides of the Atlantic by means of threatened lawsuits.
Another alarming development concerns the further liberalization of the financial services branch. Despite all experiences from the last global financial crisis, the financial industry should be granted more rights and protection while financial stability and consumer protection are inadequately considered. Interestingly enough, the European Commission seems to be following a more radical approach than the US. In the past, the government of President Obama formulated reservations to two fundamental EU demands regarding the cooperative framework of financial services in the agreement and the instrument of the ISDS for the financial industry (Vander, Stichele 2013). In view of this total concept, it is unlikely that people will agree in the negotiations on more than only the smallest common denominator in regulating the financial markets.
AN ALTERNATIVE EU TRADE POLICY IS URGENTLY NECESSARY
The TTIP negotiations are now oriented almost exclusively in the interests of businesses. This is because of the disproportional influence exercised by the lobby groups of the economy in the EU (and the US). Firstly, the negotiations must be more transparent. Both the European Parliament and civil society must be informed about the state of the negotiations and all documents must be published. Essential contents of the negotiations turn around central concerns of the public interest and therefore must be discussed in public.
There are even more hesitations as to the EU impact assessment. Unlike models that provide the desired result in advance, well-conceived economic models help in analyzing the consequences of a transatlantic agreement. Still they must be supplemented by other methodical approaches for estimating likely consequences of such an agreement. Individual studies should be occupied with the probably consequences of such an agreement as to the rights and working conditions of employees, the environment as well as the implications of the proposed institutional frameworks for the future of democratic politics, transparency and control. None of these themes has been discussed... With the help of such an approach, a realistic estimate and corroborated results on the effects of TTIP would be possible. Research institutes commissioned by EU institutions should be truly independent and not financed by business lobbies.
The public interest should be protected and negotiations marked by that guiding principle concerning the substantive organization of the negotiations. That guiding principle must characterize the negotiations. Concretely this means:
• No lowering of standards in public health, public security, worker- and consumer rights and environmental care;
• No de facto transfer of regulatory authority from democratic institutions to unelected technocratic groups;
• No arbitration court proceedings for settling conflicts between investors and states (investor-to-state dispute settlement); the proposal of the Commission to refuse "frivolous claims" of investors is not enough;
• No reduction of political action possibilities in important areas like public contracts for community projects and for realization of other public goals. Similarly, subsidies of cultural productions or educational activities must be protected.
When essential public interests are sacrificed to trifling and dubious economic advantages, the severe economic crisis in Europe is not overcome. Both successful crisis-management and the missing challenge of social-ecological transformation need a political system that strengthens democracy, expands action possibilities and subjects transnational capital again to social goals again. The TTIP negotiations in their present form cannot make any positive contribution to this.
EuroMemo Group (2014): The Deepening Divisions in Europe and the Need for a Radical Alternative to EU Policies, EuroMemo 2014; http://www2.euromemorandum.eu/uploads/euromemorandum\_2014.pdf.
European Commission (2013): Non-paper TTIP: Cross-cutting disciplines and institutional provisions, June 20th, 2013.
CEPR (2013): Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment.
Final Project Report, March 2013.
Nölke, A./Claar, S. (2012): Tiefe Integration: Konzeptuelle Grundlagen. In: Journal für Entwicklungspolitik 28 (2) 2012, 8-27.
Raza, W./Grumiller, J./Taylor, L./Tröster, B./Von Arnim, R. (2014): Assess\_TTIP: Assessing the
Claimed Benefits of the Transatlantic Trade and Investment Partnership. ÖFSE - Austrian
Foundation for Development Research, Vienna. http://guengl.eu/uploads/plenary-focus-pdf/
Seattle to Brussels Network (2013): A Brave New Transatlantic Partnership. The proposed EU-US
Transatlantic Trade and Investment Partnership (TTIP/TAFTA), and its socio-economic & environmental consequences, October 2013.
Vander Stichele, M. (2013): TTIP Negotiations and Financial Services. Issues and Problems for Fi
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John Hilary, TTIP: Deregulation and Attack on Jobs, 42 pp, February 2014 http://rosalux.gr/sites/default/files/publications/ttip\_web.pdf
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