The Transatlantic Trade and Investment Partnership (TTIP) offers an opportunity to come up with a new model for global trade agreements, by learning from the mistakes of previous deals such as NAFTA, which has “destroyed jobs” and “increased income inequality”, according to Celeste Drake.
Celeste Drake is the trade and globalisation specialist at the the AFL-CIO, the largest labor federation in the United States. She spoke to EURACTIV’s Tanja Milevska.
What is the US AFL-CIO’s stance on TTIP?
At this time, we’re trying to influence what’s in it, what’s excluded from it. We’ll make a decision as we know more about it, supporting or opposing the final version. We think it’s too early to reject it out of hand. We have some work to do to see if we can shape it and make it something that’s good for workers on both sides of the Atlantic.
What are your main areas of concern?
Towards the top of the list, some big issues, including the exclusion of special rights for foreign investors, the ISCS mechanism, clear protection for labour rights and labour market policies. We have broad concerns about public services and public procurement, and want to make sure that all governments involved retain the ability to make decisions about how to provide public services. Governments should not be subject to [law] suits through ISDS if they decide to reverse privatisation decisions.
And likewise with the public procurement decisions – we believe public procurement is a tool of economic and social development. The agreement must retain the right to say, “We have to stimulate the economy here in this depressed area, or we want to promote rights for disadvantaged minorities, or green procurement, etc.”
The fourth broad area of concern is regulation, and that TTIP is not used for deregulation.
Europeans are extremely worried that this deal will undermine the social and environmental standards their countries enjoy. Are there areas in which you fear your standards might go down?
Social protection is much stronger in Europe, (and) environmental protection is stronger in Europe, but is not universally bad in the US. We also have the feeling that the US is slightly ahead in financial services regulation and addressing the crisis.
Dodd Frank in the US is a great step forward. There are those in other countries who say we should do everything the US has done with Dodd Frank.
While we feel that all of the US efforts to re-regulate the financial sector are completely appropriate and in line with all of our trade commitments, we are strongly concerned that, because they are legitimate, there’s no reason to provide additional tools to those who would seek to undermine those very important regulations. Even if those complaints are frivolous and baseless, you don’t want to establish a pattern where big banks, with all of their financial power, are provided additional avenues through a trade agreement to fight re-regulation.
There are consumers’ groups, groups that work for good financial reforms on both sides of the Atlantic that agree that we should not put at risk the stabilisation of the economy, in order to give these big banks more market access.
How have previous trade agreements impacted US and workers’ rights, environmental and social regulation?
They’ve had a very negative impact. NAFTA is the best example. It’s the largest of the US free trade agreements, and it’s been in place the longest, so there’s a lot of data. Interestingly, in all three countries (US, Canada and Mexico), we’ve seen increasing income inequality and wage stagnation. We’ve seen a decline in union density, we’ve seen growth in poverty rates. All of that obviously cannot be attributed solely to NAFTA. But it is NAFTA, in combination with deregulation and other neoliberal policies, like reducing taxes, and therefore reducing investments in infrastructure and human capital. All of this combined has had a very negative impact.
We’ve got twenty years of data from NAFTA. Yes, there are a few consumer goods that you can point to where prices fell and increased trade flows. But trade flows are not an end in themselves. They should be a means to an end. The end should be shared prosperity, and that hasn’t occurred. So, now that the US and the EU are in negotiations for the biggest trade deal in the world, this is an opportunity to learn from the mistakes and make a new model.
What if we can lift workers up? Here’s an opportunity. Trade unions on both sides of the Atlantic are involved. Civil society has been very active. Perhaps with all of this attention, we can achieve something better.
What do figures show in terms of job creation under these type of deals?
By our measure, the US lost about 700,000 jobs due to NAFTA. While you might say that 700,000 over 20 years, given the size of the economy, is small, if we look at the projected gains of TTIP, they’re not that much larger. We have concerns about the economic models used to predict job growth, because it’s not clear what they’re based on. If you go back to the free trade model and David Ricardo in the 1870s, there was no job prediction model. All it said was using the same number of people, you can create more by reducing inefficiencies. It never said anything about creating jobs. By our measures, the US has lost nearly 3 million jobs to trade with China under the WTO. [Since Beijing joined the organization, in 2001] We think that the idea that free trade in itself is some sort of job creation vehicle isn’t very convincing, and that there are better ways to create jobs and in particular, infrastructure investments.
What we have here is a crisis of demand. Once you create consumer demand, that will create jobs, and demand, and on and on, in a virtuous spiral upwards. But if TTIP follows the model of NAFTA, which we oppose, we’re more likely to see downward pressure on wages, which will constrict demand and lead to job losses and will continue this very stagnant place, that both the US and EU countries remain in. The answer is not more austerity and more neoliberalism. The idea that you can create jobs on the cheap just through a trade agreement, on a bad model – we think we can do better. We imagine these agreements as tools to make peoples’ lives better.
The ‘infamous’ Investor to State Dispute Settlement (ISDS) has been known to be used in agreements with so-called less developed countries, where the legal system is less reliable. Why, in your opinion, is there a need to add such a clause between two blocks with the same level of development when it comes to the rule of law and the judicial system?
We think it’s strictly because that’s what business wants. There couldn’t be a clearer example to us of negotiators simply taking the desires of the business community and trying to implement them.
Not only do we have reliable judicial systems on both sides of the Atlantic, but in general, there’s more than 4.1 trillion dollars in cross-Atlantic investments without the ISDS mechanism applicable in most cases. These are sophisticated businesses that should be doing their research on where they’re investing. If they’re not certain about the stability of their investment, they can choose not to invest, or they can choose to invest in an individual contract with the government to do an investment protection, which happens frequently. They can have political risk insurance. There are all kinds of things these investors can do other than create special legal rights.
There are concerns that the surge of Eurosceptic parties, right and left, could put the closing of the US-EU trade deal under question. How do you see the latest European election results?
We’re watching with avid interest. It’s interesting to have more folks in there that will be asking the right questions on trade, or being more skeptical on trade. In terms of how the elections affect other policies, it might not be good for workers at all with some of the far-right groups… but we’re taking our information from our trade union partners. We don’t base it on the election results.