Far from creating an expanded free trade area in which anything goes, as critics claim, the TTIP is more likely to raise international standards through a regulatory ‘race to the top’, argues Patricia Garcia-Duran Huet.
- As part of Manchester Policy Week, policy@manchester will host a debate on the pros and cons of TTIP in Manchester on Tuesday 4 November. Limited places still available.
Opposition to the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US has many critics. Some of the concerns were put forward at a panel on the TTIP at the UACES Conference held in Cork in September.
Ferdi De Ville of Ghent University and Gabriel Siles-Brügge of The University of Manchester presented a paper at Cork in which they argued that the European Commission had “put considerable effort” into framing the debate on TTIP on their terms. The Commission had claimed that TTIP would “deliver much-needed ‘growth and jobs’ without stretching the public purse at a time of austerity”.
But De Ville and Siles-Brügge – who have blogged with great impact on this issue – countered that the figures used by the Commission were unrealistic and “represent an important exercise in the ‘management of fictional expectations’”. They suggested: “The models make overly optimistic predictions about the ability of the EU and US to eliminate regulatory barriers to trade – which are unlikely to be realised in the face of considerable political opposition – and also downplay the potential social and environmental impact of an agreement.”
Far from being an objective assessment of the impact of TTIP, according to De Ville and Siles-Brügge, the economic models used by the Commission “serve the pro-liberalisation agenda of the European Commission and other advocates of the TTIP”.
This presentation generated a strong debate at Cork, with most questions focused on how to preserve European social and environmental protections. Siles-Brügge has previously argued that TTIP will generate a regulatory ‘race to the bottom’.
This public debate is of course healthy but it also seems to indicate two interesting facts.
First, there has been a change in the arguments against free trade. Protectionism is no longer justified on the basis of the jobs that may be lost – domestic producers’ welfare – but instead on consumers’ welfare. As some observers have pointed out, the economic crisis instead of wounding trade liberalisation has reinforced its appeal.
It is not politically correct in Europe to challenge a trade agreement with third countries by making classical protectionist arguments. On the other hand, consumer welfare is accepted within the Single European Market as the only valid excuse to discriminate in favour of domestic producers at the expense of other EU producers.
Second, a free trade agreement with the US inspires more fears than the enlargement of the Single European Market from a consumer welfare perspective. This was clear from the more muted opposition to EU enlargement when Romania and Bulgaria joined.
Detractors of the TTIP are especially afraid of the application of the principle of mutual recognition of EU and US regulatory standards. They believe that through this principle any US product will be sold in the EU without having to comply with the EU regulations, leading to a regulatory ‘race to the bottom’.
It is interesting to note that despite the entrance of less developed members like Romania and Bulgaria, this has not happened within the Single Market. On the contrary, one may argue that the principle of mutual recognition has given a regulatory advantage to the more developed members of the EU.
This is because the principle of mutual recognition of regulations is not automatic. Enforcement implies bilateral recognitions of regulatory equivalence. For example, German product regulations may be regarded as equivalent to Romanian regulations by Romanian authorities, but that Romanian product regulations are not recognized as equivalent by German authorities.
That means that German products produced according to German regulations are allowed into the Romanian market without problem, but that Romanian products produced following Romanian regulations would not be allowed in the German market.
This regulatory advantage of the more developed countries has helped to enhance the competitive edge of their exports in less developed countries of the EU. It has also led to the progressive approval of common standards based on the more demanding regulations. Instead of a regulatory race to the bottom we are witnessing a progressive race to the top.
In other words, if the principle of mutual recognition between the EU and the US is applied through the TTIP as in the Single European Market, we should expect a progressive race to the top. If European regulations are more demanding than US regulations that would mean that our products are going to have a regulatory advantage: we are going to be able to sell in the US while the US products will have to be adapted to be sold in the EU.
Of course, there is the danger that the EU and the US agree automatic recognition for certain products. In this case US products would be able to enter into the EU market without having to comply with the specific European requirements. This is the danger on which we should focus.