My near philosophical musings about the world in general its problems and possible ways out.


TTIP 2.0 - Beware of the undead

Is there a resurrection of TTIP looming? 

On July 26, 2018, the press reported that Trump and Juncker struck a deal. Not sure if it would qualify as an artful one in the sense of the white house matador. Nevertheless hereby the European Union appeared to have won a big trade-war ceasefire with the U.S. for a small price - at least in the short term. 

Bloomberg went on to report that, in return for a pledge by U.S. President Donald Trump to suspend the threat of an extra tariff on European cars, the EU reheated proposals to bolster transatlantic economic ties and threw in a vow to buy more American soybeans. Well, a deal which leaves much to further interpretation and which may only last until Trump's next Twitter rant. 

Unsustainable as this agreement may be, some other, less prominent press release may give us more reason to be concerned: Little more than a year after Donald Trump pulled the US out of the Trans-Pacific Trade Partnership (TPP), he reportedly had ordered to rejoin the 12-nation trade deal. Should we consider his new effort just as the latest swing of his volatile trade policy? Or is there reason to expect a Deja vue? 

And will this deal possibly breathe ghostly life back into its Atlantic counterpart TTIP, which currently is considered dead as a doornail? And if an arrangement with the Europeans appears to be necessary, are the US considering "TTIP 2.0"? 

The experts were surprised anyway when Trump announced that he no longer wanted to negotiate this "wonderful" instrument of American trade hegemony. Just because it was initiated by his best hated predecessor? 

In the end these treaties, euphemistically declared as agreements to ensure a free and fair world trade, in fact essentially serve US interests. Being instruments to secure American domination, beyond that they are of little use. And certainly they're not fair. Moreover, they are diametrically opposed to values, European have fought for throughout the last 300 years. 

For Europeans these treaties should be considered more of a Danaean gift. Trade agreements of this kind with the USA are merely instruments for the enforcement of US hegemony. The TTIP negotiations have shown that such agreement would have been deeply adverse effects on the sovereignty of European states and would turn out to be detrimental for democracy itself. It would have been so for several reasons. 

The three most prominent are discussed a little further: 

  1. The possibility of being able to sue states for real or perceived damages caused by their sovereign decisions (e.g. nuclear phase-out, shift towards renewable energies, bans on driving on combustion engine vehicle in city centres, etc.) would mean that the people can no longer be the sovereign. The sovereignty of the states would be lost, ground-breaking political decisions, which can well be painful but in times of human footprint outsizing the earths capacity by several times appear more necessary than ever, could no longer be taken. According to Steven Hill they represent a leftover concept from the free trade agreements of the 1990s, such as the now discredited North American Free Trade Agreement (NAFTA), which ever since has created one uproar after another.

  2. Backroom courts, the so-called Investor-State Dispute Settlement (ISDS), which are staffed with lobbyists, are clearly a step backwards in time. Why did our forefathers fight so fiercely for separation of powers and legal codification, if we now rather discard them in favour of engaging in a power struggle with the mighty and the powerful? Even the Prussian Civil Code, promulgated before 1800 seems to be more progressive. With TTIP coming into effect, we would have easily abandoned all legal certainty in favour of the right of the strongest.

  3. And finally, secret negotiations are unworthy of democracy. To give a concise example of secretiveness: only parliamentarians and few other selected persons were allowed to view the TTIP text which was subject to the lengthy negotiations, in a specially secluded reading room under supervision and for a maximum of two hours. In addition there was also the obligation of confidentiality - a one sided one. While the EU published its proposals, the US insisted on keeping its positions secret. This might be common bad practise. However to my opinion it violates fundamental principles of even an outspoken representative democracy. It undermines its credibility and gives room to suspicion that lobbyists dictate the rules.

    My radical demand in the sense of the Hamburg Transparency Act and beyond is: everything what politicians do professionally, must be totally transparent to the public. It should be permanently streamed on the Internet. However, their private life needs special protection.

    Today it is rather the other way around. Political egocentrics make themselves look ridiculous by publishing home stories, paparazzi hunt ministers in bathing shorts in their backyards and family members must serve to raise the reputation of politicians. But most of their work takes place behind closed doors: This is the wrong approach and must be corrected. 

So what is the recommendation? Is there a fix? First let's agree on the fundamental paradigm that a global free and fair trade is desirable and would be a major achievement, once implemented. Attempts had been made, e.g. with the latest round of trade negotiations among the WTO membership, also known as the Doha Round. Although hardly free and never fair, the Doha Round marked a step into the right direction. Exclusive bilateral trade agreements are in no way a match to an inclusive global trade framework.

However there are dark clouds at the horizon. While global growth is approaching 4% this year, it's most robust in eight years, few countries are finding the budgets and political will to make use of this recovery to implement reforms. Reforms however were necessary to improve infrastructure and welfare policies in response to fears about sluggish productivity and wage growth and the impact of automation.

Rather time may be running out, as forces shift to an adverse scenario: Geopolitical risks have helped commodity prices recover, assisting some countries but at the expense of others. Global monetary conditions are tightening, catching several countries wrong footed. Rising tensions reduce the trajectory of world trade as new US tariffs and retaliatory actions take effect. There is a substantial risk that disputes could escalate into trade war.

While these effects may have an eroding effect on the authority of the WTO, there might be no other long-term beneficial choice. I would like to close my contemplations by citing an unsuspicious expert and free trade advocate. Jagdish Bhagwati, Professor of Economics, Columbia University who jokingly suggested cloning Angela Merkel, to become a German export item to at least 10 other countries, opposes TTIP in favour of rejuvenated WTO.

With regard to his first proposal, I would prefer not to comment. However, I can only agree with his position on the second point.