From the October 2015 issue of the Socialist Standard
The Transatlantic Trade and Investment Partnership (TTIP) is a free trade and investment treaty being negotiated in secret between the European Union and the USA. The main goal of TTIP is to remove regulatory barriers which restrict the potential profits to be made by transnational corporations on both sides of the Atlantic.
The British government claims TTIP could add £10bn to the UK economy, $80bn to the US and €100bn to the EU every year. It says consumers would benefit by the removal of EU import tariffs. And reducing regulation would help UK small businesses export to the US. Tariffs between the EU and US are already low, averaging around 3 percent but both sides foresee they will be eliminated under the agreement. The main focus of negotiations is on harmonising regulations, reducing 'non-tariff barriers' to trade, or abolishing them if they're deemed unnecessary. US and EU regulators have different requirements for testing the safety of products. Going through the different tests is expensive for business but TTIP aims to reduce those costs by bringing in common standards.
TTIP is championed by the capitalist class. Cameron has described it as 'the biggest bilateral trade deal in history' (Guardian 17 June 2013). John Cridland of the CBI added 'with the UK already trading more and investing more with the US than any other country, there are real advantages to drive home particularly for smaller firms. TTIP would be the biggest free trade deal ever negotiated' (CBI News 18 December 2014).
Godfrey Bloom, the ex-UKIP MEP commented:
'For the conviction Free Trader, the international classical liberal TTIP is very natural progression in a global society especially between two great trading blocks the USA and the EU. It begs the expectation of such supporters of 19th Century advocates such as Frederick Bastiat that 'when trade crosses borders armies do not'. A qualified welcome therefore from such idealists was fairly immediate, rightly so. One might carry forward Bastiat's theory to fit with more pressing international concerns such as migratory refugees: 'when trade crosses borders migrants don't'. Liberal societies with free trade agreements prosper.'
Bloom concluded 'the theory of TTIP is noble and worthwhile but in practice is doomed to failure. Does anybody imagine for a moment the regulators both sides of the Atlantic will not protect their turf, that they will voluntarily give ground, that big business in the world of crony capitalism really want to see increased competition from small and medium sized businesses?' (Huffington Post UK 11 June).
Trade and investment deals
The EU has been negotiating a similar trade and investment deal with Canada, known as the Comprehensive Economic and Trade Agreement (CETA). One of Canada’s key negotiating aims was to promote the use in Europe of oil from its tar sands. In 2012, the EU’s Fuel Quality Directive (FQD) proposed that oil from tar sands should be given a 20 percent higher carbon value than conventional oil. This reflected the greater pollution caused by its production and was designed to steer companies away from using it in the EU. However, a few weeks after CETA was concluded, the final version of the FQD had been watered down, and lacked the earlier requirement that companies needed to account for the higher emissions from tar sands, effectively neutering it.
Another free trade agreement is the Trade in Services Agreement (TISA) which would further consolidate transnational corporate power. TISA covers 52 countries including the EU, North America, some South American nations, Japan, Israel, Australia, New Zealand and Pakistan. It is set to affect up to 70 percent of the global services economy. It includes the removal of restriction on moving 'natural persons' from one country to another which will mean the capitalist class can use migrant workers to drive down wages and conditions. For some countries their only 'comparative advantage' is cheap labour. TISA would allow multinational corporations to exploit migrant workers with impunity.
The Trans-Pacific Partnership (TPP) is considered by the US as the companion agreement to TTIP. This agreement covers the US, Singapore, New Zealand, Australia, Canada and Japan. TPP is one of the primary goals of the trade agenda of the Obama administration in the US.
Right to sue governments
TTIP also consolidates the Investor-State Dispute Settlement (ISDS) which gives transnational corporations the right to challenge a country's laws. ISDS allows transnational corporations to receive compensation for the absence of a 'predictable regulatory environment.' Already under existing WTO free-trade rules this type of argument has been used to attack clean energy, mining, land use, health, and labour rights. More than $14 billion in 16 claims are now under litigation in the US. Under TTIP, a transnational corporation could sue a Government if their profits might be affected by food safety standards or wage increases. ISDS creates a parallel legal system, independent of national law, allowing transnational corporations to sue governments in secret corporate courts over laws or regulations that might prevent or reduce profit, what they term 'indirect appropriation.'
In 2012, the government of Ecuador decided to terminate its contract with US oil corporation Occidental, after Occidental sold 40 percent of its production rights to another company without abiding by its legal obligation to obtain government approval. Occidental turned to the ISDS provision in the US-Ecuador Bilateral Investment Treaty. This allows companies to sue governments through international courts for policies that threaten their profits. Occidental won and, as a result, Ecuador was forced to pay out $1.77 billion to Occidental, the highest compensation awarded to an investor through ISDS to date.
The government of Slovakia moved to restrict the powers of private insurance firms in the public health system which led to a number of health insurance companies successfully suing the Slovak government for their loss of profits. The Dutch firm Achmea attempted to use the same powers to block the Slovak government from setting up a public insurance scheme that would provide health cover to all the country's citizens. Achmea lost but because the scheme had not yet been adopted. If it is, no doubt they will try again.
