TTIP After the TPP Deal
On Monday, 30 November, the German Marshall Fund of the United States (GMF) and the Centre for European Reform (CER) held a high-ranking panel discussion on “TTIP After the TPP Deal”. Organized in partnership with the German Federal Foreign Office, this event featured Pascal Lamy, former director of the World Trade Organization (WTO); Paula Wilson, Deputy Ambassador of New Zealand to the EU; Joshua Meltzer, Senior Fellow at the Brookings Institution; and Petra Pinzler, journalist and author at Die Zeit. The discussion was moderated by Daniela Schwarzer of GMF and was preceded by two introductory statements of CER Director Charles Grant and Dieter Haller from the German Federal Foreign Office. Around 60 participants attended the two hour event, which was held in the International Club of the German Federal Foreign Office.
In October 2015, the United States and 11 other Pacific nations reached an agreement on the Trans-Pacific Partnership (TPP). In case of ratification, the trade pact would affect 40% of the world economy and create the largest free trade area in the world. While some European experts hope that the negotiations between the European Union and U.S. on the pending Transatlantic Trade and Investment Partnership (TTIP) will be boosted by the progress on TPP, societal biases and political barriers on both sides of the Atlantic remain substantial.
Given the low levels of tariffs in trade between the US and the EU, the economic gains from a further reduction of tariffs are likely to be limited. When factoring in an additional employment effect that would turn negative for some countries in the process of a more efficient inter-sector allocation of resources, the net positive effect of TTIP would become even smaller or turn negative. Albeit the heterogeneous and limited direct gains for European countries and the US from the further reduction of protectionism, other dimensions such as the geopolitical relevance of TTIP and the largely unexplored field of further standardization of cultural/precautionary standards that can generate further economic rents have to be examined on a regional and global level.
Pascal Lamy explained that trade liberalization is now becoming a very different game than in the past. In particular, the focus of trade liberalization is shifting from protection to precaution. Previously, national trade policies were traditionally about protecting domestic producers from foreign competition, and previous agreements therefore aimed at reducing tariffs and fostering competition for the sake of more consumer freedom and a more efficient (and hence cheaper) supply of goods. Consequently, the opposition to free trade agreements mostly came from national producers, while citizens were broadly in favor. In the “new world”, on the other hand, production patterns have evolved into transnational supply chains where obstacles to trade are about protecting the consumer from risks through the implementation of culturally rooted precautionary standards. Opposition to trade opening now comes from citizens who fear a lowering of precaution, while producers see the benefits of harmonizing standards, which produces economies of scale.
Lamy argued that TTIP and TPP are therefore “different animals”. While TPP is the last trade deal of the old world, TTIP is the first of the new world. 80% of TTIP negotiations deal with harmonization of consumer protection standards, while only 20% focus on such typical trade issues as tariffs and market access—which is the opposite of TPP. He noted that political leaders have thus far failed to explain this dynamic to the public, which has created a vacuum that has allowed the proliferation of anti-TTIP movements. Lamy criticized the initial communication of the strategic narrative of TTIP, and in particular said it was a “huge blunder” for former EU Trade Commissioner Karel de Gucht to describe TTIP as the “NATO of trade” or an “economic NATO”. Such an attempt to load TTIP with strategic significance not only triggered enormous criticism from the multilateral trade perspective that only allows bilateral advances in the spirit of the WTO’s goals and objectives, but also gave rise to a variety of economic studies that seemed to disprove the economic rationale for a transatlantic free trade agreement in general.
While Joshua Meltzer characterized TTIP negotiations as time sensitive and dependent on the TPP schedule, Lamy refuted the strategic disadvantage for Europeans if TTIP should be concluded after TPP. He pointed out that the EU has bilateral agreements with most of the TPP countries that reach far beyond the standards set by the trans-pacific agreement. Meltzer contended that Europeans would be at a disadvantage should TTIP fail, as the ability of the EU to speak with one voice on a variety of issues beyond trade would be called into question. Meanwhile the conclusion of TPP will absorb President Obama’s complete political capital, but will eventually generate substantial economic gains, which could further alleviate political pressure to conclude TTIP. Meltzer noted, however, that the transatlantic cooperation on, and exchange of, data flows remains of vital mutual interest to both the U.S. and the EU.
Ambassador Paula Wilson emphasized the importance of regional agreements as the foundation for future trade integration and elaborated on New Zealand’s aim to “build up” from TPP. Petra Pinzler pointed out that European demands for more transparency should not be viewed as a disturbance to the negotiations but rather as consistent with the Western values that TTIP tries to promote throughout rules-based global governance mechanisms. She also insisted that without the protests of civil society groups, highly controversial issues such as the Investor-State Dispute Settlement (ISDS) would not have been perceived by the public in such a problematic way. Pinzler further warned EU policymakers not to rush into the next round of TTIP negotiations, as European standards for data protection and the challenge of producing generic medicines in the face of intellectual property rights remain unresolved.
The lively and rich debate covered a variety of issues and provided the audience with the big picture as well as detailed examples of individual problems and technical difficulties. In addition, the number of questions from the audience after the debate reflected the great interest in the event’s topic and showed the various perspectives and complex issues, which TTIP represents for policymakers on both sides of the Atlantic.