Tipping point.

According to their advocates, two international trade agreements are set to transform the economic landscape and spread prosperity. But a groundswell of opposition is highlighting the risks posed by such deals. Dan Atkinson investigates

World trade is about to undergo some seismic shifts. In November 2014 commerce ministers meeting under the auspices of the EU's foreign affairs council restated their goal of a "deep, ambitious, balanced and mutually beneficial" transatlantic trade and investment partnership (TTIP) with the US. Negotiations on the putative liberalisation treaty had started in July.

The European Commission estimates that the TTIP could add 95bn [pounds sterling] annually to the EU's economy, making each household 432 [pounds sterling] a year better off on average. The council's statement comprised three lengthy paragraphs. The second contained scant detail about the pact itself, focusing instead on promoting the concept.

It stated: "The council underlines the importance to communicate better the scope and the benefits of the agreement and to enhance transparency and dialogue with civil society in order to highlight the benefits for European citizens and the opportunities it would create for EU companies--in particular, small and medium-sized businesses."

Meanwhile, another big trade treaty is being painstakingly negotiated on the other side of the world. The trans-Pacific partnership (TPP) aims to open markets in the US and 11 other countries, including Japan and Australia. Forecasting the advantages of signing up, government agency the Office of the US Trade Representative (USTR) stated: "Real income benefits to the US are an estimated $77bn [49bn [pounds sterling]] per year."

As with TTIP, it seems that the TPP is being given the hard sell, not least to the American public. The White House's statement of its objectives from the TPP negotiations declared: "The Obama administration is pursuing TPP to unlock opportunities for American manufacturers, workers, service providers, farmers and ranchers--to support job creation and wage growth."

The USTR's website also states that the government is committed to a "trade policy that provides new opportunities for workers and supports economic growth by opening markets, enforcing our agreements and levelling the playing field for our workers".

Note that it mentions "markets" once, but "workers" twice. Subheadings further down include "Standing up for workers" and "Protecting the environment".

Both Washington and Brussels clearly think that we all need convincing about the benefits of these pacts. But why mount such a PR charm offensive if everyone would clearly gain from them? The answer is that the gains are not indisputable. Much of the dissent is coming from trade unions and pressure groups campaigning for social equality, but distinguished economists, such as Ha-Joon Chang at the University of Cambridge, are also sceptical.

Trick or treaty?

Chang's influential book, Bad Samaritans (Random House, 2007), challenges the received wisdom that the path to prosperity for developing nations is to adopt the western free-trade model. It argues that liberalisation "does not necessarily bring overall gain. Even if there are winners from the process, their gains may not be as large as the losses suffered by the losers--for example, when trade liberalisation reduces the growth rate, or even makes the economy shrink, as has happened in many developing countries in the past two decades."

Even if the governmental forecasts were to prove correct, many critics agree with Chang that the gains would accrue disproportionately to big businesses and rich individuals. In addition, there are fears about the possible loss of democratic control over the economy. Since the postwar general agreement on tariffs and trade (Gatt) was replaced in 1995 by the World Trade Organization (WTO), member nations have agreed to binding rules upon which the WTO can adjudicate. Under Gatt, the signatories could ignore such rulings. This would matter less were the WTO merely to be charged with policing a global trading system of open borders and no tariffs. But that's far from the case.

While the talks that established the WTO and the meetings about the TTIP and TPP are routinely described as negotiations for a "free-trade deal", the framework into which they fit is not "free trade" in the 18th-century sense. Rather, it's an intricately managed system with huge rulebooks and near-permanent negotiations--and the rules don't merely cover matters such as tariffs and customs procedures. In his expose on the WTO, Misadventures of the Most Favored Nations (Perseus Books, 2009), Paul Blustein notes that the organisation extends its legislative influence "deeply into the domestic economic arrangements of its member countries in ways unmatched by other international bodies".

Blustein cites WTO rules on plant and animal products, which "can affect member countries' regulation of food safety"; on intellectual property rights, which can shape national patent laws; and on services, which can influence how governments regulate their banking industries.

The model here is the EU, in which each phase of "market access" is haggled over by negotiators, all determined that the member states they represent will gain more than they lose. If the EU is the model for the WTO, then the WTO is the model for the TTIP and TPP. It's a game with detailed laws that cover thousands of goods and services, public-sector procurement practices and safety standards--all aimed at breaking the non-tariff barriers to imports that national governments are assumed to be building under the pretext of assuring minimum levels of quality, say. The trouble starts when labour standards and environmental safeguards are deemed obstacles to trade. It gets worse when the trade rules insist that foreign businesses have the same rights as domestic companies to tender for contracts to provide public services.

Paul Collins is a spokesman for British charity War on Want, part of a global anti-TTIP coalition comprising more than 300 organisations. He claims: "TTIP would cost at least a million jobs between the EU and US and prevent any future UK government from bringing the National Health Service fully back into public hands."

Collins argues that the TTIP would even enable corporations to "sue foreign governments if they take actions that affect their profits, such as regulatory measures to shield the environment or public health".

Ironically, one reason why policy-makers are so in favour of regional pacts such as TTIP and TPP is that the WTO has failed to oversee a globally significant treaty in its 20-year history. Regional deals have been seen as easier ways than a comprehensive worldwide compact to liberalise trade. But, as opposition mounts to the TTIP and TPP, the WTO has recently secured an agreement for measures to cut red tape at frontiers and reduce agricultural export subsidies.

Roberto Azevedo, the WTO's director-general, said of the breakthrough: "We have put ourselves back in the game. We have put our negotiating work back on track."

If so, all the furore stirred up by the proposed regional treaties may turn out to be small beer in comparison.

PACT SCHEDULE

The alphabet soup of trade agreements can be baffling. Here's a guide to the most important ones.

THE DOHA DEVELOPMENT AGENDA (PDA)

This is the global agreement--embracing goods, agricultural products, services and intellectual property--that the WTO has been trying to seal since the end of the 1990s. Agreement is still far away, given the difficulty of finding sufficient common ground among developing markets, emerging economies and developed nations

THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP

The TTIP is a proposed agreement between the EU and the US. According to the European Commission: "On top of cutting tariffs across all sectors, the EU and the US want to tackle barriers behind the customs border--such as differences in technical regulations, standards and approval procedures."

Critics argue that the TTIP would undermine Europe's high standards of social, environmental and consumer protection. The commission says: "We will not encourage trade or investment by lowering any such standards."

THE TRANS PACIFIC PARTNERSHIP

This proposed compact covers Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. The US is seeking tariff reductions on goods and improved access for service providers.

Countering suggestions that the TPP would start a race to the bottom on employment rights and environmental standards, the White House has stated that ensuring "respect for worker rights is a core value" and that environmental protection and conservation in Asia Pacific is a "key priority".

THE 'BAU PACKAGE'

This was the mini-deal struck at a WTO meeting in Indonesia in December 2013 and finalised 11 months later. Its key element is the trade facilitation agreement, which streamlines customs and other procedures. Other parts of the package relate to agricultural tariffs and subsidies.

Article Details

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Author:	Atkinson, Dan
Publication:	Financial Management (UK)
Date:	Feb 1, 2015
Words:	1418
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Topics:	International trade