TTIP Trade Bloc Juggernaut
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Transcript of TTIP Trade Bloc Juggernaut
The Transatlantic Trade and Investment Partnership
A Historical and Global context
The international system fundamentally changed with the collapse of the Soviet Union in the early
1990s. From a bipolar system, we had transited to what seemed to be a unipolar system with one
hegemonic nation: the United States of America. But this status wouldn’t last very long. New contenders
would emerge. Former chief executive of Intel, Andy Grove, has spoken of a titanic economic war for
global supremacy1, one whereby China is projected to ‘overtake’ the US by 2020, a view that has gained
majority in North America2. These new contenders are reaching capabilities that may soon rival the
hegemon.
Hoping for the best but preparing for the worst leaves us with a lot of imagination. Could the increasing
economic development of foreign states emerge as economic threats for our future? Indeed, what may
prevent them from obtaining control of the raw materials of the planet and dictate the norms and
standards of trade, in their favor, against our own? This idea may seem unrealistic or even too
pessimistic under the auspice of the US Navy, NATO, the UN, the WTO and other international
mechanisms, but the world is constantly changing. The US critical infrastructure is crumbling; military
campaigns in the Middle East have bled the giant dry and the political system is increasingly paralyzed
by polarization. The US has lost on many fronts and its loyal allies in Europe are in a dire existential crisis.
Adding to these challenges is the economic crisis of 2007 whereby the economies of the West and the
world have slowed down. As other nations grow in economic, political, energy and military power, the
1 Time to Start Thinking: America in the Age of Descent, Edward Luce, published by Atlantic Monthly Press in 2012,page 53, 2 Perception or reality, the PewResearch has released a poll on the image of the US in the world. 2013. Link: http://www.pewglobal.org/2013/07/18/chapter-4-global-balance-of-power/
global system is entering an age of multipolarity. And no emerging actor seems willing, nor capable, to
lead.
Understanding the balance of power in the 21st century requires an examination of trade. Trade patterns
must be diagnosed for a rational explanation of the international system.
Inheritor of the GATT, which saw its debut in 1948, the main body that is meant to shape the
international trade system is the World Trade Organization. Its purpose has been to open global markets
multilaterally by lowering tariffs and trade barriers and settling trade disputes between states. it has
been argued that this institution has reached stagnation as of late3. Since 2007 and even before then,
the Doha Round of global negotiations for more trade liberalization has stalled. U.S refusal to reduce
agricultural subsidies is considered the main culprit4 but one must understand the larger picture. From
1958 to 1999, the GATT/WTO was notified of 75 Regional/Preferential Trade Agreements. From 2000 to
2011 the organization was notified of an additional 156 RTAs. This means that in the past decade more
than double the amount of RTAs have been created than in the past half century since the organization’s
creation. 5 Regional/Preferential Trading Arrangements within the WTO may seem as a contradiction in
an institution meant to promote non-discriminatory members to lower their trade barriers with all. But
RTAs were originally meant as mere devices for bargaining leverage within the multilateral regime, make
the multilateral process smoother.
In this paper I will display why these arrangements, under the guise of regional trade blocs have taken
the principal role of trade over the WTO’s multilateralism. Of these arrangements, the Transatlantic
3 Globalization in Retreat by Walden Bello, Trading Blocs and Multilateralism in the World Economy by Wieslaw Michalak and Richard Gibb, or better yet Deadlock in the WTO: What is next? By Beginda Pakpahan, Is Multilateralism in Crisis? By Pradeep S Mehta, Emerging protectionism – Multilateralism as a remedy? Pierre Groning, Multilateralism: Time to rethink and react differently Siddharth Chatterjeeall agree to the diagnosis that the Doha round’s decade old stagnation is a sign of multilateral liberalism illness4 Globalization in Retreat, Walden Bello, Joseph S. Murphy institute, City University of New York, 2007 page 111 5 Deadlock in the WTO: What is next? By Beginda Pakpahan. 2012 link: http://www.wto.org/english/forums_e/public_forum12_e/art_pf12_e/art19.htm
Trade and Investment Partnership may become the largest and most important in history and speculate
on the motives for this particular agreement.
There exist two predominant schools of thought for explaining international relations. I shall disclose
their assumptions and the theories they have developed for comprehending trade.
