Cato Online Forum

TTIP: Battle for the Soul of Trade Policy?

By Celeste Drake
September 2015

For more than two decades, “free trade agreements” have placed rules and restrictions on government purchasing, temporary entry visas, financial services, investment, professional licensing, technical standards, and other domestic policy decisions.1 Today, the scope has expanded to cover intellectual property, labor and environmental policy, food safety policy, and even restrictions on how publicly-funded health programs operate.2 And yet these deals are still called “trade deals” in popular discourse. On the one hand, it’s shorter than “trade, investment, and economic policy agreement.” On the other hand, it’s clearly a lot less accurate.

This misnomer allows these deals to be pitched as mere market-opening exercises that do little more than make foreign goods cheaper by reducing tariffs. While it is true these deals will lower tariffs, trying to understand their full impacts only through reference to their tariff effects is like trying to understand American television only through reference to the programming on CBS. It’s not only myopic; it’s misleading.

This misnomer also narrows the debate into a false “pro-trade versus anti-trade” dichotomy. It provides fodder for proponents of existing policies to declare (inaccurately) that “unions on principle, regardless of what the provisions are, are opposed to trade.”3 And it ignores the reality that the mantra of free trade has been used to enshrine a whole host of economic policies, virtually all of them neoliberal — not just in the United States, but around the world.

But here’s the thing: from the point of view of working people, neoliberal trade agreements don’t work. Neoliberalism isn’t objectively a better policy framework than Keynesianism (and in fact, on any number of measures, including inequality, its outcomes are demonstrably worse4). But trade agreement after trade agreement, from NAFTA to the WTO to the more recent U.S.-Korea and U.S.-Colombia deals, have locked in neoliberal economic policies for an indefinite length of time, possibly forever.

So what makes the TTIP (potentially) different? Unlike prior trade, investment, and economic policy deals led by the United States or the European Union, the two parties are similarly situated in terms of economic and political development. Neither side can simply impose its favored terms upon the other. Nor can either side, no matter how much the trade negotiators would like to do so, hide the negotiations from the public or sweep TTIP’s potential long-term impacts under the proverbial rug.

Because civil society on both sides of the Atlantic is well-developed and expects to be part of the conversation regarding how economic policy decisions are made, TTIP has provided an opportunity to bring out from the shadows discussions about the rules of trade, discussions that the proponents of the neoliberal trade model have previously been able to keep bottled up.

Under the previous pro-trade versus anti-trade debate, certain questions were, for the most part, off the table and not really up for discussion in any meaningful sense. The economic elites who benefit from the economic framework established by these agreements — in particular global corporations, their largest shareholders, and Wall Street — were able to use these “trade deals” to establish a corporate agenda of austerity, deregulation, privatization, financialization, and unrestricted free trade that, while undoubtedly contributing to global economic growth, also undermined social safety nets, job security, workplace democracy, good wages, and inclusive economies. It also contributed to the rise of a host of prosperity-threatening “beggar thy neighbor” policies, including the abuse of people and the environment in the name of competitiveness and export-led growth.

TTIP has already provided the working people of Europe and the United States with an agenda-opening opportunity. For example, the AFL-CIO and the ETUC, in the document “TTIP Must Work for the People, or It Won’t Work at All”5 make the case for TTIP, but only if it replaces the neoliberal, corporate agenda with an agenda of shared prosperity, respect for internationally recognized rights as well as democratic decision-making, and a virtuous cycle of good wages driving demand and creating decent jobs.

While some in Europe and the United States have already solidified into pro- and anti-TTIP camps (for understandable reasons), the discussion has nevertheless already broadened. Due to widespread criticism of the corporate rights-driven investor-to-state dispute settlement (ISDS) regime, the European Commission halted TTIP negotiations on the topic, requested public comment, and determined to put forth a revised proposal for settling investment disputes.6

Likewise, civil society activity across Europe has forced discussion of how TTIP rules might be used to weaken European standards regarding food, cosmetics, and a host of other products. In the United Kingdom, much of the discussion has centered on how the TTIP could undermine attempts to reverse privatization of the National Health Service and British Rail. In the United States, criticism of ISDS has finally spread outside the small circle of DC-based trade wonks, and even traditional backers of “free trade” have begun to openly discuss the negative impacts of excessive patent protections and other special interest provisions of U.S. trade deals.

