Don’t give up on TTIP

Opinion piece (Prospect)
Rem Korteweg
06 September 2016

TTIP, the Transatlantic Trade and Investment Partnership, is in trouble. A chilly protectionist breeze is blowing across the west and the likelihood of reaching and ratifying a deal is receding. Its collapse would be bad news for transatlantic co-operation and a setback for Brexit Britain.

This week, Germany’s vice-chancellor Sigmar Gabriel and France’s trade minister Matthias Fekl threw a wrench into the negotiations. Gabriel raised doubts about whether the talks should continue, while Fekl announced he would seek a stop to the negotiations. Both left-wing politicians fear that with elections approaching in 2017, and their constituencies increasingly sceptical of a deal, they have little to gain from making painful compromises.

In the United States, both major presidential candidates are campaigning on anti-free trade platforms, taking particular aim at the Trans-Pacific Partnership (TPP). Since TPP’s focus is on Asia, and TTIP’s is on Europe, some have suggested that they are in competition. But both pacts aim to remove tariff and non-tariff barriers to trade. If the next US president cancels TPP, he or she would probably not be in the market for TTIP either.

Even if a deal were reached, ratification in Europe would be difficult. The parliaments of all EU member-states and the European Parliament must agree to TTIP. According to the EU’s in-house polling data, its support has decreased continuously since 2014 and majorities now oppose a deal in Germany, Austria, Luxembourg and Slovenia. A bellwether for Europe’s ability to convince its people will be the ratification of the recent EU trade agreement with Canada. If parliaments block that deal, TTIP will stumble too.

Public opposition to TTIP fits within a broader western trend of retreat from globalisation towards protectionism and nationalism. Rising inequality, job losses and concerns about unfair competition are fuelling opposition to free trade. Increasingly too, European citizens are critical of their own variant of globalisation: the free movement of peoples, goods and capital. This has gone hand-in-hand with an anti-establishment backlash. Publics accuse political elites of favouring the interests of multinational corporations at the expense of ordinary citizens. Britain’s vote for Brexit, support for Donald Trump in the US, and rising opposition to TTIP in Europe are symptoms of the same anger and disappointment that arise from the challenges of being open and internationalist societies.

Critics of TTIP associate it with neoliberal excesses. Even if the deal would boost economic growth, they worry that it would leave their societies unprotected from a corporate assault on health and environmental standards. These worries have been insufficiently addressed. They also say that the collapse of TTIP would not be a problem. But its failure would bring not only costs in economic opportunity, but strategic costs too.

TTIP’s collapse would damage the west’s credibility on the issues of international trade. A new chapter in global trade liberalisation—one that seeks to align regulatory standards and customs procedures; sets new benchmarks on international investment protection; and promotes rules that secure workers’ rights or constrain state-owned enterprises—would remain shut. Rather than push back against a rising protectionist tide, failure to reach a deal would undermine western leadership on global trade policy.

An agreement would demonstrate that the west can undertake big initiatives and make them a success. Failure would inevitably become a sign of western decline. Rather than to strengthen transatlantic partnership at a time when its cohesion is threatened , TTIP’s collapse would invite an acrimonious transatlantic blame-game. This would yield no winners, except perhaps in Moscow and Beijing.

Brexit appears to make TTIP’s demise even more likely. The EU will lose its strongest advocate for free trade and Britain will be pre-occupied by its divorce proceedings with Brussels. Brexiters believe TTIP’s collapse would bring a UK-US deal closer. But the UK would be ill-advised to dismiss TTIP. The British economy would certainly benefit from a free-trade deal with the US, but it also needs an agreement with the EU.

After Brexit, TTIP would be the country’s quickest route to a comprehensive deal with its most important trading partners and foreign policy allies. While still an EU member, Britain should lobby trade commissioner Cecilia Malmström to ensure that non-EU countries can join TTIP. This is not just in Britain’s interest; to set global trade standards TTIP must be open. Besides, if Europe rejects TTIP, don’t expect an ambitious EU-UK trade deal to fare any easier.

The UK outside the EU has no interest in seeing the dark forces that are pulling at the west prevail. Though Britain cannot guarantee TTIP’s success, Brexit-induced indifference would speed its demise. It would be irresponsible to give up on TTIP just yet.

Rem Korteweg is a senior research fellow at the Centre for European Reform.