According to liberalism the reasons for state behavior regarding trade vary under pressures and state
objectives. Liberalism assumes that states are indeed pressured by certain lobby groups to negotiate or
not certain agreements. Liberalism also assumes that the governance model of a state will affect its
behavior. A democracy does not behave as an autocracy or a military regime. Individuals such as
presidents or particular bureaucrats may also bring about changes in state behavior. Pressures are not
just domestic but foreign as well: international organizations such as the UN or the International
Criminal Court can influence a state’s decision as well. Hence states may be lead to sign agreements that
are not evidently economical or security focused, such as the Kyoto protocol which is an environmental
engagement, or better yet, the Universal Declaration of Human Rights of the United Nations which is
meant to uphold standards for the treatment of citizens.
Liberalism has states seeking absolute gains. This assumption portrays states as “rational egoists”
meaning they seek to further their self-interests through cooperating with other states. If a state
determines environmental protection as a goal, they will seek to establish cross jurisdictional norms
with other actors. If an environmentally clean planet is deemed an absolute gain by multiple state
actors, they will tend to create international organizations that further this goal, seek advice from NGOs.
Together, states will come to create international mechanisms to shape behaviors.
The liberal theory of economic interdependence is a powerful one. This theory prescribes trade as a
means not only to enhance wealth but to also lower the likelihood of war. Interdependent states would
value trade too highly to jeopardize it through conflict, thus trading would secure peace. Classical
Economist David Ricardo spoke of comparative advantage as the way to increase overall wealth. This
theory displays that two or more states that enter trade, specializing in their respectively most
productive sectors can share a larger total then they would have had had they developed their
economies independently. An underlying assumption of this theory is the low cost of transportation. The
closer two countries are economically, the more auto destructive war would seem, hence integration
ought to lead to peace. The Schuman Declaration of May 1950 for instance, was meant to prevent
another European war by creating “the European Coal and Steel Community” with the intent to make
war “not merely unthinkable, but materially impossible” as Robert Schuman said so himself.6
Realists disagree with liberals. They argue that the sole chief concern of states is their security. They are
suspicious of international initiatives and concerned about relative gains in the international system:
how much do other states gain compared to one another. In the absence of any higher authority
(anarchy) than the state, state actors seek to preserve their existence through the military. Any
international agreement that concedes more relative power to another state is to be avoided if not
halted, even at the cost of marginal gain.
The suspicion realists have of international trade is best reflected in the school of thought of
mercantilism. Mercantilism, although not as established a dogma as liberalism, interprets international
trade as a battlefield.
Realists retort this economic interdependence argument. Although trade was high among European
states at the onset of World War I, this did not prevent Europe’s dire fate. Realists see this
interdependence leading to vulnerabilities, tension, which incentivizes states to enter conflict as a
means to ensure their continued access to necessary resources for survival. 7
6 The Schuman Declaration of May 9th 1950 URL: http://europa.eu/about-eu/basic-information/symbols/europe-day/schuman-declaration/index_en.htm 7 Dale C. Copeland ‘Economic Interdependence and War: a Theory of Trade Expectations”. International Security. 1996. URL: https://www.mtholyoke.edu/acad/intrel/copeland.htm
But trade was relatively high for the previous thirty years before the war…. Thus vulnerability from trade
could not have been the sole cause of war as realists may lead us to believe, it may very well have been
just a condition. To clarify this, Copeland refers to World War II.
Prior to World War II, the multilateral trade system had collapsed and protectionism was on the rise for
much of the 1930s. The financial crisis taking place in the USA in 1929, had cast a shadow upon a
weakened international system. Suspicion and mistrust immediately took over the international system
as mutual interdependence took a turn for the worse. Germany and Japan’s (inter)dependence on trade,
namely for food and raw materials, in a time of enhanced protectionism (1930s’) by all, pushed these
states to a survivalist strategy which was to ensure access to these vital resources by any means
necessary. Hitler’s Mein Kampf mentions Germany’s “living space” meaning agricultural land, for future
population growth. It was believed that Germany couldn’t sustain population growth, possessed
insufficient raw materials for industrial strength, and because the words and actions of other states
could no longer be trusted given a previous decade of protectionism. Hitler’s nationalism would repair
lost pride and secure Germany’s future prospects. The Eastward Nazi invasion for securing the long term
strategic resources Germany would need appeared as a rational decision since it could not be obtained
through a collapsed the international trade system and bring back “retribution”.8
Dale C. Copeland solves this conundrum, by asserting that expectations from trade determine peace and
war. Liberals are correct! Trade translates to peace when states expect to gain in the future by trading.
But realists are correct as well! Trade translates to war when states expect to lose access to their vital
resources by trading.
