TTIP: a pre-mortem
Diego Zuluaga // 11.05.2016
To say that negotiations for an EU-U.S. trade deal, the Transatlantic Trade and Investment Partnership (TTIP), have lost momentum since they kicked off in the summer of 2013 is an understatement. The pact’s slow progress looks set to become the greatest disappointment since Scott Walker’s (remember him?) failed Republican presidential bid.
There are many reasons why a deal that looked like a slam dunk when it was first announced now appears destined to fail. Below I outline four key factors behind TTIP’s diminished prospects. This is an attempt at a ‘pre-mortem,’ a common management exercise where one pretends a project failed and tries to discern the possible causes of failure.
Admittedly, it’s a bit late in the game to draw lessons from such a pre-mortem in order to avoid pitfalls in the negotiations, but at least it should help us to understand what needs to change for the EU’s future trade plans to meet with greater success. Here are my four reasons for TTIP’s failure:
1. Badly managed expectations
From the start of negotiations, TTIP has been billed as the be-all-and-end-all of global economic relations. Official EU documents referred to it as key to Europe’s economic recovery, as well as a boost to the EU’s influence in the world. The deal has also been hailed as a landmark standard-setting exercise which will enable Europe and America “to steer globalisation,” in the words of German Economy Minister Sigmar Gabriel. Don’t want China to be in charge of designing global trade rules? Then TTIP is your only hope.
There are two reasons why this line of argument is unhelpful. The first is that it’s easy for opponents to undermine the case for TTIP by questioning the magnitude of its purported impact. For instance, the most widely cited study puts the gains from boosted EU-U.S. trade at €119bn for the EU and €95bn for the U.S. While these expected gains are annual and perpetual, they look small when compared to the size of the EU and American economies (both around €15trn). It’s not hard to argue from this that TTIP is not nearly as big a deal as we’re told.
The second reason is that speaking in such grandiose terms immediately raises alarms in certain parts of both Left and Right. The European Left ask themselves: if TTIP is about setting standards, does that mean that Europe will end up with the same rules as the U.S.? Not that America is a paragon of deregulation and free markets (if only!), but what matters here is perception. The American Right wonder: if TTIP is a political not an economic project, as has been claimed, does that mean the U.S. will be brought into an EU-like political structure with the countries of Europe?
2. The complexity and bureaucracy of the negotiating process
The sad reality of trade in the 21st century is that it’s become a time-consuming and top-heavy exercise, in stark contrast to the spontaneous nature of global free trade in the 1800s. There are a number of drawbacks to this trend. It opens trade negotiations to political pressure, turning more open trade into a diplomatic bargaining chip rather than a voluntary agreement for mutual benefit. It also opens the door to heavy lobbying by business and other interest groups. Crucially, it makes trade negotiations look opaque and impenetrable, vindicating charges of a lack of transparency and dodgy dealings behind closed doors.
All of these problems of modern trade relations have been on display with TTIP. Indeed, the size of the transatlantic economies and the power of interest groups in shaping legislation on each side of the Pond have made negotiations even harder to navigate and more protracted than in most cases. This has been compounded by an inability on the part of policymakers to explain what the deal was about and why it was in the interest of the average citizen to support it.
3. Pressure by anti-trade NGOs
No single group has played a more significant role in derailing EU-U.S. trade negotiations than European anti-trade campaign organisations. Their relentless scaremongering about investment protection (ISDS), chlorinated chickens and threatened labour and consumer standards may have been baseless and utterly untrue (this can’t be emphasised enough: I haven’t seen a single claim against TTIP along those lines that stood up to the evidence). Yet, it has served to increase public suspicion about the deal and to force the European Commission to devote much energy and time to responding to their accusations.
Contrary to the impression one might get from media accounts, a majority of the population in all but a handful of Member States support TTIP. This was still the case in the December 2015 Eurobarometer, an impressive feat given the barrage of awful headlines. But the conversation has increasingly been dominated by a small number of often EU-funded pressure groups, who for instance saturated the Commission’s 2014 ISDS consultation with pre-cooked responses. Despite a lack of evidence that ISDS was working against the public interest, the EU in the end bowed to NGO demands and announced its replacement by a new public investment court.
4. A change in the climate of opinion around free trade
The public mood on both sides of the Atlantic has been shifting against free trade at an accelerating pace since the financial crisis. Indeed, we now find ourselves in the discombobulating situation where both of the main prospective candidates to the American presidency are against trade expansion. The picture is only marginally better in Europe, where protectionism is back in vogue, as exemplified by the debate around steel and the growing political consensus not to grant China market economy status.
Globalisation and increasingly open trade and investment have been the main driver of rising global prosperity – and decreasing global inequality – since the 1970s. 700 million fewer people are poor today than in 1980 in China alone. Halting the progress made towards the elimination of trade barriers will make it harder for the remaining 10 per cent of people in the world living in extreme poverty to emerge from deprivation for good.
The bottom line is that TTIP has been held back by a mixture of bad presentation, interest-group meddling and a changing global climate of opinion about trade. The EU can tackle all three by ensuring it gives a realistic account of the expected impact of trade deals; making its aims and objectives clear to the public in advance of negotiations; and by taking on the baton from the U.S. as the world’s foremost promoter of free trade. The EU stance must come from first principles: free trade is unambiguously a good thing, it is what has made the EU so much more prosperous since 1957, and it should be supported around the world.
Diego Zuluaga is Head of Research at EPICENTER. You can read our briefing Investor-State Dispute Settlement: Myths and Reality here. You can read our response to the European Commission’s report on its ISDS consultation here.
This briefing was originally published as our Wednesday Briefing. To subscribe email: email@example.com
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).
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