The Vattenfall Corporation, a Swedish energy company is using an ISDS clause in an energy treaty to sue the German government for €4.7 billion following its decision to close its nuclear power stations in the wake of the Fukushima nuclear disaster in 2011. This case has not yet been decided. Corporations don’t win every time but merely suing is an attempt to stop governments acting. As TUC General Secretary, Frances O’Grady has pointed out, it represents the spread of ‘compensation culture’ to the international level. Addressing the European Commission Trade Policy Day in Brussels in June, she said that ISDS identifies 'the compensation culture that is building up in multinational companies, where suing democratically elected governments becomes more remunerative than actually providing a service' (TUC, 23 June).
Screening regulatory measures
All new US or EU proposals for legislation or regulation would have to be screened first for their impacts on trade and business. 'Mutual recognition' means that the EU would recognise US standards as 'legitimate' and would therefore allow US exports into the EU even when they don't meet EU standards. TTIP is not to stimulate trade through removing tariffs between the EU and USA, as these are already at minimal level. The main goal of TTIP is to remove regulatory 'barriers' which restrict potential profits to be made by transnational corporations. The EU has much stricter regulations on GM crops, pesticides, food safety, and the environment than the US. TTIP deal could open the EU market to cheaper products with poorer standards such as hormone-fed beef rinsed in acid, genetically modified oil from pesticide-soaked crops, and butter laced with antibiotics. In the EU, the precautionary principle is paramount to policy-making, meaning that a business must prove to government that a product poses no threat to human health or the environment. In the USA, a product is presumed safe, and for it to be banned government must prove that there is a threat to human health or the environment.
If global temperature rise is to be kept below 2 degrees and the most severe impacts of climate change mitigated, around 80 percent of known fossil fuel reserves must be left in the ground. The EU is pursuing a trade deal that would undoubtedly lead to even more money being poured into fossil fuel extraction. One of the key aims of TTIP is to push the US to reduce or remove current restrictions on the export of crude oil and shale gas. This would facilitate the export of tar sand oil, mined in Canada and refined/transported via the US. A EU 2014 report by the Global Commission on the Economy and Climate confirmed that high-carbon investment over the next 15 years will only serve to lock in the risks of dangerous climate change.
TTIP would allow private firms running NHS services to sue the government. The NHS is a 'public service' (the 1993 General Agreement on Trade in Services Treaty defines a 'public service' as one supplied 'neither on a commercial basis, nor in competition with one or more service suppliers') but as a result of the 2013 Health and Social Care Act, more health services in the UK are being put out to tender in a competitive market by Clinical Commissioning Groups. This commercial competitive element means that large parts of the NHS will not be protected from TTIP.
The EU has admitted that TTIP will probably cause unemployment as jobs switch to the US, where labour standards and trade union rights are lower. Examples from other similar bi-lateral trade agreements around the world support the case for job losses. The Economic Policy Institute in Washington DC estimates that the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico caused the loss of a million US jobs and shrinking real-terms wages for millions more workers. The Centre for Economic Policy Research concluded in a study commissioned by the European Commission itself that TTIP could cause between 680,000 and 1.3 million job losses in Europe and between 325,000 and 715,000 jobs in the US.
The US also has lower labour standards and employment rights than EU countries. The US has not ratified a number of the most important International Labour Organisation Conventions, including the rights to freedom of association and collective bargaining. The US has also passed Right to Work legislation in 24 states, most recently in the traditional union stronghold of Michigan, which clamp down on unions capacity to bargain and organise. European companies may take advantage of the ease of market access created by TTIP to relocate to the USA, and take advantage of the weak labour regulations. There is also the possibility that American companies may be encouraged by TTIP to relocate to EU states such as Bulgaria, Romania and Slovakia where incomes are low and trade unions are weaker than in other parts of the EU.
For transnational corporations, barriers to trade are things that restrict their profits such as labour rights, food safety rules, regulations on the use of toxic chemicals, the minimum wage, health and safety laws, and environmental regulations. TTIP is a charter for profit before people. The casualties will be working class people the world over, who will end up as collateral damage, more powerless and more vulnerable than ever in the face of global capitalism. TTIP is a race to the bottom, to the lowest common denominator that will further the interests of global capitalism.
Marx in his Speech on the Question of Free Trade in Brussels in January 1848 pointed out that 'when you have torn down the few national barriers which still restrict the free development of capital, you will merely have given it complete freedom of action... every one of the destructive phenomena to which unlimited competition gives rise within any one nation is reproduced in more gigantic proportions in the market of the world.' He concluded 'the Free Trade system works destructively. It breaks up old nationalities and carries antagonism of proletariat and bourgeoisie to the uttermost point. In a word, the Free Trade system hastens the Social Revolution. In this revolutionary sense alone, gentlemen, I am in favour of Free Trade.'