8 Dale C. Copeland ‘Economic Interdependence and War: a Theory of Trade Expectations”. International Security. 1996. URL: https://www.mtholyoke.edu/acad/intrel/copeland.htm
States that are too dependent upon trade will resort to “survivalist” policies once the trade system is
jeopardized in order to safeguard their citizenry. 9
Given the spur trade has had since the end of the war, there must therefore be a reason for states to
expect gains from trade and therefore to engage in it. “Globalization” is a testimony of this.
The Hegemonic Stability Theory may be the reason to believe in gains from trade. Under the realist
assumption of anarchy, the hegemon is the closest actor to a higher authority that governs the behavior
of states. This state has the power to rule over other states’ behavior.
International trade is at the core of hegemonic stability theory. The ascendency of a hegemon correlates
with the liberalization of international trade and their eventual decline with the reemergence of
protectionism/regionalism within trading nations of the world. This correlation allows trade to be a solid
medium through which one may trace the hegemon‘s dominance on the international system. Putting
this theory to practice, history displays cycles: periods of liberalism and periods of protectionism that
would coincide with hegemonic leadership. Hegemonic ascendency pushes the system towards greater
liberalism and hegemonic decline reverts the world economy back to regionalism and protectionism. 10
Although this theory may not seem familiar at first, I shall put it into historical context and it will become
evident that this is what is in the hearts and minds of those who refer to the US as the “indispensable
nation”11.
9 Dale C. Copeland ‘Economic Interdependence and War: a Theory of Trade Expectations”. International Security. 1996. URL: https://www.mtholyoke.edu/acad/intrel/copeland.htm10 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 73 by Bruce E. Moon11 Madeleine Albright interview on NBC “But if we have to use force, it is because we are America; we are the indispensable nation. We stand tall and we see further than other countries into the future, and we see the danger here to all of us. I know that the American men and women in uniform are always prepared to sacrifice for freedom, democracy and the American way of life.” URL: http://fas.org/news/iraq/1998/02/19/98021907_tpo.html
In the liberal cycle, the hegemon uses its economic, political and military power to create a multilateral
system that ensures its dominance. States are reluctant to open their economies to trade without the
assurance of reciprocity. The hegemon guarantees this assurance through said powers. Through
incentives or coercion, the hegemon can bend state behavior. The hegemon may provide the
institutional mechanisms (fund and operate the costs of such institutions) to coerce free rider nations
who export to “defenseless” (low trade barrier) nations whilst maintaining their own tariffs or other
trade barriers.
The decline of the hegemon in military, economic or political domains reduces the reliability of the
multilateral trade system. Indeed, a powerful state, for x reason may decide not to respect the rules.
One simply needs to look at the long list of trade disputes that has blossomed since the dawn of GATT,
including the hegemon itself! Disputes lead to mistrust and fruitless negotiations which may very well
bring the multilateral project to an end.
Applying the theory:
1800-1900 Liberal- hegemon ascendency: British Empire
Starting with Great Britain in the second half of the 19th century, decisively with the repeal of the Corn
Laws in 1842 the British leadership rose through economic and military power. The empire sought to
create trade agreements with other nations such as the Cobden-Chevalier Treaty of 1860 with France12
or the Treaty of Balta Liman with the Ottoman Empire. The British Sterling became an accepted
international medium of exchange and London offered extensive credit13
12 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 73 by Bruce E.
Moon
13 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 73 by
Bruce E. Moon
1900- 1945 Protectionism- hegemon decline: British Empire
Early 20th century, relative decline of British hegemonic power with World War I the international trade
system resorted to regionalism and protectionism as a result of uncertainty. The world had to wait the
ascendency of a new hegemon to uphold the mantle of global liberalization. Europe’s economy was in
dire shape, the treaty of Versailles was considered too harsh by several economists.
1945- 1970s Liberal- hegemon ascendency: US leadership
Bretton Woods in New Hampshire, U.S.A, creates the General Agreement on Tariffs and Trade (later
evolves into WTO in 1994) IMF, World Bank. Under cold war premises the U.S sought to contain
communism and the most famous action for doing such in Europe was known as the Marshall plan. This
plan redeveloped Western European economies but in the process created some (inter)dependence on
the US economy (aid in terms of capital, commodities as well as investments)14, paving the way for this
hegemon to create the liberal order. European diplomats, fearing that their (inter)dependence to the US
economy would lead to yet another Great depression, insisted for the creation of an institution, The
International Trade Organization, to guarantee full employment. Their demand was never accomplished.
