Has business lost the battle for TTIP?

Has business lost the battle for TTIP?

With German minister of Economic Affairs Gabriel and French president Hollande declaring failure of the negotiations between the US and the EU on TTIP, which would further integrate their economies, official enthusiasm for the deal has also disappeared.

By eliminating non-tariff barriers and establishing common rules and standards, the Transatlantic Trade and Investment Partnership (TTIP) would create a more business-friendly environment. This would benefit firms, but also result in more choice, better products and lower prices for consumers

Opposition to TTIP has been particularly major in Europe, where numerous non-governmental organisations have railed against it. The common denominator in that opposition was the concern that countries would no longer be able to regulate trade to protect the environment and the health of their population and would have to succumb to corporate interests.

From Top to Bottom

Ironically, the differences in regulation between countries often serve to illustrate the so-called “race to the bottom” argument by similar groups that oppose TTIP. Firms, in that argument, invest in the country with lowest regulatory standards to cut business costs, forcing other countries to lower their standards too. A common standard would eliminate that possibility. But opponents of TTIP fear that, through further integration, TTIP would introduce the lowest (common) standards in different economic sectors. In health and safety issues for example, the lower American standards would prevail, while in the financial markets the lower European standards would dominate. It is conceivable, however, that there could also be a “race to the top” where firms would adjust their processes to the highest standards. Examples of both races can be found in studies on the effects of globalisation. [to top] [to bottom]

Global, local or in between?

Accepting the reality of increasing economic interdependencies between countries, through both trade and investments, it makes sense to have basic common rules and regulations to prevent countries being played out against each other and to reduce the costs of doing business. The global trade regime in this respect has greatly benefited from a set of agreements under the auspices of the World Trade Organization. This has been greatly successful in reducing import tariffs around the world, but it has proven difficult to advance the agreements to include rules and regulations regarding services, investments, property rights and others.

The US and EU started negotiating TTIP in 2013 among other things to help pave the way for setting global standards to strengthen the multilateral trading system. Being the largest global trading blocks, with extensive economic relations, they had a particular interest in an agreement that included regulatory mechanisms to free up trade in both goods and services and facilitate investment in their areas.

One strike, but not out?

Firms have a significant interest in the design of the rules and are lobbying to advance their case. Non-governmental organisations are doing the same thing, but in a more vocative way. They are afraid that TTIP will not only result in a race to the bottom, but will also limit the options of nations to rein in firms, i.e. favour business interests over those of (democratically elected) governments. They prefer no Partnership and currently find Gabriel and Hollande on their side. But that brings back the possibility that firms will play out states against each other. With or without legal agreements on how to behave, firms will operate in an international, global environment, which can currently only be influenced by nation states and their agreements.


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