Speri | 7 October 2015
Why geopolitical arguments in favour of TTIP are also flawed
by Ferdi De Ville & Gabriel Siles-Brügge
The PR campaign in favour of the Transatlantic Trade and Investment Partnership (TTIP) has subtly changed over the past two years. In response to criticism of the figures used to trumpet the economic benefits of TTIP, advocates have started to put more emphasis on the geopolitics at stake. In a recent speech the EU’s Trade Commissioner Cecilia Malmström stated that ‘the economic gains are certainly central to this deal. But the global impact of TTIP is essential to understand what it’s all about.’ Having analysed this argument as well, we suggest that this justification for TTIP is also seriously flawed.
When advocates of TTIP appeal to geopolitical arguments they refer often to different things: the need, for example, for the EU to develop closer ties with the US amidst the instability of the current security environment, or the need for the EU and the US to promote ‘Western values’ at a time when other politico-economic systems (such as ‘state capitalism’) are gaining prominence. That said, the main argument that is made is unquestionably that the agreement will allow the EU and the US to ‘set global standards’.
It is argued that these negotiations represent a golden opportunity for the EU and the US to establish rules for products and services that will have to be followed by the rest of the world, given that the transatlantic partners currently still represent more than 40 per cent of the global economy. As this share is rapidly declining, the argument is further made that TTIP offers the last chance to set global standards, before others do so. In her confirmation hearing before the European Parliament in 2014, Commissioner Malmström explained this reasoning as follows: ‘there is a strategic dimension to the regulatory work [in TTIP]. If the world’s two biggest powers when it comes to trade manage to agree standards, these would be the basis for international cooperation to create global standards.’ President Obama has made similar remarks, being quite explicit about the role of China in driving agreements such as TTIP: ‘as we speak, China wants to write the rules for the world’s fastest-growing region … Why would we let that happen? We should write those rules.’
This line of reasoning has served as a useful counter to the arguments of European progressive groups, including the various civil society organisations and political parties that have until now been most critical of the negotiations for fear that TTIP will dilute standards. Instead of a race to the bottom across the Atlantic, so the geopolitical argument goes, TTIP will lead to higher standards around the globe as the EU and the US share a commitment to high levels of social and environmental protection. Rather, it is the absence of TTIP that would lead to a lowering of standards as the rules would then be set by states (such as China) that care far less about the environment, labour rights or consumer protection.
But does this intuitively powerful narrative withstand careful analysis? The answer, we suggest, is that it all depends….
TTIP could indeed lead to the diffusion of high standards across the globe, but only under two conditions: firstly, if it establishes high standards, and, secondly, if it incentivises third-country firms and governments to adapt their practices to these standards. This would be the case if the EU and the US decided to harmonise their current regulations upwards (in other words, by adopting a common, high standard): this would then lead to strong rules and would incentivise alignment by third countries which would accordingly gain access to both the EU and the US market at once. Alas, upward harmonisation is not on the table! Rather, in line with the preferences of transatlantic business, the negotiators are mainly working towards mutual recognition of rules and/or testing procedures. This would mean that, for affected sectors, products and services approved for sale on one side of the Atlantic could be sold in the other market without having to meet additional standards and/or undergo further testing.
Much can be said about the risks of mutual recognition for levels of protection, but here we concentrate on what this approach means for the ability of TTIP to lead to the establishment of ‘global standards’. Crucially, this depends on the question of whether mutual recognition will also be available to producers in the rest of the world (‘erga omnes’ mutual recognition in trade jargon) or whether it will only be applied to those firms located in the EU and the US (‘bilateral’ mutual recognition). To give an example: if TTIP were to lead to the mutual recognition of drug regulation and testing, would it suffice for a Chinese manufacturer to receive a certificate from an American testing facility to be able to market its product directly in the EU? At the start of the TTIP negotiations, the EU made its position clear on this issue for two crucial sectors, automobiles and electrical machinery. Third countries would not benefit from mutual recognition in TTIP: ‘it can reasonably be assumed that in reality the outcome of the negotiations … would rather result in bilateral than in erga omnes recognition of safety standards’.
It is quite likely that bilateral, rather than erga omnes mutual recognition, will also apply in more sensitive areas such as the regulation of medicines or food safety. This means that TTIP will not lead to the setting of global standards, as it would provide little to no incentive for firms and governments in third countries to align their practices with transatlantic standards, as the status quo of duplicate regulations and testing would remain in place for them. What’s more, because of the ‘regulatory discrimination’ implied by TTIP, with EU and US firms benefitting from preferential treatment courtesy of bilateral mutual recognition, third parties might even lose market share in the EU and the US. This might well lead to a loss of EU and US influence on global rules.
Our analysis of the geopolitical ‘setting global standards’ argument that has become central to the advocates’ discourse on TTIP shows it to be seriously flawed. TTIP will only lead to high global standards under certain conditions and, based on what we currently know about the negotiations, these conditions are unlikely to be met. This demonstrates that a ‘transparent’ debate is not the same thing as an ‘honest’ one. Advocates of TTIP, such as the European Commission and the US Administration, need not only to make bold claims about the benefits of the agreement without adequate justification: they need actually to explain how TTIP will help to realise them.