condacted by Marco Trifuoggi

Monday Talk with Fredrik Erixon

  • The postponement of the vote on the T-TIP agreement in the European Parliament on June 10 marks a significant defeat for the supporters of the trade agreement. Despite both Merkel and Obama calling for a fast conclusions of the negotiations at the G7 summit, the Commission has already stated that an agreement will probably be reached only in 2016. Given its nature and the forthcoming elections (US in 2016, France and Germany in 2017, the UK referendum somewhere in between), is there still a case for T-TIP?

FE: There is still a case for TTIP, and it has not declined because of the turbulence in the European Parliament. TTIP has never been an initiative that would be closed fast, it was already from the start an initiative that would take 3-4 years to finish. And it is more important that the agreement that comes out of the talks is a good agreement rather than a hurried agreement.

  • The core of the issue in the Parliament was the ISDS, the Investor-State Dispute Settlement mechanism. While the Commission reassures the Member States that such provision does not represent a threat to regulatory interventions, many of its critics stress the significant costs in terms of compensation or settlement that may countries have o may have to sustain – i.e. the Vattenfal or the Philip Morris cases. Considering that the official estimate of the benefits of T-TIP (€120 billion) has been repeatedly challenged, does this form of investor protection outweigh its related costs? Is it still politically sustainable?

02c8fe4b8601139ccb1227FE: No, ISDS was never part of the estimates that have been done on the potential benefits of TTIP, and the cases you mention are not about cases between the US and an European government, or the EU. ISDS has generally positive effects on investment flows, but most of the gains come from specific sectors where political patronage or political mismanagement is rampant. ISDS in TTIP is just one part of getting better ways to deal with disputes when they occur. It is better they are dealt with in a legal way than in a political way. Disputes would not go away if there is no ISDS at all in he world economy. They would just be treated differently – and, for most governments, more controversially.

  • In spite of Cameron’s claims, many in Great Britain still fear that a successful T-TIP would mean the privatisation of large parts of its public sector, starting from the NHS, the National Health Service. However, while the lack of disclosure on the on-going negotiations prevents any real assessment on the matter, the CETA agreement with Canada, does actually contain a provision safeguarding this sector. Are public health services heading towards privatisation and, in a broader sense, is the European culture of welfare going to clash with its US counterpart?

FE: There is no universal trend in Europe as far as healthcare is concerned, but the simple fact is that a good part of the European healthcare sector is already organised by non-state entities, and in some countris – but not others – the role of non-state entities is increasing. I wished more countries would go in that trend, but this has nothing to do with trade policy. I have never in my life seen a trade agreement that demanded privatisation of certain state production, and TTIP will certainly not be such an agreement either. 

  • According to the Commission, there is no official estimate of the benefit of T-TIP in term of job creation, beside a vague increase by “several million”. However, the European Parliament acknowledges that different forecasts exists, counting potentially as much as 600,000 job losses, given the diverse labour markets. What is the most realistic scenario and how much can the European Global Adjustment Fund be effective in this regard?

FE: Freeing up trade and commerce certainly has positive effects on productivity and growth. There are more than a dozen studies estimating potential cost and benefits from TTIP with the help of various economic models of trade. They all come to the conclusion that TTIP would have positive economic effects. Then there is a study that is not using established models of trade to estimate the effects of TTIP. It comes to the conclusion that it would lead to an economic depression in Europe. But the study is not credible.

  • If an agreement on T-TIP is reached in 2016, what could be the overall impact on third countries in term of trade diversion, given that the World Bank has recently recognised that many developing countries are now facing a structural slowdown combined with the likely increase in the interest rate by the Federal Reserve by the end of this year?

FE: TTIP, like every other preferential trade agreement, will have trade diversion effects. They are not probably not substantial as trade diversion effects tend to be stronger when there is a singificant amount of trade released because tariffs have gone down. That’a not the case in TTIP as tariffs are already small and as the benefits will come form areas where TTIP-induced reforms also will include other exporters. Furthermore, TTIP will not change the fact that the world economy is moving eastwards to Asia. The pull power from Asia on today’s economy is enormously strong.

 

*Fredrik Erixon is a Swedish economist and writer. He is the Director of the European Centre for International Political Economy (ECIPE), a world-economy think tank based in Brussels he co-founded in 2006.

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