赵晨:Ambition up in the Air

——Public animosity hinders American-EU deal
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赵晨(社科院) (进入专栏)  

Demonstrators hold anti-Transatlantic Trade and Investment Partnership banners during a rally against the proposed U.S.-EU free trade pact in Berlin on October 10, 2015 (XINHUA)

During his visit to Europe in April, U.S. President Barack Obama and German Chancellor Angela Merkel appealed in Hannover for the negotiations on the Transatlantic Trade and Investment Partnership (TTIP) to be concluded this year. The TTIP is a proposed free trade agreement between the United States and the EU. Initiated in 2013, it aims to reduce trade barriers and homogenize regulations in member economies in a bid to promote economic growth and establish new international trade rules and standards.

However, just before Obama's arrival in Europe, a number of German social groups organized a mass demonstration, in which 90,000 people protested against the TTIP. Support of the deal in Germany has also fallen from 55 percent two years ago to 17 percent now, according to a recent poll by the Bertelsmann Foundation, the largest private non-profit foundation in Germany.

On May 2, the international environmental group Greenpeace leaked a 248-page document from the secret TTIP negotiations. It showed that U.S. negotiators had made tough demands in areas including market access, genetically modified food, public procurement, cultural products and regulatory policy. Washington's stance has aroused great discontent amongst the European public.

In response, French President Françoise Hollande said on May 3 that France would not accept any treaty that may damage the country's cultural and agricultural sectors.

Against this increasingly hostile backdrop, the chance of TTIP negotiations being concluded at all, let alone by the end of this year, has been notably reduced.

A broad alliance

The TTIP is based on two major objectives. Economically, both sides hope to increase bilateral trade and provide economic stimulus through tariff reductions and the removal of non-tariff barriers. In a report presented to the European Commission in March 2013, the Center for Economic Policy Research, a London-based think tank, stated that if these two aims were achieved upon the completion of the TTIP, the annual growth of EU and U.S. economies would increase 0.4-0.5 percent.

The report claimed that an ambitious and comprehensive transatlantic trade and investment agreement could bring significant economic gains as a whole for the EU (119 billion euros or $135 billion a year) and the United States (95 billion euros or $108 billion a year). For a family of four in the EU or the United States, this translates into an extra 545 euros ($617) or 655 euros ($741) of disposable income per year, respectively.

The output value of the service industry, which has not been fully liberalized on both sides of the Atlantic, accounts for 20 percent of the combined GDP of the United States and the EU, higher than the total of agriculture and manufacturing. Some experts estimate that if service-related trade barriers were completely removed, the benefit created would be equivalent to the free movement of goods over the last 50 years brought about by the General Agreement on Tariffs and Trade as well as the World Trade Organization (WTO).

Politically, by setting new international trade and investment rules, the United States and the EU could consolidate their dominant status in global governance. Since the financial crisis of 2008, their economic strength has been in relative decline, while the momentum of emerging economies continues to grow. This has encouraged the two leading economies toward further integration.

The report Global Trends 2030: Alternative Worlds, published by the U.S. National Intelligence Council in 2012, predicted that Asia's weight in the global economy would surpass North America and Europe's in 2030. These slumping giants therefore need each other to prop up their economies in the future.

Through negotiating the TTIP, the United States and the EU aim to take advantage of their own vast markets to continue monopolizing the setting of international trade rules and standards, and to maintain their position of superiority in the new global economic order. In the process, they manifest apprehension over the rise of emerging economies, spearheaded by China. Thus, a major political purpose of the TTIP is to contain this rise and entrench their status as rule-makers rather than rule-takers.

European critiques

Despite the TTIP receiving the endorsement of political elites, skepticism over the deal has been growing amongst the European public. Major concerns exist on whether the agreement will lead to job cuts, the lowering of European health and environmental standards and the squeezing out of local firms by powerful multinationals. Many consumer groups, environmental protection organizations and trade unions have launched campaigns against the TTIP. To a certain extent, this agreement has already become a new target of the anti-globalization movement across Europe, as well as in the United States. Many opponents believe that the TTIP is merely a rigged game, helping transnationals reap profits at the expense of public rights.

There is a major divergence between the United States and the EU over what sort of settlement mechanism should be employed for trade disputes. The United States insists on the investor-state dispute settlement (ISDS). The instrument rules that an investor has the right to file a case before an arbitral tribunal for compensation for violations of its legal rights and interests by the policies of its investment destination. This means that foreign investors would be allowed to sue governments that introduce legislation favoring domestic industries. Many Europeans claim that the ISDS favors transnational corporations over host governments; therefore palpable unease prevails over the U.S. scheme, which is perceived as non-transparent and undemocratic.

An opinion poll by the European Commission showed an overwhelming 97 percent of respondents opposed the inclusion of the ISDS into the TTIP. Hence, the commission has proposed to replace the arbitral tribunal with an investment tribunal in a bid to shift the power balance away from transnational companies, but so far Washington has not responded to the proposal.

Other concerns of the EU in negotiations center on environmental protection, labor rights and food safety. Numerous Europeans worry that once the TTIP takes effect, the EU's standards on environmental protection and social rights will be eroded to U.S. levels, which are considered lower than those in the EU. For instance, some nations including France and Germany are concerned about U.S. hydro-fracking methods, which have been accused of undermining the environment.

European environmental groups and green parties are vigilant on the comparatively lower standards of U.S. agricultural products. In particular, significant numbers of consumers also worry that the TTIP will result in the ban on genetically modified food imports being lifted, smashing Europe's food safety standards. Several demonstrations have been staged across Europe in protest of the TTIP, attempting to prevent imports of chlorine-washed chicken, hormone-boosted beef and genetically altered crops from the United States.

Moreover, conflicts also stem from the fact that the United States not only enjoys a trade surplus with the EU in sectors such as music, film and TV entertainment, but also holds an edge in the digital technology and Internet service industries. France has been insisting that cultural products such as film and digital media should be excluded from TTIP negotiations for fear that powerful U.S. companies will damage domestic industries.

Meanwhile, German education and science trade unions have criticized the privatization of education that would be triggered by the TTIP. They claim that the move would pose threats to public education and erode the quality of educational institutions. The outcry has led to an EU proposal for the cultural and educational sectors to retain government subsidies, but Washington countered that it would reduce U.S. companies' opportunities of fair competition.

Trust issues

In 2013, it was reported that Merkel had been under U.S. surveillance for approximately 10 years, causing German trust in the United States to decline sharply. The absence of European information security officials in TTIP negotiations has inspired public skepticism across the continent. There is a chasm of difference between the United States and European nations in the field of data protection. So far, neither side has ceded ground. The United States has pressed for EU concessions, but these have faced objection from the European public. EU citizens worry that if the TTIP takes effect under the protection of the ISDS, American Internet giants may easily obtain their personal data and violate their privacy.

In general, American and European establishments are keen to move forward with TTIP negotiations, so as to boost economic growth across the Atlantic and to withstand the rule-making power and influence of emerging economies. However, even if talks were finished ahead of the 2016 American presidential election, follow-up approval procedures would require longer deliberations.

On top of this is the possibility of a rejection of the terms of the TTIP by the U.S. Congress or national parliaments of EU members. Public resentment toward the historic pact is rising on both sides of the Atlantic. For now, the deal appears to be deadlocked and will require a comprehensive resuscitation to be successfully floated back to the unconvinced U.S. and European public.

Beijing Review

The author is a research fellow with the Institute of European Studies under the Chinese Academy of Social Sciences

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