TRADE TIES

Protectionism in a Global Economy

TTIP protest dpa
Opposition to TTIP might mean missed opportunities, says the author.
  • Why it matters

    Why it matters

    Many Germans fear that global trade agreements such as the Transatlantic Trade and Investment Partnership with the United States will hurt their businesses and dilute their values.

  • Facts

    Facts

    • Profits from globalization are worth more than €2 trillion ($2.5 trillion).
    • But world trade is growing by only half as much as in 2008.
    • Less than half of Germans support the proposed TTIP.
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  • Audio

    Audio

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Constance is taking a stand against free trade. The German town on the lake that bears its name – which also runs through Austria and Switzerland in the foothills of the northern Alps – is up in arms over globalization. Specifically, they oppose the planned Transatlantic Trade and Investment Partnership with the United States.

An overwhelming majority of the Constance town council recently proclaimed opposition to “further liberalization of international trade,” citing fears that local businesses would be hurt.

The protectionists in Constance are not an isolated case in Germany, according to a recent survey. A poll conducted by the research institute, TNS Emnid, found that less than half of Germans support the proposed transatlantic free trade treaty.

Their defiance is due to more than just fears of chlorinated chickens from America. Ever since the financial crisis of 2008, the global exchange of goods, services, capital and ideas has faltered.

World trade is growing only half as much as before the financial crash. The international flow of capital is almost 70 percent below its peak in 2007. Throughout the world, direct foreign investments have decreased by a third.

Ever since the financial crisis of 2008, the global exchange of goods, services, capital and ideas has faltered.

Admittedly, the international financial world was bound to shrink after the excesses of the past. Germany’s foreign minister Frank-Walter Steinmeier says “globalization is in recession” – but the recession was self-made.

It is mostly banks that have withdrawn behind national borders. According to figures from the Bank for International Settlements, trans-border credits have consistently declined, especially in Europe. In view of the expected turnaround in U.S. interest rates, banks are reducing the flow of credit to developing countries as well.

And without international capital and financial markets, the flow of goods and services quickly bumps up against national borders.

The same is true for data exchange. There is certainly good reason for Europeans to be indignant about U.S. espionage. But to try to set up a German or European Internet is just as absurd as the proposal to break up Google.

The Internet can only be domesticated at the price of freedom. China is the best example of this. And whoever reproaches Google for misusing its market power can seek recourse through European antitrust laws.

Germans should know best of all that globalization is no end in itself. According to a Bertelsmann Foundation study, Germany — along with Finland, Japan and Denmark — has profited most over the last 20 years from the free exchange of goods and services.

Profits from globalization amount to more than €2 trillion ($2.5 trillion). That’s €1,240 ($1,530) per person per year. And the transatlantic free trade pact could increase the economic performance of the European Union by €120 billion per year. That is not small change for a stagnating economic zone.

 

Source: European Commission, Eurostat
Source: European Commission, Eurostat

 

So what causes the resistance of citizens in Constance and elsewhere? A lack of trust after the financial crisis and revelations about spying by the U.S. National Security Agency are big factors.

But the trade treaty negotiations are concerned with more than reducing tariffs. The partnership would promote our standard of living – and not only on such mundane issues as the color of turn signals for cars. It is a matter of food safety, health, environmental protection and labor legislation.

Whoever seeks to create uniform standards here needs some trust in advance. Europe and the United States can afford to take this risk, because the overlapping of globalization standards is greater on both sides of the Atlantic than with any other trading partners.

We still have a chance to invigorate trade with the United States and to set standards for globalization. That doesn’t mean that in all areas we have to come to an agreement on the lowest common denominator. Our values are not in danger – in Constance or anywhere else.

 

To contact the author: riecke@handelsblatt.com

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