Cato Online Forum

The Politics of TTIP in Europe: In the Shadow of the Ageing German Voter

By Iana Dreyer
October 2015

The launch of the Transatlantic Trade and Investment Partnership negotiations in July 2013 was a triumph for Europeans with strong “Atlanticist” instincts and the vision for Europe as a dynamic, globalized, economic powerhouse: essentially, business and cosmopolitan policymakers.

TTIP aims to unlock the untapped potential of an economic relationship that is already very deep, but in which trade and investment continues to be hampered by, most importantly, unintentional barriers created by disparate regulatory regimes. TTIP could help reduce these sorts of impediments and cement market-friendly reforms in Europe. There is also a geopolitical dimension: TTIP is about strengthening a political alliance of liberal democracies in a world in which emerging illiberal powers have increasing clout.

Yet in the face of fierce public controversies over the project, one can legitimately ask whether the EU will be able to deliver on TTIP. Germany’s scepticism towards the agreement, amplified by growing power conflicts between the EU Commission and the member states, could lead to unintended outcomes. This essay argues — perhaps provocatively — that TTIP is being negotiated under the shadow of an ageing and increasingly risk-averse German median voter.

Atlanticism, Reforms, Ageing: The Drivers of European Public Opinion on TTIP

The fact that TTIP would stir controversies in Europe is not in itself surprising. The big surprise is that, while a majority of Europeans do favor the project, the Germans do not. Opinion polls show that a solid majority of Europeans back TTIP: 56 percent favor “a free trade and investment agreement with the United States,” according to the latest Eurobarometer poll.1 But only 31 percent of those polled in Germany are pro-TTIP.

Germany matters. It is the European Union’s most populous country (80 million inhabitants); it is located at the heart of the European Union; its economy is export-oriented; and, it has been the bloc’s growth engine throughout the economic crisis. Germany is traditionally a ‘pro-trade’ power in Brussels. German business — its big companies as well as many medium-sized companies — is strongly in favor of TTIP. Germany has been a proponent of transatlantic trade integration for many years and an enthusiastic initiator of TTIP. So, what’s going on?

Commentators have argued that Germans — and Europeans more broadly — are hostile to TTIP because they are concerned for the future of their food standards, health sectors, data privacy, and U.S. espionage. Those concerns are not insignificant, but they only scratch the surface. In fact, the underlying drivers of TTIP hostility run much deeper.

Generally, attitudes toward TTIP seem to be shaped by three factors:

  • Whether a country is ‘Atlanticist’ in its foreign policy outlook and, relatedly, whether the country used to be in the former Soviet bloc
  • Whether the country’s median age is above 43.5 years
  • Whether the country is reforming its economy and becoming more “competitive.”

The more a country is Atlanticist, or the younger its population, or the more it has been undertaking economic reforms in recent years, the greater is the likelihood of a prevalence of favorable public opinion toward TTIP. In contrast, the less the country’s foreign policy is U.S.-oriented, or the older its population, or the weaker its competitiveness, the greater is the likelihood that its population is sceptical of TTIP. The table below presents an overview of the prevailing attitudes in the EU’s 28 member states.

Atlanticism

Atlanticism is the default foreign policy orientation in the EU.2 In most countries with staunch Atlanticist foreign policies, the majority of the population favors TTIP. Former Soviet bloc countries, many of which have joined NATO during the last decade, also fall in this category. In Western Europe two countries stand out: France and Germany.

According to the latest Eurobarometer poll of May 2015, 53 percent of the French are in favor of TTIP (up from 50 percent during a previous poll in November 2014). France, with its strong tradition of hostility to the US-led NATO alliance has recently shifted its fundamental foreign policy stance. In 2009, for example, France joined NATO’s integrated command structures (it had left in 1966).