1970s- xxx Protectionism- Hegemonic decline: US leadership
By the 1970s, key American industries, namely steel and autos were in fierce competition with foreign
manufacturers. These industries abroad would promote protectionist policies as best they could. In
foreign countries, namely Japan and European countries but also emerging economies such as China and
India, industrial policies existed to aid their national sectors. Nowadays the debate for reinvigorating
protectionism exists in the US as well.
14 The Marshall Plan: Origins and Implementation by William F. Sanford, Jr. Bureau of Public Affairs, Dept of State. May 1982. Link: http://marshallfoundation.org/library/documents/marshall-plan-origins-implementation-bulletin-june-1982/
As this graph from the St Louis Reserve Bank archives portrays, the US had a low growth in exports in
between the two wars. This low participation is a symptom of a weakened international trade system.
Post WWII shows a strong increase in GDP growth and export growth that correlates with the
Hegemonic status of the US in a prosperous trade environment. From the Oil crisis of 1973 onward, the
US has been exporting and growing its economy at a slower rate.
The Hegemon liberalizes, but in protectionist fashion.
A key aspect to remember about hegemons is that they are states. Although they may preach the
benefits of liberalization, they are not de facto immune to protectionist tendencies. 15 To the contrary, a
hegemon may create international organizations to “harmonize” international trade with norms that
itself will not respect.
Indeed, the U.S leadership created these multilateral institutions (GATT, WTO) to liberalize world trade,
but since its inception the US has infringed the rules and has engorged mercantilist behavior.
Protectionist tendencies which are not uncommon from realist thinkers go back to the very creation of
the country. Alexander Hamilton first coined the term “infant industry”, a protectionist argument meant
to defend the nascent American industries against foreign competition. Hamilton is also responsible for
forming the “Report on Manufactures” in 1791. It is stated in this report given to the House of
Representatives that “The Secretary of the Treasury in obedience to the order of the House of
Representatives, of the 15th day of January 1790, has applied his attention, at as early a period as his
other duties would permit, to the subject of Manufactures; and particularly to the means of promoting
such as will tend to render the United States, independent on foreign nations, for military and other
15 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 72 by
Bruce E. Moon
essential supplies.” 16 Although these concerns may appear as justified for a nascent nation or
transitional economies such as China, the fact that the United States continues to apply mercantilist
policies even at the height of its power is a testimony to the resilience of this school of thought. “Indeed
it was precisely because of its power over the world economy and within its managing institutions that
the United States was able to take the initiative in justifying protection under the GATT, first in the early
1960s, when the cotton industry was in trouble, subsequently in the 1970s, when the problem had
extended to man-made fiber, and lastly in the 1980s, when other natural fibers were brought under the
regulatory framework created in GATT for such discriminatory restrictions. …There have been marginal
differences-if any at all- in the US policy process in times of undisputed primacy and in times of waning
hegemony.” 17 Furthermore… “The first voluntary export quotas of postwar trade history were
implemented by Japan in response to requests from the United States in December 1955. By January
1957, Japan had delineated a five-year plan of export restriction to satisfy U.S pressure. Although the
United States was not the sole country to feel the competition from lower-cost countries, it was the only
one that could and did turn its own need for protection into a global regulatory framework to manage
trade.”18
Since then, the WTO has recorded a multitude of complaints on behalf of states. The list is virtually
endless as countries accuse others of unfair competition. As Moon puts it: “Of course, when the United
States asks another nation to restrict its exports and threatens retaliation if it does not agree, the
agreement is voluntary in exactly the same sense that one hands over one’s wallet to a gun totting
16 Report on Manufactures, Alexander Hamilton, December 5th 1791, http://www.constitution.org/ah/rpt_manufactures.pdf 17 The New International Political Economy, Craig N. Murphy & Roger Tooze, Lynne Rienner Publishers, 1991, page 8318 The New International Political Economy, Craig N. Murphy & Roger Tooze, Lynne Rienner Publishers, 1991, page 83
mugger voluntarily.”19 Thus Japan accuses the US of liberalizing those industries in which it has the
competitive advantage, but to adopt ad hoc mercantilism in those where it does not.
Both liberalism and realism provide insights that assist us in understanding state behavior. Yet as one
may come to notice, states do not adhere to a single school of thought. States perceive at times
liberalization as means for achieving certain goals, but at times the control and protection of certain
industries is deemed necessary.
