Not At Any Price

Why TTIP Isn't Worth It

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Would TTIP be more trouble than it's worth?
  • Why it matters

    Why it matters

    • There is massive public resistance to the TTIP deal, but plans continue to move forward.
    •  
  • Facts

    Facts

    • The TTIP deal will see tariffs lowered, regulations standardized and investment simplified.
    • The deal has been roundly criticized by consumer groups who fear a lowering of food hygiene standards and other effects.
    • Details of the sensitive negotiations have been leaked, causing the European Commission to limit access.
  • Audio

    Audio

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The Stop TTIP alliance recently handed over 3.28 million signatures to President of the European Parliament Martin Schulz.

Almost half were from Germany. Rarely has there been such vocal criticism of an international treaty, and rarely has there been so much solidarity among the groups opposing it.

While the free exchange of goods and services is something we should welcome, it cannot be made into a tin god. The unobstructed exchange of goods isn’t always the best way to reach a higher path of growth.

There are good reasons to argue that temporary trade restrictions can actually promote the modernization and industrialization of an economy. Economic history shows that this was how many of today’s leading industrialized nations, such as the United States, Great Britain and Germany, prepared their path to global prominence. China’s rapid rise to become a major economic power also wasn’t the result of rapid liberalization of its goods and capital market.

If the Transatlantic Trade and Investment Partnership, or TTIP, is signed in 2016 as planned, the German economy will likely be the biggest winner in Europe. As the European export nation par excellence, the United States recently became its most important trading partner.

But it is unclear how significant these benefits will be. Tariffs between the U.S. and the E.U. are already relatively low, and a further reduction would hardly exert any measurable impact on growth. Economic impulses would result primarily from the dismantling or harmonization of norms, technical standards and rules to protect workers, consumers and the environment.

“This makes it more difficult to assess and judge the beneficial effects of TTIP,” the German Council of Economic Experts wrote recently, and rightfully so.

The unobstructed exchange of goods isn’t always the best way to reach a higher path of growth.

There are massive concerns that offset the positive economic stimuli. TTIP will limit lawmakers’ ability to influence technical and social standards, along with fiscal policy. Even those disgruntled by the government have had to reconsider plans for special legal treatment of foreign investors, particularly in light of the lack of transparency in the negotiations to date.

It is extremely irritating that E.U. officials in charge of TTIP have had many meetings with business leaders, while consumer organizations, environmental groups, unions, municipalities and creative artists have hardly been heard at all. Equally disconcerting is that members of the German parliament have been given no information about the treaty to date, unlike their U.S. counterparts. This is also expected to change, but only after the lawmakers have relinquished their mobile phones, and only under the supervision of a security officer.

In light of this asymmetrical and selective information policy pursued by the negotiating committee, German Bundestag President Norbert Lammert, a member of Chancellor Angela Merkel’s conservative Christian Democratic Union, rightfully believes that it is “out of the question that the Bundestag will ratify a trade agreement between the E.U. and the United States, when it can neither accompany nor influence the accomplishment of this agreement.”

All the more surprising, then, is the strange unanimity with which the chancellor and the vice-chancellor support TTIP.

The key points of criticism are the planned arbitration boards, to which foreign investors would appeal in disputes. If arbitration boards, even those that are reformed, rule on the complaints brought by foreign investors instead of ordinary national courts, this can only mean two things: Either we have no confidence in the national administration of justice, or the interests of foreign investors are to be treated differently from those of domestic investors.

This isn’t changed by the fact that Germany has already signed a number of these arbitration agreements. Many were concluded with countries that lacked an independent judiciary. The U.S is a nation with a constitutional tradition, and the same is true of E.U. countries. Relative to the two parties to the treaty, arbitration boards that grant special status to foreign companies are simply unnecessary.

European trade commissioner Cecilia Malmström said recently that there is “no direct and exclusive causal relationship” between the influx of foreign direct investors and arbitration boards that stand above national law. If this is true, arbitration boards are unnecessary from an economic perspective. That’s why TTIP in its current form is a bad idea.

 

The author is president of the Handelsblatt Research Institute. You can reach him at: ruerup@handelsblatt.com. To contact the author: ruerup@handelsblatt.com

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