How European Trade Policy changed
Just over 10 years ago the European Union decided to engage with a new vision concerning her international trade agenda. After the failure of the infamous Doha Development Round negotiations in 2001, the moratorium on new bilateral trade agreements was lifted. The EU sought out new partners outside of the agreed upon multilateral negotiating rounds, and started developing its new trade vision.
When then Trade Commissioner Peter Mandelson announced in 2006 that the EU trade policy was going to turn over a new leaf, he implied that the EU had to adapt to the globalisation by becoming more competitive and more defined by a sense of purpose . The competitiveness had to be increased, and the EU had to attempt to engage all possible external markets. There where within the WTO the negotiations had stagnated due to the rise of the newly industrialised nations, the Commission saw the opportunity to commit trade policy into a competitive and market-defined vision. Even then, the finite nature of our planet was barely taken into account.
WTO Plus, or the subversion of multilateralism
Although the WTO remained central, the politics of bilateralisation of trade relations led to an end of the global vision to trade, thus avoiding public opposition to the global trade models (think the Seattle protests in 1999). The vision held by trade commissioner Pascal Lamy in 1999 was buried. Where the multilateral approach started from balanced negotiations, in view of a global consensus (at least in principle), the new bilateral vision gave primacy to the market potential of the new partners. In addition to this the levels of tariff barriers, or the level of market protectionism towards EU exporters, drove the push for trade deals. This commercial focus signified an important rift with the traditional trade approach of the EU. Where initially the EU had constructed its policy around rather political foundations, such as the development (or postcolonial control) of former European colonies within the ACP group, connected through the Lomé and Cotonou agreements, or the extension towards the East (and strategic encirclement of Russia?) and the Mediterranean through the European Neighbourhood Policy, this was replaced with some form of economic reciprocity. Since 2007 the EU, thanks to the mandate granted by the Council of Ministers, has engaged in negotiations with ASEAN, India, South-Korea, the Andean Community, Central America, Mercosur, Canada, Singapore and others. And now also the United States.
As indicated, the progress at the Doha Development Round of the World Trade Organisation stagnated. The main reason for this was the discontent voiced by the developing nations concerning the agriculture chapters, among which Brazil, India and Argentina were the most vociferous. The refusal to liberalise the European and American markets led to a stagnation of the negotiations. When the EU and the US realised that they could no longer push through their will, they decided to shift gears and engage, through bilateral agreements, in a one-on-one negotiation, to achieve further liberalisation on topics beyond the limits allowed by the WTO. The EU quickly followed suit. The US engaged in this approach of bilateral trade agreements, giving their aggressive approach the euphemistic name: WTO Plus. The European Commission on the other hand decided to become involved in very active lobbying within the European institutions to convince everybody that the EU could not lag behind, and risk losing out, and end up being confronted with negative trade conditions. When the ultra-liberal Karel de Gucht came to lead the Directorate General for Trade, as Commissioner in 2010 this approach really took off. De Gucht managed to sign Free Trade Agreements (FTA) with South Korea (2011), Colombia and Peru (2013), Central America, Singapore, Georgia, Moldova, and Ukraine (2014), which we all know has led to quite a volatile situation. In October 2014 he additionally managed to sign a FTA with Canada (CETA). Besides the ‘successful’ negotiations, he also initiated talks with Japan and Vietnam, and reignited talks with Mercosur.
Regulatory Convergence. Come again?
The contents of these agreements are, in the case of the EU, never agreed upon beforehand, limiting democratic control. They are only held to a number of demands, imposed externally. They need to correspond to the demand of the WTO that states that almost all trade in an agreement needs to be liberalised. The European Commission thus sees this as a necessity and obliges itself to make a minimum of 90% of goods tariff free. Additionally the EU seeks for further agreements that go beyond the traditional and seek out the elimination of non-tariff barriers to trade. This refers to rules that are meant to defend consumer goods, or the labour market for example. The elimination of these non-tariff barriers is expressed in the lingo with the beautiful euphemism of regulatory convergence. This creates the illusion of development of new rules, that should be used for the protection of the consumer, the employee, the citizen. Alas, regulatory convergence in reality implies the elimination of the most obstructive laws that impede the full expression of the interest of multinational companies, thus allowing them to shop among laws and regulations, in the search for the least cumbersome environment, after which the lowest common denominator is accepted by the negotiating states as a new benchmark
The creation of free trade agreements on a bilateral level of course entails a number of consequences. In an almost dogmatic manner we are reminded that new agreements, and complete liberalisation will bring about welfare benefits. There is even suggestion that the deeper the nature of a free trade agreement, the deeper the extent of the welfare benefits. There is however no economic model that presents us with a correct representation of this projection within an insecure economic reality. The projections that manage to develop a cost-benefit analysis can in no way give us a realist representation of something which is bound to pan out in the middle to long run. In an unstable capitalist system, where the speculative economy has grown to become many times larger than the real economy, no macro-economic long-term prediction can be considered as true.