After global liberalism, Regionalism
With these difficult trade dilemmas, states have found a middle ground with regional integration. By
having free trade within a region and impose trade barriers for those outside, countries have found a
strategic middle ground between liberalism and mercantilism in which domestic industries can expand
and yet benefit from protection against outsiders. It is assumed that regional integration shortens the
scope of possible trade disputes among signatories and that the will to negotiate a trade agreement
infers certain shared values or objectives, allowing for a multilateral governance body to mitigate
dislocation and manage disputes to a smaller degree than the WTO. 20 Given the apparent impasses at
the WTO, it seems states have been leaning in this direction, meaning they expect future gains from
regionalism rather than the WTO. This makes sense since the Doha round has stalled. Free trade areas
are allowed under the WTO’s 24th article as stated previously, albeit as a device for further multilateral
concessions. These agreements do contravene the liberal spirit of the WTO: the nondiscrimination
principle of the Most Favored Nation clause. 21
19 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 113 by Bruce E. Moon20 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 125 by Bruce E. Moon21 Article XXIV: Territorial Application – Frontier Traffic – Customs Unions and Free-trade Areas. WTO. Link: http://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm
The EU’s ‘success’ as a common market is the premise to a shift in the global political economy. The
open world of free trade liberalism created by the US hegemon, namely GATT (WTO) is closing to
become a more regionalist one. According to the bicycle theory, as long as the free trade agenda moves
forward, even if this means global trade patterns become regional, the momentum will prevent
nationalistic drifts towards protectionism.
This EU regional liberalism isn’t new. The Treaty of Paris which created the European Steel and Coal
Community in 1951 was only the beginning. European integration has not stopped since. Even when
referendums tend to oppose further EU integration.22
The EU’s engagement to regional integration led to trade diversion that could only be interpreted as
mercantilism for the exterior countries. Countries within have witnessed growing unemployment and
dwindling industries , fueling nationalist political parties eager to blame free trade led by Brussels and
demand nationalist protectionism. Domestic interest groups (from exporting industries) will continue to
push for liberalization. Hence as previously stated, states must navigate their economic trade policies
with awareness of foreign pressures and domestic pressures as well and this has led to the middle
ground of regional integration, also known as trade blocs.
In 2012 the European Commission published its ninth Report on protectionism. This report stipulated
that emerging economies, namely Argentina, Brazil, India, Indonesia and Russia were particular in so far
as they “appear more inclined to apply potentially trade-distorting measures.” The Report confirms the
trade restrictive measures of third countries’ previously reported. These countries, notably Brazil, China,
India, South Africa and Ukraine “have recently introduced large stimulus packages to promote specific
industrial sectors, combined with trade distortive measures.” These countries do these industrialization
policies with the aim of shielding their domestic markets from international competition. Even though
22 Maastricht Treaty by BBC. April 30th, 2001. Last seen December 4th 2014. Link: http://news.bbc.co.uk/2/hi/in_depth/europe/euro-glossary/1216944.stm
global trade is recovering from the crisis, the EC is concerned that the pace of protectionism has
accelerated. 23 The example of YPF’s expropriation by the Argentine state received a lot of media
coverage.
Meanwhile, to protect themselves from the emerging markets’ mercantilism in a system whose
multilateralism has halted, one could infer that the advanced economies will create a mercantilist
barrier of their own: the Transatlantic Trade and Investment Partnership.
The early 21st century’s transition from an international system characterized by the US hegemon that
had established the WTO, IMF and the World bank, to a multipolar system with rising contenders and
mercantilist trade blocs is a historical inevitability that the US must abide to. Indeed, under the
supervision of Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff of the US military, two
strategic experts have published a new National Strategic Narrative that assumes a new century in which
the United States is no longer the hegemon and must adapt to a new environment with contending
stakeholders24. This assumption of a declining US has not been expressed in this paper alone and is a
shared statement.25
The “Transatlantic Trade and Investment Partnership” seeks to reduce trade barriers between the US
and the EU. Furthering the economic interdependence between these two markets is expected to boost
23 Ninth Report on Potentially Trade Restrictive Measures by the European Commission. September 2011- May 2012 http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149526.pdf24 “It is time for America to re-focus our national interests and principles through a long lens on theglobal environment of tomorrow. It is time to move beyond a strategy of containment to astrategy of sustainment (sustainability); from an emphasis on power and control to an emphasison strength and influence; from a defensive posture of exclusion, to a proactive posture ofengagement. We must recognize that security means more than defense, and sustaining securityrequires adaptation and evolution, the leverage of converging interests and interdependencies.” National Strategic Narrative by “Mr. Y”. 2011. Woodrow Wilson Center, Princeton University. http://www.wilsoncenter.org/sites/default/files/A%20National%20Strategic%20Narrative.pdf 25 Time to Start Thinking again by Edward Luce, 2012 http://www.nytimes.com/2012/04/08/books/review/time-to-start-thinking-by-edward-luce.html?pagewanted=all ; The Post-American World by Fareed Zakaria, 2008, http://www.nytimes.com/2008/05/06/books/06kaku.html?pagewanted=all
economic growth. It is also an ambitious agreement on high standards for trade and investments by two
of the world’s strongest economic poles.
