Groundbreaking Trans-Atlantic Free Trade Agreements

At the beginning of February, trade diplomats from the European Union and the United States will gather in Brussels for the eighth time for negotiations of the Trans-Atlantic Trade and Investment Partnership. It is reported that the heavily debated rules pertaining to investor protection will be on the agenda at the meeting, and a tribunal that foreign investors can turn to, to claim compensation, should they feel mistreated by their host country, will also be discussed. Some European politicians feel this protection undermines the sovereignty of their countries and do not wish for it to be included in a free trade agreement, even though it has also been established in some contracts, such as the one the EU has with Singapore. Opponents are worried that companies could use it to bring about the downfall of unwelcome environmental laws. The Americans, however, emphasize the legal security this protection offers and quite rightly, vehemently demand that it be adopted as standard. It will facilitate investment as it will remove the fear some companies have of state arbitrariness and expropriation.

High Gains in Efficiency for Businesses

Even the food sector is dividing opinion. Europeans are suspicious of completely genetically modified American foodstuffs. More importantly, they are afraid of American chicken, which has been disinfected with chlorine, or of American beef and pork, which have been treated with growth hormones. Yet, Americans also have many reservations. They are still wary of BSE-infected meat from Europe, for example. Moreover, the dossier’s data security and financial market regulations, as well as working and environmental standards are being disputed. Here, the Europeans primarily suspect that the hard-fought-for norms pertaining to labor law would be cut to a lower level.

According to the schedule at the time, both parties intend to have reached an agreement on the outline of an arrangement in the course of the year. If they allow this window to close, experts fear that no consensus will ever be reached. Of course, the United States presidential elections will take place in 2016. As a rule, large-scale trade projects are met by stark resistance from the American population. The EU and U.S. must therefore reach an agreement before the elections if they really want to engineer a trans-Atlantic breakthrough. The negotiation procedure has been exceedingly difficult up to now. First, the parties are seeking a kind of gold standard. The scope of contents ranges from food law to questions on labor law to environmental issues. Second, it’s the principle of it all. If the United States were to forgo investor protection as a standard clause in the contract with the EU, it would create a precedent. Why should the Association of South East Asian Nations accept such protection in a trans-Pacific agreement with the U.S. when the EU does not? Third, society’s support for the TTIP is increasingly waning. The resistance is directed toward “fishy,” apparently nontransparent negotiations, which are projected onto the confused globalization fears. The EU reacted to the criticism this week by publishing some of its proposals. Even if a face saving agreement is achieved, the complex ratification process harbors still further uncertainties. If just one of the 28 EU member states were to demand renegotiations, the arrangement would be, under some circumstances, put on ice.

Even if the obstacles preventing a TTIP appear to be huge — not to say overwhelming — it should not be forgotten that a great deal is at stake. It would create the world’s largest free trade area, encompassing about one-third of the planet’s exchange of goods and services. Historically speaking, it would be the largest bilateral agreement of all time. In a generous scenario, in which the parties remove not only customs duty but also nontariff trade barriers, companies on both sides of the Atlantic could exchange their wares much more quickly and efficiently. European products would not have to undergo the tedious process of being modified so they conform to U.S. standards, and vice versa. Thanks to consistent norms, firms could save a lot of money, which would otherwise have been spent on making bureaucratically enforced adjustments. The two most dominant regions in world trade would have the opportunity to set the international rules pertaining to the exchange of goods and services and stack them in their favor. A comprehensive TTIP would see other countries become obliged to adopt these uniform standards if they wish to be present in the markets. Overall, the norms would become more strongly harmonized as a result. On a multilateral level, a reduction of nontariff trade barriers has been promoted for a while. Considerable progress, however, has not yet been apparent. This is how the members of the World Trade Organization were informed of trade facilitation in 2013. However, when its implementation was discussed in 2014, India backed out. In the end, it took a great deal of effort to reassure the Indians of the Bali package. It should be recognized that this would only represent a small part of the overarching Doha Round, which has been stalled for over a decade.

Full Speed Ahead!

The TTIP could breathe new life into world trade, which is in a shaky state. According to a study by the IFO Institute in Munich, the entire global economy would benefit from it. It is calculated that the global income per head would increase on average by 3.3 percent. Even in the current economic crisis, this would be an urgently needed growth stimulus. Switzerland could benefit from this and must look for a way to become part of any future TTIP. In 2006, the Swiss government broke off its involvement in FTA talks with the United States due to differences in opinion regarding agricultural policy. In order to test its inclusion, or other options, the European Free Trade Association nations — Switzerland, Norway, Iceland and Liechtenstein — have intensified their trade discussions with the Americans.

But what will it take for the TTIP to cease being seen primarily as a threat, rather as a once-in-a-lifetime opportunity? To start with, more clarification is necessary, above all on the topic of courts of arbitration, which have been unfairly demonized and described as antidemocratic. In addition, the trans-Atlantic FTA has simply been reduced to a debate of minor issues, such as chickens that have been disinfected with chlorine. Even if European supermarkets were to sell such things, the consumer would still be able to make his own decision to buy them or to choose an alternative product. Freeing up trans-Atlantic trade would be an eminently important step forward, which could move the goal posts to a decidedly better position and improve legal certainty in all corners of the globe. Therefore, we must hope that the EU and United States do their level best to ensure they gain more support from their respective populaces, and for the sake of the “bigger picture,” agree to do so very soon.