The disadvantages of these free trade agreements will however also present themselves in a less abstract manner. When third countries, for example Congo, will lose export shares to the EU, through the relatively less favourable market access conditions, they will be faced with a direct loss of export. This is directly relevant in the case of developing nations: through the development of bilateral trade agreements they will witness the collapse of their preferential access to the European market. For the countries that do not partake directly in these agreements witness an indirect welfare-reducing effect. In the traditional Euro-bubble newspeak these trade-shifting effects of bilateral trade are often disregarded. The increase in inequality that these agreements entail is seldom mentioned in the hypocritical discourse of trade cooperation, or partnership agreements.
These unequal bilateral negotiations have had as perennial advantage that the EU has continuously been able to fill the dominant negotiating position. The EU is the strong economic player, and tantalizes prospective ‘partners’ with a market with over 500 million consumers. Despite these promises, the asymmetry is so strong that we often remark that the markets are opened to a massive import of finished products of the European Union, and a continuation of the dependency relations. Because of this, local industries, and agriculture are strangled. Countries end up incapable to foresee in their own needs, thus spiralling into a situation of stagnating development. Since the approval of the association agreements with Central America (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama), and the provisional entry into force of these agreements, in view of their ratification, we have seen that the agreements focus on the development of large scale economic projects, which use limited amounts of skilled labour, and focus mainly on the use of natural resources of the partner countries. Aprodev, a n umbrella organisation for Central American NGOs states bluntly that these agreements counteract the sustainable development and poverty reduction in the region, besides increasing pressure on natural resources such as land and water, which will lead to a diminishing food production, deforestation, loss of biodiversity and the increase of social conflicts, in a region already racked with strife and violence.
The asymmetric free trade agreements include regularly, and practically almost always clauses that oblige the negotiating countries to open up their capital markets for foreign capital. In many cases this leads to the inundation of those markets by powerful financial conglomerates that push for the privatisation of healthcare, transport and water distribution, giving way to the unchecked exploitation of financial speculation of these barely regulated markets. In addition to this clauses are often include in these agreements that render it practically impossible to return on these decisions, except to be faced by extensive fines.
Negotiating between ‘equals’
When Europe started the development of these bilateral agreements in the early 2000s, the United States managed to sign free trade agreements with Australia, Chile, Singapore, Bahrain, Morocco, Oman, Peru, Dominican Republic and the Central American States (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua), Panama, Colombia and South-Korea. However, since the beginning of the new millennium the United States has witnessed its economic hegemony come under pressure. The unfettered capitalism, and the coerced insertion of the global economy (bar a few exceptions has led to the US being overtaken by major emerging economies. Less hindered by minimum working conditions, wages and rigid final structures we have seen that the BRICS (Brazil, Russia, India, China and South-Africa) are 5 economic molochs that have overtaken the growth numbers of the EU and the US since the turn of the century. Through a combination of their ever increasing economic power and their demographic advantages have continuously increased the weight of these countries in the global economy. Compulsive financial speculation, tied into an insatiable thirst for oil and the lunacy of squandering away have of the budget to military expenses has led to the US being overtaken by more flexible and assertive players that have tried to recalibrate the planet. The multipolar world has reared its head.
Despite this irrefutable reality the United States have demonstrated a reluctance to accept this. On the contrary even. Since President Barack Obama was elected, the United States has never attempted to hide its “manifest destiny” . The economic vision of capitalism without borders, or neoliberalism, is being used as a weapon in the battle for global dominance.
The EU as tag-along
The EU, as an, in theory at least, independent actor, has inserted itself into the vision of the United States, and has engaged in negotiations for the Trans Atlantic Trade and Investment Partnership since 2013. At the height of the economic crisis in 2011 talks were first held to see how the Trans-Atlantic treaty, the wet dream of many a business lobby in Brussels and Washington since the 1980s, could be framed in a discourse that would promise jobs and bring an end to the recession. Seeing as the European and American markets for goods at this time is barely hindered by tariff barriers, the negotiators rapidly needed to look out for other elements to base negotiations on. Quite rapidly they looked at intellectual property rights, services, investments, public procurement, regulations and non-tariff barriers to trade, including chapters on sanitary and phytosanitary measures. Regulations on both sides of the Atlantic would be made compatible, and the least cumbersome regulations would become the foundations.
