Global trade has become an increasingly hot-button issue, particularly among the U.S. presidential candidates, and the representatives endorsing them, as election-time draws closer.
These concerns are particularly pertinent in light of slowing global economic growth, blatant unfair trade practices from Russia and China, and a renewed concern over U.S. service and manufacturing jobs moving overseas.
The ongoing rhetoric and contentious exchange of words regarding global trade has largely focused on the Trans-Pacific Partnership (TPP).
But there’s another important trade agreement, known as the Transatlantic Trade and Investment Partnership (TTIP), which has garnered increasing attention recently, as a result of the recent Brexit vote.
The proposed TTIP is a comprehensive trade deal between the Unites States and the European Union (EU), with a two-fold goal: to promote trade, and boost economic growth.
The finalization of the agreement was originally set for 2014, but it now looks like it may be delayed until 2019 or 2020, which means the next U.S. President will inherit the package.
Many believe Brexit could derail the treaty entirely. But even barring derailment, Brexit will surely stymie the decision-making involved in this mammoth and controversial free-trade deal. In fact, the ongoing negotiations between the U.S. Executive Branch and the European Commission (EC), have recently entered their 14th round of negotiations in Brussels.
If and when the partnership is finalized, it will open up a market consisting of over 800 million consumers, as the largest trade agreement in history.
The negotiations between the U.S. Executive Branch and the European Commission (EC) are ongoing; but with the exception of its general objectives, only a few details included in the deal have been made public.
The Heart of the Matter
The objectives of the TTIP treaty are as follows:
- Eliminate both tariff and non-tariff barriers on goods – including agriculture, industrial, and consumer products.
- Lower trade barriers on services.
- Eliminate customs duties on digital commerce and IT – including movies, music, TV shows, video games, etc.
- Grant comparable rights to U.S. investors in the EU and vice versa.
- Reduce or eliminate artificial or trade-distorting barriers.
- Enhance customs cooperation between the U.S. and the EU.
- Ensure equal labor rights in the U.S. and the EU, with the objective of avoiding unfair labor competition.
- Obtain mutual agreement on environmental standards, intellectual property rights and product standards.
Still Lacking Transparency
The eight-step mission sounds excellent in theory, but the uncertainty surrounding it, as well as the perceived lack of transparency, have been the root of harsh criticism, which in turn has left the TTIP mired in controversy on both sides of the Atlantic.
In fact, in 2016, the Dutch environmental activist group – Greenpeace, leaked a classified voluminous 248-page document from the negotiations, revealing the positions of the two parties, and exposing significant discrepancies in a number of areas.
Now, with Brexit blocking its momentum, any clarity on the issue seems further out of reach than ever before.
The Devil Is In the Details
European critics of the TTIP argue that the EU would have to lower its agricultural standards in order to reach an agreement with the U.S., by being forced to accept genetically modified food, which is currently illegal in the EU.
Nevertheless, European officials have flat out denied that the EU would lower its standards for a trade agreement.
Critics claim the TTIP could allow US big business to avoid having to meet various EU health, safety, and environment regulations, by challenging them in a quasi-court set up to resolve disputes between investors and states. Governments could, ostensibly, be sued in secret tribunals for taking reasonable policy decisions
As for U.S. critics, the belief is that the TTIP will increase costs, initially borne by farmers, but eventually passed onto consumers.
American critics are more worried about having to comply with strict EU regulations, and with the possibility of European corporations taking over American business.
The average American consumer expects to purchase fruits and vegetables in picture perfect, flawless condition from grocery shelves. These standards are largely due to the U.S.’s heavy use of genetically modified organisms (GMOs) in the production of its major crops. Outlawing GMOs could place a burden on American farmers and food producers, alike.
Nor is agriculture the only industry to be up-in-arms over this. Greenpeace recently warned that the TTIP would put Germany’s renewable energy efforts in “mortal danger.”
The organization claims that current German legislation gives green energy preferential access to the national grid. This, however, would be regarded as illegal under the TTI. Additionally, consumer-funded subsidies granted to renewable power producers, and subsequently paid through energy bills, would similarly be seen as impediments to competition on energy markets.
Despite some negative sentiment, nearly 3.5 million Europeans support the treaty’s passage.
And President Obama, a free trade advocate, has been sending the message to Europe’s leaders to speed up the TTIP process.
Now all we need is just a little patience.
Even as the U.S. and the E.U. double down on trying to conclude talks, they unanimously reject the concept of a “TTIP-light” version, which officials have said would be hard to sell to Congress and the European Parliament.
Rather both sides are seeking an ambitious, comprehensive, and balanced agreement – which requires more time overall.
In the meantime, all of this ensures even more uncertainty and volatility ahead, especially for those vying for investments in Europe and in the UK.
Good investing,
by Shelley Goldberg