Free Trade Agreements are Amazing! Or Terrible! Or Both...

Depending on whom you ask, the Transatlantic Trade and Investment Partnership (TTIP) free trade agreement between the United States and the European Union is either a huge opportunity for mutual economic growth and cooperation between the world’s most prosperous democracies, or it will only serve to enrich large corporations while degrading working, environmental, and agricultural conditions in both the United States and Europe.

TTIP has been in negotiations for years without a firm agreement. The next round of negotiations starts up this month. European negotiators are optimistic that a draft agreement can be hammered out by the end of 2015. After that, the treaty would have to be ratified by all of the individual countries.


Europe and America would be best friends.

Europe and America would be best friends.

This makes the negotiations tricky, because if individual European countries don’t like provisions of the treaty, they can theoretically torpedo the entire agreement. This might be unlikely, if only because single holdouts would face a huge amount of pressure from other European countries, but it means that the negotiators on the European side have to be really careful about the kinds of provisions that approve or reject.

The arguments in favor of TTIP are pretty straightforward: by harmonizing regulations and removing tariffs, you could unleash a huge amount of two-way trade across the Atlantic. Increased trade…increased income…growth…yada yada yada. We’ve heard these arguments before.

The arguments against TTIP, at least here in Europe, are also not super surprising, but are a bit more nuanced than the gung-ho “MORE TRADE IS ALWAYS BETTER!!!” pro-arguments. I’ll try to list out the most important ones:

Loose Labor and Working Regulations

It’s no secret that labor and working conditions in Europe are slightly more regulated they are in the United States. This ranges from stronger collective bargaining rights to safety regulations to hiring/firing rules. Pro-labor voices in Europe are scared that harmonizing European and American working regulations will become, in effect, dropping from European standards to the lower American ones. Europeans are proud of their social system, and workers don’t want to lose protections that make working life in Europe very different from working life in the States.

The Environment

Environmental controls are also a lot stricter in Europe than they are in America. Some European’s are wary of having to compete with American firms that aren’t compelled to comply with stringent rules regarding pollution and emissions. This is a cost advantage for the American firms, the thinking goes, which means that in order to compete, European countries would be forced to lower their environmental standards step by step until the cost structures are equal.

Closely related to these concerns are questions about energy and climate change. As you might have heard, Germany has been investing an enormous – one might even say a bonkers - amount of effort and money into its so-called Energiewende, or Energy Change, in order to reduce carbon emissions and increase the percentage of electricity use from renewable sources. This costs money, of course, and if German firms are going to be forced to compete against firms from America, where the priority given to climate change is, shall we say, rather lower than in Europe, German firms are going to be at a cost disadvantage.

Investor Protection

There has been a huge uproar recently over proposed provisions in TTIP regarding investor-state dispute settlements. This would be an independent arbitrator, where investors could bring cases directly against countries without the interference of that country’s government. The arbitrator’s decisions would be binding, and individual governments wouldn’t be able to appeal. So if Goldman Sachs didn’t like a new financial rule that Holland just passed, they would bring a case in front of the arbitrator, whose decision could theoretically  invalidate the national Dutch law.

Europeans are flipping out. They are terrified that big US finance firms would essentially line up outside the arbitrator’s door in order to weaken European financial regulations (which, again, are stronger than in the USA). This topic remains a huge issue, especially in Germany, and my feeling is that unless it is resolved in a way that Europeans can live with, TTIP won’t survive.

Chlorine Chickens

What’s a chlorine chicken? I’m not exactly sure, and I hope I’ve never eaten one, but apparently it is possible in the United States to give slaughtered chickens a chlorine bath before selling them in stores. This is…gross.

Europeans basically view the entire American agricultural system through the lens of chlorine chickens: unnatural, disgusting, and not something that should be sold in Europe. I feel like a broken clock here, but the argument once again comes down to Europeans not wanting to buy food that is produced using lower American standards both because they think it’s unhealthy and because it applies cost pressure to European farmers.

So what next?

These objections notwithstanding, my gut feeling is that the trade agreement will be negotiated and then ratified. There is just too much support at the highest levels of European politics: the EU Commission is in favor, the biggest European firms are, and so is Chancellor Merkel. Popular support varies by country but generally hovers above 50%.

And like so many other things in politics,  I think it's very possible that a final reckoning of whether TTIP is "good" or "bad" will be impossible. It's the the kind of project that will be whatever people want it to be. For those who hype increased transatlantic trade as a key benefit for everyone, it will probably be viewed as really successful. And for those who worry about how large corporations would be the primary beneficiaries and that standards in Europe would erode, well, that's also probably true, too.

Those things aren't mutually exclusive. Which of those stories you want to emphasize ultimately depends on your opinion and your politics.