While those who would prefer that the corporate agenda continue unabated in the TTIP are still pooh-poohing these concerns and attempting to steer the conversation back to trade versus no trade, it is too late. The dam has been broken. Europeans and Americans are talking about the rules of trade and who benefits.

Just as in most areas in life, the rules of trade matter. A lot. For example, if the rules on regulations and technical standards place a higher value on the “right” to sell a product in the form and manner preferred by its producer than on the obligation of a government to keep its populace well-informed and safe, standards will be undermined, no matter how many promises TTIP’s chief negotiators make.

The door is now open to honest discussions about whether and how labor provisions in the TTIP can lift standards and increase wages and protections for workers, rather than simply how to put words on paper that read well, but do little or nothing to prevent global corporations from mistreating workers in their supply chains or to prevent a downward spiral of wage concessions.

Citizens and their elected representatives are also asking whether the TTIP should have anything at all to say about public services. State provision of services can be critical to addressing universal access, poverty alleviation, economic equality, and other public aims. So, for the first time, defenders of the corporate trade agenda are confronting public questions about why public education and public health programs are “trade” issues and why governments should face trade challenges when they decide to reverse failed privatization schemes.

Citizens have also forced discussions around whether investor rights in the TTIP should come with obligations; whether financial services provisions in trade agreements have been designed mainly to weaken banking regulations; whether procurement commitments undermine Keynesian stimulus policies; and how the corporate trade agenda could threaten data privacy, affordable medicines, natural resource conservation, efforts to control climate change and even democratic oversight of regulators.

Most importantly, perhaps, citizens are asking why such decisions, traditionally made in democratic fashion by national governments, should be made at the supra-national level. Not only do ISDS panels have no citizenry to respond to, neither will any Trans-Atlantic councils or commissions created by the TTIP. While it may be in the best interests of global corporations to operate under a set of nearly immutable rules created behind closed doors and removed from voter activism and ire, it is not necessarily in the interests of citizens. Questions about such secrecy and privileges are now on the TTIP agenda.

American workers are rightly convinced that past trade deals have not been made for their benefit, but rather for the benefit of corporate entities that seek to avoid the responsibility to pay their fair share of taxes, protect the environment, and pay fair wages and benefits to the very workers whose labor creates their wealth.7

American and European workers are now fighting for the soul of TTIP. Will it be just another corporate rights agreement or will it usher in an era of progressive, standard-raising agreements designed to promote inclusive growth and shared prosperity? No one believes that righting the course of globalization and trade will be quick or easy. But if the process is to begin, the TTIP, with informed, active and engaged civil society on both sides of the Atlantic, seems an opportune place to make a stand to change the rules: not to stop trade, but to use it as a tool to achieve a global economy that works for all.

Notes:
1 See, e.g., U.S.-Canada Free Trade Agreement, available at http://www.international.gc.ca/trade-agreements-accords-commerciaux/assets/pdfs/cusfta-e.pdf.
2 See, e.g., U.S.-Korea Free Trade Agreement, available at https://ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text.
3 Colleen McCain Nelson and William Mauldin, “Obama Tries Tough Sale of TPP Trade Deal to Fellow Democrats,” The Wall Street Journal, April 17, 2015, available at: http://www.wsj.com/articles/obama-tries-tough-sale-of-trade-deal-to-fellow-democrats-1429312837.
4 See, e.g., Joseph E. Stiglitz, The Price of Inequality, W. W. Norton & Company, 2012; John Rapley, Globalization and Inequality: Neoliberalism’s Downward Spiral, Lynne Rienner Publishers, 2004.
5 Available at: http://www.aflcio.org/content/download/132421/3553131/AFL-CIO+TTIP+Report_6+%282%29.pdf.
6 See http://trade.ec.europa.eu/doclib/press/index.cfm?id=1234.
7 See, e.g., the AFL-CIO’s publication “NAFTA at 20”, available at: http://www.aflcio.org/content/download/121921/3393031/version/1/file/March2014_NAFTA20_nb.pdf.

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.

Celeste Drake is a Trade & Globalization Policy Specialist at the AFL-CIO.