TTIP was announced as of June 2013 by the US and EU heads of state, namely the US President, the
President of the European Council and of the European Commission. Both actors wish to reinforce what
is already a strong historical bond by furthering their strategic economic interests with TTIP26. As of
October 2014, the agreement had already finished its 7th round of negotiations. 27
Atlantic relations have a long history. Indeed, TTIP is merely the continuation of a relationship that
existed at the onset of the post war unipolar system. The Marshall plan, NATO, the Atlantic Council are
international organizations and bonds that predicate common values, interests for both sides of the
Atlantic. In 1995, the TTIP’s predecessor TAFTA (Transatlantic Free Trade Agreement) was accompanied
by the New Transatlantic Agenda and the Joint EU-US Action Plan28. A free trade agreement between the
US and the EU fell short and what came to being discussed was a “New Transatlantic Marketplace”. In
this case the wording matters, the decision to use “marketplace” rather than “free trade” may very well
reflect the unease state officials had with committing vital resources to competition to one another
despite their strong relationship. The term “free trade” has precedence; it has come to connote strict
interdiction of state intervention whereas “marketplace” is a broad, vague term that implies the
possibility of including state intervention. In politics, any departure from vagueness leads to
26 “And that broad support, on both sides of the Atlantic, will help us work through some of the tough issues that have already been mentioned. There are going to be sensitivities on both sides. There are going to be politics on both sides. But if we can look beyond the narrow concerns to stay focused on the big picture -- the economic and strategic importance of this partnership -- I’m hopeful we can achieve the kind of high-standard, comprehensive agreement that the global trading system is looking to us to develop. “ –Remarks on TTIP by the President of the US, June 17th 2013, http://www.whitehouse.gov/the-press-office/2013/06/17/remarks-president-obama-uk-prime-minister-cameron-european-commission-pr , Bold added by author of this paper27 Report of the Seventh Round of Negotiations by EU Chief Negotiator Ignacio Garcia Bercero. Link: http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152859.pdf28 New Institutions for Transatlantic Trade? By Brian Hindley. Royal Institute of International Affairs, Jan. 1999. Link:http://www.jstor.org/discover/10.2307/2625462?uid=3739696&uid=2&uid=4&uid=3739256&sid=21105348318223
inconvenient corners. In this sense, the liberal cooperation was superseded by realist suspicions. The
NTM nonetheless failed because France vetoed the deal in April 1998. It was reported that the French
vetoed because the treaty “did not offer the guarantees we desire” declared French president Jacques
Chirac. 29 This veto was belittled by German Minister of foreign affairs Klaus Kinkel and Jay Ziegler,
spokesperson for the US representative of Commerce Charlene Barshefsky: “the political orientation
towards further liberalization of commerce must be maintained” and “The US and EU will work together
to further liberalize their two services markets and to pave the way for WTO services negotiations. The
two sides also will try to ensure that any new policies do not have an adverse impact on business
conditions for service providers” and “The US and EU will work together to consider complementary
steps to eliminate market access restrictions and to establish disciplines in sectors where this is needed
in order to generate new business opportunities” 30
A sector that has been source of much debate is that of agriculture31. The objectives of the US in this
matter are clearly stipulated, in fact it is the first objective of the US to "eliminate all tariffs and other
duties and charges on trade in agricultural, industrial and consumer products between the US and the
EU, with substantial duty elimination on entry into force of the agreement, transition periods where
necessary for sensitive products, and appropriate safeguard mechanisms to be applied if and where
necessary.” 32 Whereas on the EU side, where the actual debate is taking place, the high commodity