Reunited, prosperous, and increasingly powerful in Europe, Germany is no longer as unquestionably Atlanticist as West Germany was in the Cold War era. In recent years Berlin has defied Washington’s positions within NATO (e.g., over Eastern enlargement) and during controversial war episodes (e.g., Libya — where France intervened militarily with strong U.S. backing in 2011).

Age

The five countries with the oldest populations in Europe are: Germany (median age 46.1), Italy (44.5), Austria (44.3), Greece (43.5) and Slovenia (43.5). Public opinion polls reveal that the majority in three of these five countries hold unfavourable views of TTIP.

Europe’s youngest countries (Cyprus, Ireland, Romania, Slovakia, and Poland — all with a median ages below 40), in contrast, are staunchly in favor of TTIP. The only exception is Luxembourg, with its median age of 39.6, but no majority in favor of TTIP.

A closer look at Germany provides further support for the argument that age plays a major role in shaping attitudes to TTIP. The results of a July 2015 poll focused on German attitudes show significant discrepancies between age groups. Overall, only 42 percent of those polled believe TTIP would be “good for Germany”.3 But a healthy majority — 65 percent — of 30-39 year-olds believe TTIP would be good for Germany, while only 34 percent of those aged 60 or more shared that view.

Reforms and Competitiveness Trends

Whether a country is engaging in reforms to boost economic competitiveness also seems to shape the attitudes of its citizens toward TTIP. In order to obtain a comparable view of trends in this area among the 28 EU members, I used three indicators: a one-year evolution of the ranking of a country in the World Economic Forum’s Global Competitiveness Index4, an EU Commission database on labour market reforms5, and whether the country has been under a Eurozone rescue package after 2010 or is currently run by a reform-oriented government.

Here again, Germany stands out. Though top of the list in global competitiveness rankings, Germany is sliding down that ladder. Ranked 4th in the 2013/14 WEF index, Germany now ranks 5. Labour market reforms undertaken in the last decade were recently reversed: labour taxation and labour protection have both increased again. More recently the government reversed reforms related to the retirement age and pension entitlements. In 2015, it enacted a relatively high (for advanced country standards) nation-wide minimum wage. Austria and Slovenia also show signs of turning away from market-friendly reforms.

France, known for its hostility to market reform, is changing. The current government is enacting a series of market-friendly laws. In Italy several reforms were introduced in recent years under pressure from Eurozone leaders and financial markets. Both Italy and France have managed to halt a long downward slide in their global competitiveness rankings.

EU member state public opinion on TTIP & its drivers

Percent ‘for’ to TTIP l6 2014/15 GCR Ranking + trend compared to GCR 2013/2014 Former Soviet bloc Country ‘Reform government’ ‘Atlanticism’ Median age in 20147
Austria 23 16 - down N N No/Neutral during CW 44.3
Belgium 53 18 - down N Y Y 43.1
Bulgaria 67 54 - up Y N Y 42.6
Croatia 63 63 Y Y Y 42.1
Cyprus 64 58 — stable N Y Y 35.7
Czech Republic 62 37 — up Y N Y 40.9
Denmark 66 13 — up N N Y 41.6
Estonia 63 29 — up Y Y Y 41.2
Finland 58 4 — down N N No/Neutral during CW 43.2
France 53 26 - stable N Y Recent atlanticist shift 40.9
Germany 31 5 — down N N Recent shift away from atlanticism 46.1
Greece 66 81 — up N Y Y 43.5
Hungary 63 60 — up Y Y Y 41.1
Ireland 77 25 - up N Y Y 35.7
Italy 58 49 - stable N Y Y 44.5
Latvia 62 42 - up Y Y Y 41.4
Lithuania 79 41 - up Y Y Y 41.2
Luxembourg 37 19 - up N N Y 39.6
Malta 79 47 - down N N Y 40.9
Netherlands 63 8 - stable N N Y 42.1
Poland 71 43 - d Y N Y 39.5
Portugal 60 36 — up N Y Y 41.1
Romania 78 59 - up Y Y Y 39.8
Slovakia 56 75 - up Y N Y 39.2
Slovenia 46 70 - down Y N Y 43.5
Spain 63 35 - stable N Y Y 41.6
Sweden 64 10 - down N Y Y 41.2
United Kingdom 63 9 - up N Y Y 40.4
EU average 56 _ _ _ _ _
United States _ _ _ _ _ 37.6

The Political Economy and Institutional Dynamics of TTIP

The general political climate described above provides a sense of the backdrop to what will be inevitably difficult negotiations on reciprocal market access and on rules between Washington and Brussels.

