Only A Miracle

Only a miracle can salvage the Transatlantic Trade and Investment Partnership between the United States and the European Union. It would require a big change of direction to get it signed before the end of the Obama presidency. Actually, it would take double that, since the perfect storm is building on both sides of the Atlantic. It is a storm of electoral symbolism and protectionist substance.

In the United States, Republican Donald Trump has been promulgating a proposed modification of the whole approach to international treaties. It is opposed to regional treaties and would try instead to substitute new bilateral treaties with each country to have more bargaining power and make fewer concessions. However, this is not possible since the EU committed a long time ago to conducting its foreign trade as an integrated community. And the Democratic candidate is imposing nearly impossible conditions. So there are few incentives for Obama to make the necessary concessions to the Europeans.

In the European Union, France and Germany are stepping up their innuendos as the elections get closer. In addition, a de facto coalition between the extremes – anti-globalization radical environmentalist leftists, and xenophobic and protectionist ultra-rightists – has occupied the streets and taken control of the debate over this issue to the detriment of the centrist factions which, although they are still in the majority, are losing ground in the polls.

The TTIP has become a major catalyst for unrest resulting from a globalization that is incomplete and asymmetric. It is also a spur for the complaints of the losers in the Great Recession and a scapegoat for rampant economic nationalism. That the project is gravely ill, almost dying, is clearly illustrated by the resurgence of signs of protectionism. New trade barriers imposed since 2008 have affected 4.6 percent of world trade. And in the period from October 2015 to May 2016, measures of this type have been implemented at a rate of 22 per month, as against 15 per month for the same period a year earlier. And if it is certain that free trade, without rules or social compensation for the losers, turns out to be flawed, although it does promote economic growth, it is even clearer that the race to impose protectionist measures and close markets has historically only brought less prosperity, desolation and war.

So it is in Europe’s interest to raise questions about opportunity cost and about the disadvantages that burying the TTIP would bring in its wake. Beyond the overwhelming evidence that a great opportunity for additional GDP growth would be lost (although some sectors would experience declines, which would have to be compensated), the EU would lose out on its major geostrategic issue, namely the possibility of rebalancing the growing displacement of world economic weight toward the Pacific (reflected, among other things, in the TPP treaty) by means of a compensating emphasis on the Atlantic area.

And within Europe, inaction on the treaty would especially hurt countries like Spain. The near complete lack of penetration of U.S. markets by certain traditional manufacturing sectors, like textiles, ceramics and canning, as well as food and agriculture, pharmaceuticals and the automotive industry – and small and medium-sized enterprises in general – does not constitute a credible protectionist alternative for these sectors, which might benefit from the additional lowering of trade barriers anticipated with the TTIP.