29 “Veto français annoncé contre le NTM” in the newspaper l’Humanité. 1998. http://www.humanite.fr/node/493577#sthash.1nCa2wtb.dpbs 30 United States and European Union Conclude Joint Action Plan for the Transatlantic Economic Partnership” by Jay Ziegler . Office of the USTR press release. November 9th 1998. Link: http://www.clintonlibrary.gov/assets/storage/Research-Digital-Library/clinton-admin-history-project/101-111/Box-102/1756308-history-ustr-press-releases-november-december-1998.pdf31 EU under pressure to allow GM food imports from US and Canada by The Guardian 2014. link: http://www.theguardian.com/environment/2014/sep/05/eu-gm-food-imports-us-canada; Monsanto Agritech Lobbying for the TTIP: Britain Spearheads Campaign to Make European GMO regulation Meaningless by Colin Todhunter. Published on GlobalResearch.org. 2014. Link: http://www.globalresearch.ca/the-monsanto-agritech-lobbying-for-ttip-britain-spearheads-campaign-to-make-european-gmo-regulation-meaningless/5410706 ; An open door for GMOs? – take action on the EU-US Free Trade Agreement published by the Corporate Europe Observatory. 2013. Link: http://corporateeurope.org/trade/2013/05/open-door-gmos-take-action-eu-us-free-trade-agreement 32 U.S. Objectives, U.S. Benefits In the Transtlantic Trade and Investment Partnership: A Detailed View by the Office of the US Trade Representative. March 2014. Link:
prices and ongoing reform of the Common Agricultural Policy are given as reasons for negotiating these
markets.33 The concern raised with opening the agricultural markets revolves over the question of
consumer protection regarding GMOs. Many Europeans have expressed their discontent with GMOs and
the EU has taken note of this 34.
Therefore, from a liberal perspective, as long as both parties respect their previous commitments, TTIP
will be an opportune agreement that is mutually beneficial to both sides as they seek to further their
common goals.35 The economies of the US and EU are witnessing slow growth if any at all36 and this
agreement will bring down barriers, saving millions for exporters and importers alike, creating jobs and
enhancing the consumer welfare on both sides of the Atlantic hence furthering the goals of states and
non-state actors.
It is difficult to perceive any realist inspiration in these negotiations, more so when it is stated that “In
every case, the overall outcome for the EU was positive; but what was clear was that the more
liberalization there was, the better the overall result.” 37 Hence, if the official position openly promotes
http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Objectives-US-Benefits-In-the-TTIP-a-Detailed-View33 Q&A TTIP by the European Commission on Trade “The decision to start negotiations was in large part due to the continuing economic crisis and the stalling of the multilateral trade negotiations in the World Trade Organisation - the so-called Doha Development Agenda. In addition, the reform of the EU's Common Agricultural Policy and high commodity prices meant that both sides were ready to discuss agriculture and negotiate opening their markets” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/ 34 Q&A TTIP by the European Commission on Trade “Will the EU be forced to change its laws on Genetically Modified Organisms? – No, it will not.” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/35 Q&A TTIP by the European Commission on Trade “An independent study by the London-based Centre for Economic Policy Research (CEPR) suggests the EU's economy could benefit by €119 billion a year – equivalent to €545 for an average EU household - and the US' by €95 billion a year.” And “The economic growth and increased productivity created by the agreement will benefit workers in the EU and US, both in terms of overall wages and new job opportunities for high- and low-skilled workers alike.” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/
36 Quarterly National Accounts: Quarterly Growth Rates of real GDP, change over previous quarter by the OECD. Appendix 37 Q&A TTIP by the European Commission on Trade “What’s in it for the EU?” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/
liberalization, what are we to think of? Any realist interpretation may de facto lack official backing and
therefore fall into conspiratorial conundrums.
