T-TIP: the Future of Free Trade?

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By Devlin Murphy

July 23, 2015

The Transatlantic Trade and Investment Partnership (T-TIP) is a proposed trade deal on the horizon.  If you haven’t heard the acronym you probably will soon. But what is it, who does it benefit, and why is it controversial?

T-TIP is a proposed trade agreement between the European Union and United States aimed at creating the world’s largest free trade zone spanning the North Atlantic.  If passed, it would be the largest free trade deal in history.

It is currently being negotiated by the United States Trade Representative (USTR) headed by Ambassador Michael Froman. The USTR state on their website that “T-TIP presents an extraordinary opportunity to strengthen the bond between vital strategic and economic partners.”

The agreement has been proposed since August, 2013 with multiple rounds of secret negotiations.  We are currently in the 10th round of negotiations, with no specific word on when they expect to finalize any potential deal.

There are twenty eight European countries as well as the United States that are currently involved in T-TIP negotiations. If an agreement is reached T-TIP would then have to be ratified by all of the member countries.

T-TIP is based around the reduction or elimination of tariffs and taxes on cross border goods.  This allows them to compete freely with domestically produced goods in markets in both the United States, and Europe.

Additional parts of T-TIP are to reduce, what proponents are calling, regulatory “barriers” to trade in areas ranging from food safety law to environmental and banking regulations.

It is estimated, by the European Commission, that T-TIP could boost the US economy by 0.4% of GDP (?$104.5 billion) and the E.U. economy by up to 0.5% of GDP (?€120 billion).  The commission states “This would be a permanent increase in the amount of wealth that the European and American economies can produce every year.”

However, opponents to T-TIP state that the group that would mostly benefit are large corporations that can afford to ship their goods internationally, not mid or small sized businesses.

As stated earlier, the boost to countries’ economies should not be underestimated, with reduction to European and American households of four estimated at approximately €400 or ?$450 a year respectively.

Proponents’ claims are simple.  They state that T-TIP will benefit businesses, the public, and governments. Many argue that T-TIP will keep America competitive with other world powers, and cement the longstanding economic relationship with Europe for decades to come.

Furthermore, they state that having a comprehensive agreement with member nations allows for functional, codified, and binding dispute resolution mechanisms that ensure no one member nation plays fast and loose with the rules.

Proponents, on both side of the Atlantic, believe that strengthening trade ties will lead to increased economic and national security stability.  Many believe this is vitally necessary to combat the recent increase in aggression from Russia.

Lastly, proponents argue that this deal will be structured in such a way as to favor the United States due to our status as the single largest economy in the deal.  Thus the increase in sales of American goods and labor would create jobs and ship revenue back to the United States’ economy; while at the same time offering low cost goods and labor to European countries.

There is a large amount of statistical data to back up these claims, in support of T-TIP. History has shown that nations that have entered into free trade agreements such as NAFTA, AFTA (ASEAN Free Trade Area), and others have shared growth significantly above comparable nations that haven’t pursued trade liberalization.

However, opposition to T-TIP has begun to gain traction in both the U.S. and Europe, with opponents claiming that in addition to weakening regulations, it will harm small local businesses and the general population.  While there are some similarities, opposition groups have differing concerns in the United States and Europe.

An objection shared by opponents on both continents, is that the deal would not be inclusive and could be harmful to non-member countries.  In particular, they argue this could be damaging to Northern African nations that would not be able to compete in Europe with goods from large American corporations due to comparatively lower prices.

Labor groups in both countries have advocated against T-TIP due to the preferential treatment it will likely give larger corporations over smaller local businesses. Opponents say that the low cost goods will drive small domestic producers out of business.

There is also a concern about the secretive nature of the T-TIP negotiations.  Many say that they are worried because the public does not actually know what is in the deal apart from the small amounts that are disclosed.  While there is merit to this, this practice is commonplace in the creation of trade deals to allow for negotiation on specifics without public objection before the agreement is finalized.

European opponents argue increased privatization of national industries such as the National Healthcare System (NHS), in England, will inevitably lead to less inclusive service and a decrease in efficiency. They often cite problems within comparable privatized American sectors. Opponents do not want these problems to come to Europe.

Some groups have even gone so far as to claim that T-TIP threatens European style democracy as a whole.  Opponents have gained some number of support from the public with more than two million people in Europe signing a petition against T-TIP.

Opposition in the United States takes on a different feel. European nations have stated they would like to end the “Buy American” clause. Historically this has mandated that the United States can only purchase national security investments from American companies.  If ended, this would allow European companies to competitively bid for Department of Defense contracts. Opponents believe this will harm some the defense research and development industry within the United States.

Yet other opponents have argued that T-TIP would cause the erosion of U.S.’ energy advantage.  Currently, the United States in enjoying a surplus of natural gas (through the controversial new procedure known as fracking) and oil.

This surplus is due to policies designed to keep American energy stateside after the OPEC oil embargo of the 1970s. Today, these policies restrict the transatlantic export of crude oil.  This combined with the development of the Strategic Petroleum Reserve, as well as price controls have made energy plentiful within the United States.

Ultimately the public needs to see what is in the final deal before they can support or condemn it, and that will take time.  Will T-TIP end up being the next NAFTA growing the economies for all member nations?  Or will opponents’ fears be realized with regulatory erosion, and loss of domestic jobs? The potential agreement, if successfully negotiated, is expected to be announced sometime in 2016.

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