With trade negotiations at the global level practically deadlocked for years, long-neglected regional agreements - once the main means of trade liberalization - are returning to the scene stronger than ever. The US is at the center of initiatives for two mega-agreements that could determine the future course of world trade.
The Trans-Pacific Partnership (TPP) is closer to finalization and includes 11 countries, in addition to the US, which account for about 40% of the global product; yet, importantly, China is not one of them. The Transatlantic Trade and Investment Partnership (TTIP) with the EU is an even more ambitious project that should connect two giant regions that together account for half of the world's trade.
Trade agreements have long not been the exclusive domain of experts and technocrats. It is not surprising that the mentioned initiatives caused fierce debates in the public. The positions of proponents and opponents are so irreconcilable that most observers are confused about the expected results. In order to understand what is the subject of the dispute, we must bear in mind that the agreements are motivated by a combination of different goals, behind which, globally, there may be good and not so good intentions. On the economic front, advocates have only words of praise for trade agreements. The abolition of trade barriers will improve efficiency and contribute to the specialization of the economy; also, export growth and the creation of new jobs are expected thanks to easier access to partner markets. The first of these two claims is the conventional argument of comparative advantage which is usually used to advocate trade liberalization; the second argument is mercantilist. The proclaimed goals of the agreement are contradictory. From the point of view of comparative advantage, trade gains arise from imports; in order to afford imports, the country must give up exports. All countries benefit, as long as trade grows in a balanced manner. Trade agreements do not create jobs; they just move them from one industry to another.
From the mercantilist point of view, on the other hand, exports are good, imports are bad. Countries that increase net exports make a profit; everyone else is at a loss. Trade agreements thus create new jobs, but only those that disappear in other countries.
Hence, both arguments in favor of the agreements conflict with the main claim of their advocates, that such arrangements can simultaneously create new jobs and bring profit to all signatory countries. It is unusual that the proponents of TPP and TTIP try to use both arguments to their advantage.
On the political front, proponents of the agreement argue that the TPP and TTIP will strengthen and protect good, liberal trade rules globally. The removal of barriers and the transparency of regulations are good in principle. But not everything is so simple there either.
A significant benefit of the Trans-Pacific Agreement for the US is that it imposes stricter regulations on intellectual property protection on other countries. Such rules have uncertain effects on innovation, and provide substantial rents to US patent and copyright owners.
The reduction of the so-called non-tariff trade barriers between the US and Europe, which is envisaged by the TTIP, will almost certainly narrow the space for action by domestic legislators. Even if the regulatory harmonization process does not lead to a race to the bottom, the interests of investors and exporters will gain more weight than social and environmental needs.
What is most worrying are the provisions on the settlement of disputes between investors and the state. Those provisions established a separate legal remedy outside the state's judicial system, allowing companies to bring actions against governments for alleged violations of trade agreements. Advocates defend the provisions, arguing that they will not have significant consequences for signatory countries where the rule of law is established, such as the US, and will lead to increased investment where this is not the case, for example, in Vietnam. The question arises why such provisions in TTIP, an agreement signed by the developed economies of North America and Europe.
The changes brought about by the TTP and TTIP in the mentioned areas look more like a corporate takeover of the state's competence than a consolidation of liberal values.
One of the most important, also vaguely defined goals of the agreement concerns a topic that is not even mentioned in the text: China. Both the US and Europe would like China to play by their rules. Negotiating the new rules without China's participation can be interpreted as part of a strategy to finally force China to enter the liberal global system. But it can also be interpreted as an attempt to isolate China with discriminatory barriers in lucrative markets.
Finally, critics of the agreement are bothered by the secrecy of the negotiations. The drafts of the agreement are not available to the public, and the few outsiders who have seen the text have pledged not to disclose the content. Such a policy is supposed to facilitate negotiations. But as US Senator Elizabeth Warren has noted, the effect is just the opposite: if the transparency of negotiations would make the final product less acceptable to the public, we must ask ourselves how much we need what is being negotiated.
Presenting the final version of the text to the legislators for a vote, without the right to make subsequent changes and additions, is a good solution. But that is no reason to hide the plans from the public. The time for secrecy is over, if there ever was one.
Finally, too much remains unclear about the economic and political effects of these initiatives, and this is cause for concern. By accusing skeptics of protectionism, the proponents of the agreement only discredit themselves. We need an open and well-grounded debate on specific provisions. This will only be possible when the negotiated texts are made available to the public.
(Social Europe, Peščanik.net; translated by: Đ. TOMIC)
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