The Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnerhsip (TPP) are quickly becoming the subject of increased interest and criticism. These two trade deals – the former being discussed between the US and Europe, and the latter between the US and Asian nations including Japan and South Korea – stand to change the face of global trade.
The countries signing up to the partnerships are seeking to break down barriers to trade in all kinds of goods, from pharmaceuticals and food to energy. Many groups in the US and Europe have raised concerns about how the deals are being negotiated and their implications for standards and democratic principles.
But TTIP also has significant implications for the countries that aren’t even included as members – particularly those in the Global South. These implications are being significantly overlooked by almost everyone involved.
It is commonly accepted that the agreements – along with their counterparts between the EU and Canada (CETA) – are partly a response to the collapse of the Doha Development Round of trade negotiations at the World Trade Organisation (WTO). This was a trade deal that would see the introduction of measures that intended to make world trade “fairer” for the Global South while also pushing forward with the further liberalisation of global trade.
The collapse of the Doha deal is bad news for the global south because the WTO is a genuinely multilateral organisation. Unlike other economic institutions such as the World Bank Group or the International Monetary Fund, all WTO member states possess a single vote. That’s a huge advantage for the Global South, since it’s impossible for a small group of economically powerful states to totally control the mandate and outcome of negotiations, as they continue to do elsewhere.
The Doha negotiations were hamstrung by a clash of opinion. Certain global south states, such as India, Brazil and smaller nations such as Mali, are pushing for further market access for their agricultural products but are resisting tariff reductions on industrial products. All the while, the Global North powers are pushing for the exact opposite. The result is stalemate.
The response has been to move on TTIP and the TPP – trade agreements that exclude the “won’t-do” countries. EU representatives appear confident that the sheer size of the market that the TTIP purports to create will force other countries to bow to the wishes of the EU and the US.
TTIP and the TPP would, nevertheless, have a broad range of effects on non-signatories. For instance, the so-called least developed nations, including sub-Saharan countries and small island states, have important trade relations with the EU and continue to negotiate specific trade agreements, such as the Cotonou Agreement – which gives certain states access to the EU market. This ought to offer some level of control over trade negotiations, particularly changes in standards or market access.
But TTIP and the TPP are expected to lower tariffs, even though taxes on trade between the EU and US are already relatively low. Much more significantly TTIP will harmonise standards between the EU and the US. This will almost inevitably give rise to what is described as trade diversion.
In practice, trade diversion means that trade between the EU and the US will become easier, faster and cheaper. That will make it harder for countries not involved in TTIP to compete – particularly less industrialised nations, which primarily trade in agricultural products and raw materials. These nations will struggle to meet the standards and offer competitive prices.
The sensitive nature of less developed economies means that even temporary disruptions to trade could significantly hinder development and the livelihood of local people.
Past experience also indicates that the winners from these changes will be large corporations, since they will be best able to adapt to new standards and lower prices. If small-scale businesses lose out, that will harm the most vulnerable sections of the global south, endangering food security and depriving many people (particularly women) of a crucial source of income and empowerment.
From the sidelines
Aside from the potential dangers for developing countries, we also need to reflect on whether the US and the EU are overestimating their power in bilaterally setting international trade standards through TTIP and the TPP.
China, for example, follows negotiations extremely closely but is unlikely to simply subscribe to whatever its Western counterparts decide. It has slowly started to develop its own treaties with Switzerland and South-East Asian states.
Brazil, too, has slowly but steadily challenged the received wisdom of international investment law. It has concluded treaties that do not include mechanisms to allow companies to take legal action against states – one of the most controversial aspects of TTIP and the TPP.
All this makes the revival of competing trading blocks and the intensification of geopolitical tensions a stark possibility. Arguably, this scenario will make the position of weaker states even more difficult, since they will have to strike an impossible balance between the competing standards of different trading blocks that leave little room for their economic needs.
All in all, when discussing the impact of TTIP and the TPP, we need to think beyond the narrow circle of its signatories. The global financial crisis followed by anaemic growth and intense austerity might have diminished the interest of Europeans and Americans in the economic hardships of the rest of the world, but that doesn’t mean they can ignore how their policies continue to reverberate beyond their borders.
The economic crisis has shown us that the economies of the world are profoundly interconnected. Negotiators would be foolhardy to think they can plough on regardless of that fact when settling on TTIP and the TPP.