TIPP – UK / US trade deal

TIPP (Transatlantic Trade and Investment Partnership) is a potential trade deal between the EU and US. It is currently being negotiated by the European Commission and the US.

The aim of the agreement is

• Encouraging trade and investment between the EU and the US.
• Extend principles of European Single Market to include the US, enabling lower prices for consumers, greater trade and prosperity.

However, critics of the agreement fear that the proposal will lead to lower environmental standards, job losses, privatisation of public services, and overall is geared towards favouring big business at the expense of the consumer and environment.

The main areas of TTIP include

• Removal of red tape and bureaucracy for firms who are exporting.
• Setting new rules to make it easier to export, import and invest.
• Harmonisation of rules and regulations relating to trade between EU and US.
• Create a fairer process and clearer rules for firms who invest in other countries. This includes ISDS (Investors state dispute settlement) which enable firms to sue governments for lost profits relating to government regulation.

Potential benefits of TTIP

• Encouraging inward investment from US companies, which will lead to the creation of jobs and kickstart the EU economy.
• Extending the principles of the single market to reduce interference and non-tariff barriers to trade
• Greater choice of imports, enables lower prices for consumers. This could be significant in areas like jeans and cars. It might help to reduce the price differential between US and EU in areas like clothes and computers.
• More exports. The UK could export more to US. For example, British lamb and venison cannot currently be exported to US.
• The EU received over €325 bn investment flows from around the world (34% of world inward investment) The British government have claimed that TTIP could add £10bn to the UK economy.

Criticisms of TTIP

• Unaccountability of TTIP negotiations. With negotiations occurring behind closed doors, many fear that important decisions on trade and the environment are being made by unelected and powerful business interests.
  • However, it will still be up to the EU and national governments to accept or reject any treaty. Critics may argue that because of potential benefits, the agreement will be supported – even if it contains areas which are highly damaging. The UK government has already publically supported TTIP and are likely to accept any agreement.
• Investor state dispute settlement (ISDS) A key US demand in negotiations, this allows private firms to sue government for loss of profits related to regulation. Examples, including US fracking company suing the Quebec government following a ban on drilling under St Lawrence River. The ISDS would be enforced by an independent body, which would bypass national courts. It could potentially be damaging if US company sue for loss of profits, due to a government wishing to protect environment. The fear is that TTIP could be weighted towards interests of powerful companies more than consumers and environment.
  • However, it is worth bearing in mind, there are already many of these agreements in place, in theory ISDS could help improve the balance between business and local society.
• Access to cheap fossil rules. The TTIP could allow Europe access to cheaper US crude oil and natural gas. This would lead to lower energy prices for consumers.
  • However, it would damage the EU’s renewable energy industry and damage efforts to reduce reliance on fossil fuels.On the other hand reduced regulations over wind farms could enable growth and lower costs in this industry.
• Structural unemployment. Trade agreements often lead to winners and losers. In the short term, some EU companies will lose out to cheaper and more efficient US firms. This can lead to structural unemployment in Europe.
  • On the other hand, the TTIP can open up markets for EU exporters. Overall the increase in competitive pressures from the trade deal may encourage greater efficiency amongst firms.
• Privatisation of public services. One of the potential aims of TTIP is to open up public services, such as health and education to US companies, increasing competition and potentially reducing costs. But, there are fears this will accelerate process of privatisation of important public services, leading to a decline in standards.
  • The EU commission counter by saying that EU governments will still be able to retain a monopoly in public services, provide subsidy and limit access to those markets if they wish. EU commission on TTIP
• Removal of local content requirements. Currently renewable energy needs to be sourced locally. Removing this requirement enables energy firms to import renewable energy. This can improve the renewable energy market, but it could be unpopular locally as people are less likely to support wind farms if the energy is exported to other countries.
• Harmonisation of regulations could lead to lower standards. US has different regulations on foods. For example, it has greater tolerance of pesticides and GM foods. If the EU harmonises legislation to US standards, it could lead to a decline in standards on food, chemicals and the environment. For example, the EU currently bans 1,200 substances from cosmetics, the US just 12 (due to precautionary principle). The other fear is that with common regulations, they could be pressure to cut regulations and impose lighter targets on issues such as carbon emissions.
  • On the other hand, harmonisation could lead the other way. The EU could adopt stricter regulation on finance, and the US could adopt stricter legislation on the environment. However, increased regulation may be hard to sell due to opposition from companies who would have higher costs.

• Protection of standards. The EU claim that the TTIP will protect key regulations and public services. They state that the TTIP will not compromise
  • EU standards.
  • The precautionary principle for avoid potential problems to environment / society.
  • Giving EU countries the right to not accept any commitment to open up public services to other providers. EU commission

Conclusion

In theory, a trade deal between the US and EU makes sense. It has the potential to create a larger trading block and remove unnecessary blocks on trade and investment. Harmonisation of rules and regulations could help promote greater co-operation – a co-operation which is needed to solve a global problem like environmental degradation.

However, it all depends on the content of the TTIP. It could be an opportunity to lower EU environmental and labour standards and encourage a race to the bottom in terms of government regulation.

The other fear is that the general agreement may have significant benefits in terms of trade, but within the agreement contain several sections which are undesirable and regressive in terms of supporting the environment / public services. In order to get the larger benefits, we may be stuck with smaller issues which are undesirable.

Related pages

• Benefits of free trade

External pages

• TTIP at BBC
• What is TTIP and six reasons why the answer should scare you at Independent
• TTIP at European Commission