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Glyn Moody's look at all levels of the enterprise open source stack. The blog will look at the organisations that are embracing open source, old and new alike (start-ups welcome), and the communities of users and developers that have formed around them (or not, as the case may be).

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TTIP Update VI

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In my previous TTIP update, I reported on an extremely important leak about the Trans-Pacific Partnership agreement (TPP), which is the other half of the US attempt to stitch up world trade through supranational treaties.

It's still too early to hope for something similar on the TAFTA/TTIP front - but rest assured, it's only a matter of time (another reason why the insistence on secrecy is not just anti-democratic and insulting, but stupid, too.) However, Corporate Europe Observatory (CEO), one of the key sites dealing with transparency (and lack of it) in Europe has come into the possession of a TTIP document that is very interesting:

CEO has today published a leaked version of the European Commission's communication strategy for overcoming public skepticism about the controversial EU-US trade negotiations, the so-called Transatlantic Trade and Investment Partnership (TTIP). The document was discussed at a meeting with EU member states on Friday 22 November. In order to "reduce fears and avoid a mushrooming of doubts", the Commission proposes to "further localise our communication effort at Member State level in a radically different way to what has been done for past trade initiatives".

It's not very long, so I recommend reading the whole thing on CEO's site; here I'd like to pick out a key passage. The leaked document spells out what it sees as the three main communication challenges, the first of which is the following:

Making sure that the broad public in each of the EU Member States has a general understanding of what TTIP is (i.e. an initiative that aims at delivering growth and jobs) and what it is not (i.e. an effort to undermine regulation and existing levels of protection in areas like health, safety and the environment).

TAFTA/TTIP may "aim" at delivering growth and jobs, but what exactly does that mean? The European Commission's own research predicts a range of possible outcomes:

Under a comprehensive agreement, GDP is estimated to increase by between 68.2 and 119.2 billion euros for the EU and between 49.5 and 94.9 billion euros for the US (under the less ambitious and more ambitious scenarios). However, if the FTA would be limited to tariff liberalisation only, or services or procurement liberalisation only, the estimated gains would be significantly lower. For example, an FTA limited to tariff liberalisation would lead to a lower (23.7 billion euro) increase in GDP for the EU and a 9.4 billion euros increase for the US.

There's a big difference between the 119 billion euros - the figure routinely quoted by the European Commission, even though it is only one extreme case - and the 23.7 billion at the other end of the scale, for estimates of the boost to the EU's GDP. From the research document again:

The comprehensive option includes two scenarios: a less ambitious agreement that includes a 10 per cent reduction in trade costs from NTBs and nearly full tariff removal (98 per cent of tariffs) and an ambitious scenario that includes the elimination of 25 per cent of NTB related costs and 100 per cent of tariffs.

NTB refers to "non-tariff-barriers", and basically means things like health and safety regulations, environmental protection, employment rules and financial rules. In other words, most of the things that make Europe what it is today: an extremely safe and pleasant place to live. The 119 billion euros figure always quoted by the European Commission refers to "the elimination of 25 per cent of NTB related costs". If we don't get rid of those, the predicted GDP boost is a much more modest 24 billion euros - hardly worth bothering about, given that the EU's GDP in 2012 was 12,900 billion euros (indeed, even the massively-improbable 119 billion euro figure is still less than 1% of EU GDP.)

In some cases, it may be possible to remove those non-tariff barriers that without compromising on health and safety standards, but in others, it is clearly impossible. A representative case in point is the famous chlorine-washed chicken. In the US, it is permitted to wash chicken carcasses in chlorine water, whereas this is not regarded as safe in the EU. These positions are not compatible. So how will this "non-tariff barrier" be dealt with?

The European Commission has said that health standards will not be compromised, which suggests that the EU will not accept chlorine-soaked chickens; but the senior vice president of America's National Chicken Council has a different view of what will happen in TAFTA/TTIP [pdf]:

We have been assured on a number of occasions by our trade negotiators that our industry's issues will not be traded-off for some other issue on the EU side. We trust our negotiators will secure the most favorable outcome possible, but at the risk of being redundant, we will want to be doubly-assured that the end product is worthy of our support.