Oh No! Karel De Gucht
Despite the quite murky short-term benefits for the citizens both in the EU as well as in the US, the deal is being sold as the solution to the temporary failure of cannibalistic financial capitalism. Former Trade Commissioner Karel de Gucht, a man not known for his tact or modesty, had nevertheless tried to instil, before leaving his post at the end of 2014 (to be replaced by Cecilia Mallström), that the TTIP entailed many positive consequences. Among which the growth of economic activity (0,5% over 10 years – for the EU), hundreds of thousands of jobs (2 million over a period between 10 and 20 years, meaning no more than 0,6% of the grand total currently active in the US and EU markets combined), and a direct income growth of around 545 euros (without specifications of the origins). In an interview, that has gone on to become legendary, de Gucht, at liberty to defend his views, was interrogated fiercely by a sceptical journalist of the WDR, leading the Trade Commissioner to come well short of convincing. At no point during the interview he could state factual data convincing us of the advantages of the treaty. Additionally, the statements made were later refuted by multiple scientific investigations. This implies that at the moment we have no certainty or clear vision of what the concrete economic advantages of such a deal could be.
The negotiations have additionally been harshly criticised for its secretive nature, on both sides of the aisle . Access is limited to the negotiators, and only a very limited selection of Members of the European Parliament can access the documents and comment. The reading takes place in a small room within the entrails of the EP building in Brussels, without the permission to take notes, take the documents outside, or photocopy them. Knowing that large European corporation, and their industrial lobbies have met with representatives of the European Commission on TTIP, to transmit their demands or visions, whereas the qualms of civil society, unions and environmental associations have only been voiced around 30 times, questions surrounding the democratic legitimacy of the negotiating mandate start to resound again that bit louder.
Knowing full well that the direct advantages of this ‘partnership’ will in all likelihood not be felt by you or me, and the disadvantages even more so, the question to ask remains: cui bono?
The lobbies of the transnational companies that have tried for years to weaken the European norms on consumer protection as well as labour conditions, as well as wanting to break through American protectionist measures seem to be the first to enthusiastically encourage the agreement.
But what is it really all about?
Both the United States and the European Union see the step by step deterioration of their political and economic dominance in the world. The rise of the BRICS, who haven’t missed their entry into 2015 with the inception of their own development bank, and the announcement of their own rating agency, worries the traditional balance of power. When they declared, on the occasion of their 6th Summit in 2014, the construction of their New Development Bank, with assets worth $100 billion and an additionally reserve fund with the same amount they reacted against the lack of reforms within the International Monetary Fund, demanded as of 2011. The construction of the NDB thus represented an important step, and a declaration of intent of these major emerging economies (although some would argue that they are already well established), together representing 41,6% of the global population, and 19,8% of all GDP to recalibrate the balance within global capitalism. We see a de facto shift of the economic centre of gravity from the West, to the East and more importantly, to the South.
President Vladimir Putin said so very recently at the Summit in Fortaleza:
“ We can see a whole set of converging strategic interests. Firs of all, it is the common goal to reform the international monetary and financial system. In her current shape she is unjust towards BRICS countries, and towards all new economies in general. We should take up a more active role within the decision-making system of the IMF and the Worldbank. The international monetary system depends too much on the US Dollar, or better said, on the monetary and financial policy of the US authorities. The BRICS want to change this.”
TTIP on the other hand would lay the foundations for a quasi unified market of epic proportions which would impose trade rules for the coming decades, not only for those within the market, but also for those on the outside. It would allow the US and the EU to impose their trade vision on each and every bilateral partner, and would tie the world into a system where all is decided by capital, cynicism and the dehumanizing characteristics of the market mechanism. Those who think that the consequences of TTIP stop with these negotiations also need to take into account the following.
TTIP – TPP – EPA – FTA: The end isn’t in sight yet
While the United States negotiate with Europe, in parallel negotiations are held with eleven Pacific States (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam), the so-called Trans Pacific Partnership (TPP). The United States have already indicated that they want to close the deal before the negotiations with the EU come to their conclusion. This would mean that changes to the TTIP mandate will be included to make them market conform with TPP, leading the EU to indirectly sign trade deals with other countries.
The impact of TTIP and TPP can hardly be overstated. What we are witnessing here is the geostrategical insertion of European trade policy. The European Union and the United States have in started an implicit economic war with the emerging economies China, Russia, Brazil and India. As EU parliamentarian Bart Staes (Greens) recently stated:
“Both players openly state that via TTIP they want to impose the global standards and dictate the global economy de facto. After the failure of the Doha Development Round of the WTO the EU and US have slowly but steadily been destabilizing the central role of the WTO to the advantage of bilateral agreements. TTIP is going to be the crown jewel of the neoliberal free market ideology ”.
When in 2020 the preferential trade regimes the EU signed with the ACP countries (the so-called Cotonou agreements) end, the 79 countries of the regions Africa, Pacific and Caribbean will either independently or as a region enter into a new agreement with the EU. If the TTIP agreement is established, we can be sure that the unbridled and rapacious multinationals will feast as never before, on our hollowed-out rights. Sustainable Development, cooperation, social equality and the environment will suffer and those politicians elected to defend the common interest will find themselves subordinate to the private interests of transnational grand capital. The future looks bleak if we do not rise up to defend democracy, human dignity and solidarity