Is the Transatlantic Trade and Investment Partnership a Triumph of Capitalism over Democracy?


The recent G20 summit in Brisbane has recast a light upon the proposed Transatlantic Trade and Investment Partnership (TTIP). David Cameron’s support for TTIP, a free trade deal between the EU and the US, also leads to the question of the UK’s position in this agreement, given calls to leave the EU from Conservative backbenchers.

TTIP aims to remove ‘behind the border’ trade barriers between the US and members of the EU. The bilateral trade between these two economic regions amounts to around £393 billion year, trade between the EU member states and the US account for half of global economic output. Therefore, the agreement is viewed to be potentially lucrative for both partners.

However, the level of economic growth this deal will generate has been questioned. The EU Commission has funded studies that have estimated there will be around 0.5%, as a result of the partnership. However, critics argue that this conclusion has been drawn using the general equilibrium model, which rests upon the assumption that anything that is produced will be bought. This means growth prospects outlined by the EU are optimistic. Therefore, the agreements focus on reducing trade barriers and transatlantic harmonisation to bring about economic growth may not actually provide economic growth.

Additionally, the costs of harmonisation have not been studied. The deal aims to set common western standards. It is unknown whether the US will alter their standards to meet those of the EU or vice versa. Alternatively, new standards could be set. This will undoubtedly affect current businesses in various industries, including healthcare, food and manufacturing, as they will have to adapt to comply with new standards. A uniform standard will be profitable for some. For example, car manufacturers can form a single production line and thus cut their costs. However, smaller businesses may not have the capital required to meet new standards and therefore it seems TTIP favours larger conglomerates, over small business owners.

Many also view TTIP as a challenge to democracy due to the manner in which it was commissioned. Discussions relating to TTIP began behind closed doors at European Commission in July 2013. These talks followed a similar trade partnership agreement that had been made with Canada in 2009. Plans for TTIP were not made public until November 2013 and this was due to a leak, rather than the transparency of the EU Commission. The documents revealed were regarding how to package TTIP to the public. It was not until earlier this year that the TTIP mandate was finally published.

This seemingly veiled process has led many to question the extent to which TTIP was proposed democratically. Those who were opposed to TTIP attempted to form a group and applied for ECI status. The EU Commission formed the European Citizens Initiative (ECI) as a vehicle through which people could present their opinions. Despite accumulating 800,000 signatures, the group was not allowed to form an ECI. This has heightened scepticism and contributed to the notion that TTIP is being pursued at the expense of democracy.

One of the main reasons why TTIP has gained strong opposition is that in the current form, the partnership will include the investor-state dispute settlement (ISDS) mechanism. This is an instrument of public international law, that grants an investor the right to use dispute settlement proceedings against a foreign government. Recently, this has led to a tobacco company suing the Australian government. Despite the nature of the press coverage, ISDS is not necessarily an affront to democracy, as it encourages governments to treat foreign companies fairly.

With average tariffs already low, at approximately 3% and the less than substantial contribution to economic growth, it seems that the setting of common standards is a key aim of the partnership. This is largely in response to the standards from Asia, which are considered to be lower and enable Asian goods to be produced at a lower cost. Therefore, TTIP can be seen as a response to the rise of other nations. By creating a single transatlantic market, through TTIP, the US and EU member states will be better equipped to meet the challenges of Asian competition and secure their flailing positions in the global economy.

Image from https://de.wikipedia.org/wiki/Transatlantisches_Freihandelsabkommen