July 15, 2014
Economics just flies out the window when the business interests want to get a trade deal passed. The NYT gave us more evidence of this fact in an article on the state of negotiations on the Transatlantic Trade and Investment Partnership (TTIP).
The article tells us that the TTIP appears to be facing troubles because of the opposition of environmental and consumer groups and the recent spying scandal in Germany. This opposition is presented as sort of tragic given the need for a deal:
“From the European side, new impetus for freer trade came on Monday in the form of new industrial production data indicating that the eurozone’s incipient economic recovery might have taken a step backward.”
You’ve got to love this one. Europe just got new data showing that industrial production was weak last month, therefore it needs to push ahead with a trade agreement, that in the most optimistic scenario will not be signed before the end of the year. It will then be phased in over the next decade. Yeah, that’s a good way of addressing weak economic data from May.
What’s more striking is the mix of a discussion of real trade issues with regulatory issues that business interests are using to obstruct progress on trade. The starting point of the piece is how current trade rules cause Mercedes-Benz and Freightliner to take apart cargo vans in Europe so that they can be shipped to the United States to be reassembled. Of course this is a pointless source of inefficiency and waste. The vans could be sold more cheaply to consumers if they could be shipped as is, without the needless dis-assembly and reassembly. Eliminating the rules that lead to this practice is a great story how an agreement can lead to economic gains.
But the piece goes on to tell us that the negotiators are interested in much more than eliminating trade barriers. According to the article, they want to take away Europeans’ right to set their own health, safety, and pollution standards. The article tells readers that the working proposal is that if a product meets standards in either the U.S. or Europe then it can be sold in both places.
This means, for example, that Europeans would have to give up plans to impose energy efficiency requirements on cars or other products, if the U.S. Congress didn’t agree to the same standards. Given that a large segment of the Congress claims not to believe in global warming, it is understandable that Europeans would not be inclined to accept this position. The same would apply to regulations of food, drugs, and other consumer products.
The article doesn’t mention this fact, but much of the focus of the deal will be on increasing forms of protectionism, specifically copyright and patent protection. These policies will raise prices and slow growth. Also, if the concern was in reducing barriers that raise prices, items like the protectionism that makes doctors’ pay twice as high in the United States as in Europe would be front and center. But of course reducing barriers that protect the earnings of highly paid professionals is never on the agenda in trade negotiations.
As a practical matter, if the agenda of TTIP were simply removing actual trade barriers, like the ones that provide the backdrop for this piece, the deal could probably be concluded and approved fairly quickly. However, these trade barriers are a small portion of the TTIP agenda. The weakening of consumer, safety, and enviromental regulations to make them more friendly to corporations is the main point of TTIP. Powerful business interests are happy to hold the real but modest economic gains from freer trade hostage in order to advance their regulatory agenda.
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