In the European Union, negative attitudes toward TTIP largely focus on a limited set of topics. These anxieties can be seen as typical of ageing societies: they reflect a fear of market and technology risk. The concerns ranges from technological change (digital/data, biotechnologies, fracking) to health and healthcare (National Health Service in the UK for instance, or fear for food quality standards). The difficult discussion in Europe on investment protection clauses in TTIP also largely reflects sceptical attitudes about risk: ISDS critics ask for ‘the right to regulate’ markets to eliminate risks (e.g. to health or environment).

TTIP has also put the EU Commission in a difficult position because the ultimate object remains unclear. Do the parties want to emphasize market liberalisation or regulation? Civil society groups fear the emphasis will be placed on trade and investment liberalisation and pursuing the interests of private corporations above those of others. But, in fact, the reverse may be the more realistic concern. A recent study shows that in the European Union, pressure groups from civil society more easily get their way achieving desired policy outcomes more easily than business groups8.

The tensions inherent in this push and pull have been amplified by the growing power struggle between Brussels and the member states, impacting the formulation and substance of the EU’s negotiating positions in TTIP. The EU formally enjoys exclusive legal competence over trade policy, as per the 2009 Lisbon Treaty, which governs the functioning of the EU. TTIP is clearly within its remit. But the Commission is still in conflict with member states over whether it has exclusive competence on investment protection. This affects the discussion on TTIP. When it signs agreements that involve areas in which the EU has no exclusive competence (so-called ‘mixed agreements’) member state parliaments are also required to ratify any agreements. Given its strong regulatory component, it is likely that TTIP will be considered a mixed agreement. Parliaments of big member states — notably Germany’s Bundestag — insist that they are entitled to a say in TTIP, despite the fact that members of the European parliament already tend to vote along national lines, and that German MEPs are the biggest group in the Union’s legislature.

So, to conclude, the state of play described above suggests one of two possible TTIP outcomes: 1) An unambitious and suboptimal agreement that largely reflects the preferences of Germany’s ageing median voter — with some compromises for the United States and its own preferences; 2) No deal at all, as negotiations collapse over disagreements on issues like data flows and protection, investment protection, and biotechnologies.

Notes:
1 European Commission, “Public Opinion in the European Union”, Standard Barometer 83, July 2015
2 Atlanticism is defined here as support close cooperation with the United States in matters of national security and defence.
3 Available in German only. Accessible through the following link: http://www.foodwatch.org/fileadmin/Themen/TTIP_Freihandel/Dokumente/Emnid-Ergebnisse_TTIP-Umfrage_Juni_2015.pdf
4 World Economic Forum, Global Competitiveness Report 2014/2015
5 LABREF: https://webgate.ec.europa.eu/labref/public/. Data used to ascertain are for 2012 and 2013, the latest available.
6 European Commission, “Public Opinion in the European Union”, Standard Barometer 83, July 2015
7 Source: CIA World Fact Book.
8 A Dür et Al. “Interest Group Success in the European Union. When (and Why) Does Business Lose?”, in Comparative Political Studies January 20, 2015.

The opinions expressed here are solely those of the author and do not necessarily reflect the views of the Cato Institute. This essay was prepared as part of a special Cato online forum on The Economics, Geopolitics, and Architecture of the Transatlantic Trade and Investment Partnership.

Iana Dreyer is founder and editor of Borderlex, a web-based international trade news service based in Europe.