But if one were to read in between the lines, realist/mercantilist notions do stir up. The current context
is one of a collapsing multilateral system, no perceivable hegemon, rising economies and rising trade
blocs and fears of dwindling natural resources38 all of which may lead to international crises39. In this
context, leverage will be of crucial importance for the new international system as possible frictions
arise between the geo-economic objectives of nation states and their trading blocs. These objectives
may vary from control of rare natural resources such as minerals or energy, to transportation standards
(a matter of security) to the usual quarrels of trade disputes, barriers and diversion. As the Director-
General of the WTO stated himself: “regional agreements are becoming more and more important in
terms of trade rules, and for the political weight they represent in international negotiations.”40
For realists, the most important statement about TTIP may very well be the following: “The harmonizing
of EU and US technical standards could well provide the basis for global standards: the size of the
transatlantic market is so big that if it had a single set of rules it would be in the interest of other
countries to adopt them too. That way, they would only have to produce goods to one set of
specifications, making trade throughout the world easier and cheaper.” This is not the only writing on
the wall for realists though41. These statements assert that the US and the EU together can reach a
38 Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production by the Government Accountability Office. February 2007. Link: http://www.gao.gov/new.items/d07283.pdf39“Accordingly, the decline of commitment to multilateralism may lead to a break-up of the global trading system and promote protectionist trading blocs whose competing geoeconomic objectives could to lead to an international crisis. In Trading Blocs and Multilateralism in the World Economy by Wieslaw Michalak and Richard Gibb. Publishers are Taylor & Francis, Ltd on behalf of the Association of American Geographers. June 1997. Permalink: http://www.jstor.org/discover/10.2307/2564370?uid=3739696&uid=2134&uid=2&uid=70&uid=4&uid=3739256&sid=21105369943123 40 The global challenge: opportunities and choices in the multilateral trading system speech by DG Renato Ruggiero. October 16th 1995. Link: http://www.wto.org/english/news_e/sprr_e/harvar_e.htm 41 “And, as it brings together the world’s two major economies, the TTIP will set standards for the future”; “Likewise, the TTIP could also encourage others to revive the WTO negotiations. Furthermore, if the EU and US are able to harmonize many of their regulations and standards, this could act as a basis for creating global rules with all
critical mass making TTIP the trade bloc juggernaut that can replace the WTO all together, effectively
imposing their will upon the global trading system. As discussions over the Trans Pacific Free Trade
Agreement continue, state officials throughout the developing world ought to pay close attention to the
ongoing TTIP negotiations as its concluding norms and standardizations may very well become the ones
imposed upon them during later TPFTA negotiation rounds. The environmental and transport norms
particularly may affect states whose economies depend on exporting to the EU and US markets such as
China or Russia. Even though the EU asserts that “no, harmonization is not on the agenda”42 the
unspoken implications and promises of trade liberalization should sound the alarm for any realist who
pays attention to relative gains. If the US and the EU succeed in making “trade” and “investment” more
transparent, easier through bridging regulatory redundancies and overall form a trade bloc partnership,
then the word “harmonize” will have fulfilled all its meaning without having ever been employed.
Whether realist or liberal one must pay tribute to the historical inevitability that Klaus Kinkel, Jay Ziegler
and Charlene Barshefsky incarnate so well.
Conclusion
The Transatlantic Trade and Investment Partnership is born from a decades old relationship. It has
emerged time and time again in the past. It appears to be the latest vehicle of a stubborn spirit: that of
the Atlantic Identity. Given the powers involved, this agreement may become the trade bloc juggernaut
that will come to define the post-WTO world.
the cost savings and economic benefits that would bring.” Q&A TTIP by the European Commission on Trade. Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/ 42 “Are the EU and US going to harmonise their standards? – No, harmonization is not on the agenda” Q&A TTIP by the European Commission on Trade. Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/
This post-WTO world, a world the US hegemon created, has now been abandoned by its creator
who has rationally accepted to return among the ranks of ordinary states and play into the balance of
power paradigm. TTIP’s accelerated process (2-3 years for expected completion) must be put into
context: the development of the Trans Pacific Free Trade Agreement in which the US has been
outreaching to Asian states, notably China. The US-EU partnership may offer both parties the critical
mass they seek to bring leverage in their negotiations with other trade actors.
Currently, an interesting development that provides a certain “TTIP appetizer” is the “Canada-
E.U Comprehensive Economic and Trade Agreement” (CETA) that is already completed and awaiting
approval from the EU parliament. It too has caused controversy.
The era of certainty that a hegemon provides through multilateralism is coming to an end; the
era of strategic partnerships has begun. It is an era characterized by balance of power struggles and
uncertainty as states seek to fulfill their objectives but also guarantee their own survival.
APPENDIX
Economic Report of the President, February 1992, URL: http://fraser.stlouisfed.org/
One can see the export trends correspond to the rise and decline of hegemonic presence in the
international trade system.
The fear of energy depletion is omnipresent given the assumption of resource scarcity. Realism provides
the framework in which to conceptualize (relative gains) these fears into proper policy
recommendations.
Economic Growth in U.S.A and E.U and Euro Area from 2011 to 2014. OECD Stats.
Low economic growth is a burden that state officials try to resolve. In the past states would resort to
industrial policies to develop their economic capacities. Nowadays the neoliberal approach has
promoted the free reign of markets instead, limiting state intervention. States have played a secondary
role in the economy, after markets, seeking other states with whom to make trade agreements in order
to enlarge their common market base.
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