That certainly sounds like they think that chickens washed with chlorine water will soon be winging their way to European plates, whether Europeans want them or not. The same confidence that the EU public's wishes will be swept away during the TAFTA/TTIP negotiations can be found in other areas, such as US beef produced with growth hormones, the contentious issue of GMOs, as well as the application of EU's rigorous chemical safety framework REACH - another key target for the US industry.

This exposes the central dilemma at the heart of TTIP: either the European Commission abandons the precautionary principle - something that is actually enshrined in the Lisbon Treaty - in a desperate attempt to realise some of the over-promised financial gains, or it gives up the big numbers and settles for a mere 0.2% GDP growth in order to preserve European health and safety regulations: it can't in general have both.

In fact, even if the European Union did deregulate massively - something that industry on both sides of the Atlantic is pushing hard for [.pdf] - with who knows what consequences for public health and safety, it might all be in vain anyway. It's obviously hard making prediction (especially about the future, as they say), but luckily we do have the past as a guide.

TTIP (and TPP) are actually part of a series of major trade agreements that the US has been signing in order to impose its laws and economic philosophy around the world. The two most important ones prior to TPP and TTIP are the North American Free Trade Agreement (NAFTA) and the South Korea-US Free Trade Agreement (KORUS). Here's what happened with NAFTA:

The United States ran a $1.6 billion trade surplus ($2.6 billion in today's dollars) with Mexico in 1993, the year before NAFTA. Last year [2011], the United States ran a $64.5 billion deficit.

And here's KORUS:

In the year after the agreement took effect (April 2012 to March 2013), U.S. domestic exports to South Korea (of goods made in the United States) fell $3.5 billion, compared with the same period in the previous year, a decline of 8.3 percent.

But maybe the trade agreements are generating jobs at least - that's one of the things that the European Commission says TAFTA/TTIP will do. Here's what happened with NAFTA:

Bill Clinton (1993) and his supporters claimed in the early 1990s that the North American Free Trade Agreement would create 200,000 new jobs through increased exports to Mexico. In fact, by 2010, growing trade deficits with Mexico had eliminated 682,900 U.S. jobs

Well, what about KORUS?

When the U.S.-Korea Free Trade Agreement was completed in 2010, President Obama said that it would increase U.S. goods exports by "$10 billion to $11 billion," supporting "70,000 American jobs from increased goods exports alone"

Here's what actually happened:

Using the president's own formula relating changes in trade to jobs, the growth in the trade deficit with South Korea in the first year since KORUS took effect likely cost more than 40,000 U.S. jobs

So if you were willing to water down health and safety in the hope that you will be recompensed with that 119 billion euros GDP gain, every indication from the past suggests that you are a mug, because the claimed benefits would not flow.

Actually, that's not entirely true: some companies would indeed save money by being able to dump today's EU environmental, labour, health and safety regulations. But those savings certainly wouldn't "trickle down" to the public, not even as more (lower-paid) jobs: one consequence of trade agreements is that companies tend to move their production to the country with the lowest costs. One way of reducing costs is to reduce wages, and so TAFTA/TTIP may well actually see working people in the EU worse off than the current situation. And if you think that's just my ill-informed opinion, you might like to read what the Economic Policy Institute has to say on TAFTA/TTIP:

A much more likely outcome [than the European Commission's rosy projections], based on North American experience under NAFTA, is that production workers in all the member countries will suffer falling wages and job losses (Scott et al. 2006), while U.S. and EU investors will profit handsomely, reinforcing the rapidly rising share of profits in corporate and national income that has taken place over the last decade in the United States (Mishel 2013).

Given these incontrovertible facts about past trade agreements, and the fundamental contradiction in the European Commission's stated aim of achieving large GDP gains by abolishing non-tariff barriers while preserving the precautionary principle and maintaining the European Union's uniquely high health and safety standards, you can see why its communication department has a big job on its hands.

Full list of previous TTIP Updates.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

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