TTIP: What is a trade deal for if it doesn’t even create trade?

by Werner Hager and Matthieu Choblet

a follow-up article on our previous publication on TTIP, originally published on ttip2014.eu

 

European integration has many purposes, among which maintaining peace is certainly the most valuable. Yet, the main incentives for integration by means of the European Community and the European Union were the growing economic ties between the many states of Europe. The Transatlantic Trade and Investment Partnership (TTIP), which the Commission is currently negotiating with representatives of the US government and the industry on both sides of the Atlantic, is similar to the project of European integration, to the extent that it aims at creating a transatlantic single market. The underlying assumption of such a project would be that it leads to the creation of additional trade, which in turn would strengthen the transatlantic relationship.

Last year a couple of economic studies have been produced which focus on quantitative assessments of the potential economic effects of TTIP. The numbers we find in these studies, though they are to be used with some reserve, show disconcerting results. Basically two scenarios can be identified: In the first case, TTIP has no significant impact on the economy at all; in the second case and taking into account a ‘comprehensive liberalization’ scenario, the alteration of economic growth remains mediocre, but trade relations are significantly affected. It would appear however that TTIP is not fitting mechanism to create trade, but rather something that would significantly divert it.

Diverting trade to elsewhere is not the same as growth

In economic sciences it is common to differentiate between ‘trade creation’ and ‘trade diversion’. The first one is obviously the desideratum of a liberal trade-policy. Conversely, ‘trade diversion’ denominates the phenomenon of new trade relations simply substituting the existing ones without achieving a net gain in trade volume. The respective data brought forward by the IFO-Institute and the Bertelsmann Foundation has often been quoted and is easily accessible online. To name but a few: US-British trade would increase by about 60 percent, US-German trade would gain up to 94 percent. At the same time UK-German trade would decrease by 41 percent and UK-Irish trade would even lose roughly 46 percent.

The outcome is clear: while trade between individual European countries and the US would increase, trade within the EU would sharply decline. If we work on the premises that intra-European trade is an essential constituent of European integration, the latter would lose much of its importance. The financial crisis in the euro area is already giving us a foretaste of what it means when the European project becomes a vague and ephemeral idea. It is already a fact that the markets of the Euro-periphery are losing their relevance for exports from core countries, which lead many citizens to believe that mutual support isn’t worth the effort. Having said that, the authors of this article do not wish to see European integration as a project which exclusively relies on the craving for business and profit. However, trade diversion through TTIP does not just affect European identity, but it also endangers the protection of environment and labour legislation.

„TTIP: What is a trade deal for if it doesn’t even create trade?“ weiterlesen

TAFTA | TTIP: New Dawn for Atlanticists, Sunset for old Europe?

by Werner Hager and Matthieu Choblet

a contribution to „The Transatlantic Colossus – Global contributions to broaden the debate on the EU-US free trade agreement“

Abstract

TAFTA | TTIP negotiations are taking place in the context of what could be a new era of free trade. Both the EU and the US have bolstered their efforts to conclude bilateral free trade agreements all over the world in the last years. Simultaneously however, the EU and the US have sometimes experienced discord, with US-politicians increasingly turning their attention towards the Asia Pacific region and Europeans being seemingly preoccupied with themselves. Atlanticists have perceived this as a weakening of the transatlantic relationship, a critique which has sometimes been made with regards to European integration more generally. To be sure: a politically stable and economically dynamic Europe has always been in the interest of US international politics. Nonetheless European integration has sometimes been described as contrary but not complementary to the ideals of Atlanticists. The euro was notably set up as an alternative leading currency. With TAFTA | TTIP, trade would be diverted from the intra-European area towards more EU-US trade, thus weakening the relative importance of trade within the common market. We argue that TAFTA | TTIP is a project which would lead to a relative decline of traditional European integration to the benefit of transatlantic integration.

 

INTRODUCTION: A NEW ERA OF FREE TRADE

TAFTA | TTIP negotiations are taking place in the context of what could be a new era of free trade. With the multilateral Doha Development Round being manifestly stuck, both the EU and the US have recently bolstered their efforts to conclude bilateral free trade agreements all over the world (Dadush 2013). These attempts are currently culminating in the project of a Transatlantic Trade and Investment Partnership (TTIP). This project can be traced back to a series of agreements in the 1990s that lost some impetus in the meantime (Siebert 2013). The idea was reinvigorated when Germany took over the EU-presidency in 2007. German Chancellor Angela Merkel seized the opportunity to revive the transatlantic project by setting up the Transatlantic Economic Council (TEC) (Techau 2013). Its members are both government agencies, such as the US Chamber of Commerce, and private pressure groups, such as Businesseurope and the Bertelsmann Foundation. The TEC has been doing the preliminary work for the joint High Level Working Group (HLWG), which ultimately laid the foundations for the current negotiations (European Commission 2013b, 5; US Department of State, 2013). In this essay we argue that the TAFTA | TTIP may turn out to be against the interest of European integration. This is not because Atlanticism and European integration are necessarily contradictory, but because the predicted outcomes of this particular project will lessen the importance of intra-European trade. However intra-European trade has increasingly become the ‘raison-d’être’ of European integration, which is consequently under threat.

„TAFTA | TTIP: New Dawn for Atlanticists, Sunset for old Europe?“ weiterlesen