Developing countries will be among the biggest losers if the Transatlantic Trade and Investment Partnership (TTIP) is implemented, warns Marion Lieser, explaining what a socially and ecologically fair trade deal would look like.
Marion Lieser became managing director of Oxfam Germany in January 2012. Lieser spoke with EURACTIV Germany’s Dario Sarmadi.
Which immediate effects of TTIP should developing countries be concerned about?
TTIP can lead to distortions in trade – so-called trade diversion effects. Developing countries are often victims of such effects.
What, precisely, do you mean by that?
If the EU and US further open their markets, imports from third countries, and thereby developing countries, could be forced out. Florida is an example of this. The state on the east coast of the United States produces exotic fruits. If more goods flow from there to the EU, it is plausible that fruit from developing countries would lose some of their market share. But at the moment, something like that is difficult to predict.
TTIP’s supporters and opponents rely on very different prognoses. Which of these studies are believable?
Most studies should be read with a great care. They are based on complex model calculations with countless assumptions and parameters. Depending on how the parameters are set, there is a different outcome. Let’s take a look at the recent study published by the ifo Institute in Munich which was conducted on behalf of the German Ministry for Economic Cooperation and Development (BMZ). According to this study, the effects on developing countries are low overall. For some, a slightly negative and for some, a slightly positive effect on economic growth is predicted.
And where does the problem lie?
Take Kenya as an example. According to the ifo-study, the country’s agriculture exports could shrink. At the same time, tourism in the country is supposed to flourish when travellers from the transatlantic realm have more money in their pockets thanks to TTIP. This theory is very daring, but let’s just assume for a moment that this effect would really occur. Who would profit from the boom in tourism? Who will ensure that it won’t just be a small group of individuals who rake in these profits and that growth losses in other areas won’t be carried by society as a whole?
But if you mention trade diversions as a point of criticism and then say model calculations are too vague, how can you be sure that developing and newly industrialising countries will be the losers in TTIP?
One can look at the effects previous free trade agreements have had. Mexico opened itself up to the United States and Canada through NAFTA and to the EU through a bilateral free trade agreement. Since then, Mexico has become more unstable, inequality has become more severe, the winners mostly include big corporations who were able to expand their market share.
Trends like this can often be observed under free trade agreements. And the liberalisation agenda of TTIP is likely to lead to similar results, including increasing inequality in third countries, a category to which developing countries belong.
The European Commission, on the other hand, says TTIP is a gold mine for developing countries. Through standards harmonisation, it argues, exporters in African states would only have to produce according to one product norm.
Product standards are different all over the world. Sure, certain exporters concentrate on the EU and the United States, but there are also standards in South Korea, China or Brazil that are relevant for other exporters. And which standards are we even talking about? Is it technical production standards? If we talk about harmonising power connections, that could be accomplished with a global norm-setting organisation.
But isn’t the harmonisation of standards in an economically strong EU-US economic bloc a step in the right direction to at least make life easier for some of the exporters?
The US and the EU are welcome to match their technical norms, but not with the added demand that other countries in the world be forced to accept these norms as well. Instead, they should push for the development of multilateral standards. For food security, for example, there is the Codex Alimentarius. It could be developed further. There are international fora on setting standards on almost every issue. But whoever wants to set global standards in a duet is saying goodbye to multilateralism.
However, lead negotiators and those from the economic sector are saying that the global negotiations in the World Trade Organisation (WTO) have been stagnating for years.
Since the beginning of the Doha Round there has been lip service from industrialised countries on how important multilateralism is. But the EU and the United States have hardly moved for years. Meanwhile, the conflicting interests within the round require that actors talk with each other in a targeted manner.
In their speeches, key politicians on both sides of the Atlantic swear to the importance of the WTO. But in actual day-to-day business, they would rather follow their bilateral agendas.
Why are the Doha negotiations stagnating?
For instance, because industrialised states do not want to give up their privileges in the agriculture sector. Here, we are talking about subsidies, for example, that the industrialised countries want to keep in tact – even subsidies that have distorting effects globally. Several developing countries, on the other hand, want to protect certain forms of agricultural products. That is important for food security in their populations. Industrialised countries do not want to accept tha, but still keep a firm grip on their own high protective standards. I believe these conflicts could be overcome. But to do this, everyone must move, even the EU and the US. Instead, they are trying to push their maximum demands through. The Doha round will never become a development round this way.
Wouldn’t it be smarter for developing countries, in light of TTIP, to expand regional blocs as well?
Such trends already exist. There is stronger regional integration in Latin America, in South Asia and in Africa. There, 26 countries established a new free trade area just a few weeks ago. In addition, there are stronger south-south trade relations. African countries are building trade with China, South Korea or Brazil. And still: It would be desirable for negotiations to take place within a multilateral organisation again, where everyone is at one table. After all, it is not desirable to have a fragmented world.
One industrial field that is supposed to be affected by TTIP is the textiles industry. According to the European Commission, intentions are to work towards common labelling standards. Now, Development Minister Gerd Müller is working on implementing high standards for German apparel companies. Will TTIP back him up?
One would have to see the negotiation documents. Which textile standards are we talking about here? The technical standards and product requirements or also those regarding fairness in production? With regard to textiles, we have an abundance of voluntary standards for companies on respecting human rights, labour rights and ecological standards. But these voluntary obligations do not get us anywhere. We need binding standards that apply to all. The problem is such obligations cannot be understood as trade barriers in TTIP. If the EU introduces strict standards for textile supply chains, then it could lead to lawsuits from American corporations if they argue these standards are limiting their profits.
There is currently an idea going around to establish a commercial court as a replacement for the private arbitration courts. Does that present an opportunity to shape trade in a way that makes it fairer for developing countries?
A European commercial court is an emergency solution with which negotiating parties are trying to talk their way out of the investor-state dispute settlement (ISDS) procedure that has received justified public criticism. Completely normal legal actions are available for investors. A parallel instrument that gives international investors an advantage over national investors? We don’t need something like that.
But it is also about developing a reformed ISDS as a blueprint for future free trade agreements.
But we don’t need a commercial court for that. There are currently many good proposals from various institutes. A recommendation from the global trade and development conference UNCTAD, for example, maintains the balance between protection and obligations for investors. We do not need new institutions but, rather, should discuss the necessary ISDS reforms, globally.
Considering all of your demands for multilateral trade agreements – are you against TTIP?
TTIP in its planned form is not conducive to sustainable development. But if the US and the EU use their bilateral negotiations to bring their economic systems more in sync with social and ecological sustainability, if they sign off on a bilateral agenda on how to make progress in climate protection and employee protection and reduce inequality, then TTIP would have a useful function. But then again, that would be a completely new TTIP.