Free Trade Agreements – Three Perspectives

By Sebastian Keil. Sebastian will begin a program in International Studies at the University of Leiden in September.

The latest leaks by Greenpeace have put TTIP, the planned free trade agreement between the US and EU, into the focus of public discussion once again. The fact alone that this “secret” deal is so heavily debated by society and that there is so much information available is a major win for the democratic spirit. However, TTIP is neither the only nor the most impactful treaty that is currently in negotiation. TISA, the Trade in Service Agreement, for example is negotiated by 23 trade partners, including EU and US. ^[1] In Asia, the Trans Pacific Partnership (TPP) has been signed and could be a game changer in the struggle between the US and China for influence in the Southeast Asian region.[2] While TPP is an agreement between some of the Association of Southeast Asian Nations (ASEAN) and the US, China is currently trying to “upgrade” its own free trade agreement with ASEAN.^[3] This article will shed light on three different perspectives in order to outline why free trade agreements (FTAs) continue to be of major importance to policy makers. The first paragraph will examine how corporate lobbyists are in close contact with policy makers when it comes to the content of FTAs, and how business interest shapes the language of TTIP and other agreements. Subsequently, there will be a brief examination on the impact on FTAs on the global struggle for power. Finally, the increasing role of civil society on the finalization of trade agreements will be highlighted.

The Corporate Perspective

At the core of the agenda of TTIP, TISA and TPP lie the ideas of liberalization and deregulation. Broadly speaking, both terms point at removing state intervention from markets in order to keep them “free”. ^[4] “Free” in this context means free for the private business sector to flourish. Mainly targeted are so-called “non-tariff trade barriers”, which could for example be regulations, norms and laws. As the main interest of basically any corporation is to increase profit and market share, there is a great variety of what could be considered a “barrier”. In order to enforce this interest, some sort of international arbitrary system is supposed to be established (within each individual FTA). These systems already exist in the context of different trade agreements, and they basically allow corporations to sue states if they intervene in a way that could affect profits or future profits. There are already infamous examples of the abuse of arbitrary courts. The Swedish corporation Vattenfall for example took Germany to an international tribute, because of its plan to abandon nuclear plants by 2022.^[5] Protecting investment is also an objective of TTIP (and other treaties), ^[6] and goes hand in hand with liberalization, as one part of it is to free up capital flows.

Additionally, the protection of Intellectual Property Rights (the concept of granting ownership over ideas) is crucial to modern trade agreements.^[7] The origin of Intellectual Property Rights as we know them today can be found in “The Statute of Monopolies” from 1624. The Statute was a tool used by the British crown to grant monopolies over certain goods and services to selected enterprises.^[8] Although this was only intended as a means to ensure production over some things for a certain time frame, the system began to form its own dynamic and was heavily abused by those it empowered. On a global scale, Intellectual Property rights are often criticized on the ground that they actually prevent developing countries from advancing, and make them dependent on the owners of the vast majority of patents, copyrights and trademarks – western businesses. TTIP, TPP and TISA can in this context be seen as an extension of the TRIPS-regime, which is one pillar on the WTO convention of 1994. ^[9]

So called free trade agreements have been heavily criticized for promoting the interest of big business with no regards of civil interest. Numbers confirm this assumption: From all the TTIP meetings the European Commission had with interest groups, 88% have been held with corporate lobby groups, only 9% with public interest groups. ^[10] This exclusion of civil interest manifests itself in the language of the draft contracts. A WikiLeaks expert analysis of the leaked TISA documents found the following: “Trade in services agreements treat services as marketable commodities, and deny or subordinate or deny altogether their social, cultural, environmental, employment, and development functions. People are not viewed as citizens or members of their communities they are ‘consumers’.” ^[11] This rhetoric is crucial in free trade agreements. The language that is enforced sees the world only as a market place. This itself is fine, but since these agreements have an effect on various aspects of society, not just business, they ought to take those aspects into account as well.

The Power Perspective

“The hidden hand of the market will never work without a hidden fist. McDonald’s cannot flourish without McDonnell Douglas, the designer of the F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the US Army, Air Force, Navy and Marine Corps. “

• Thomas Friedman

With this quote, Friedman is pointing at the existence of what some call the “US-Empire”. Although the US has not acquired any foreign land for 70 years, it sure is the nation whose interest is enforced most dominantly around the world. Free trade agreements play a crucial role in preserving this interest. In the context of the multilateral WTO, uprising powers like China and India are currently opposing the US initiated agenda of liberalization. TTIP, TPP and TISA allow for the US to open up new fronts.^[12] The WTO is generally not that interesting for the developed world anymore, as it has become just to polarized for it to dictate global trade policy like in the early 90s. It is therefore no coincidence that negotiations have stagnated ever since and shifted towards a more bilateral/plurilateral approach.

The TTP deal, which has been signed in early 2016,^[13] and the territorial troubles in South East Asia show how power struggles manifest themselves in economical as well as military terms. Both China and the US are currently trying to further integrate the ASEAN region into their sphere of influence and “write the rules” in the future. Both have vital interest in the region, as it is expected to be the center of economic activity in the long term. By 2020, 60% of all US naval capacity is expected to be based in Asia Pacific.^[14] In the South China Sea, the US supports its allies, such as the Philippines, in bringing forward territorial claims against their big neighbor China. While US officials claim that the US does not take sides and is present only to preserve peace^[15],critics argue that containing China is a strategic pillar of the US “pivot to Asia”.^[16] Indeed, the fact alone that the conflict is taking place in the South Chinese Sea and not for example the coast of California, confirms the claim of the latter. The US-launched Freedom of Navigation Operations (FONOPs) and the Chinese reaction to them will be decisive factors for the future of the South China Sea, and ultimately world stability.^[17]

While this section looked at the reason for treaties like TTIP, TPP and TISA from a nation state perspective, the first paragraph examined it from a corporate perspective. It is crucial to note, however, that these two perspectives are closely interlinked. In the end of the day, it is the market space of their big business and their investors, that the USA and China are gnashing their teeth for. Multinational corporations transcend the nation by definition, and therefore have vital interest in having influence in regions like ASEAN, just like investors who want to be able to put their money wherever they believe it will multiply.

The Peoples’ Perspective

Free trade agreements are constituently promoted by politicians on the ground that they intend to create jobs and growth.^[18] This doctrine seems to have lost its accountability within the population. The number of TTIP supporters is rapidly declining in both the US and EU countries like Germany (only about 17% of people think it would be a good arrangement).^[19] People are aware that those agreements are about something that the vast majority has no relation to: corporate and power interest. The way in which policy makers have (unsuccessfully) tried to keep the treaties in secret also raised suspicion about their true intention. Hundreds of thousands of people have marched against TTIP, TPP and TISA already and more are to be expected.

What is considered a “trade barrier” for one side, is often a right of human dignity for the other. Environmental and health regulations, workers’ rights and protection of public services from corporate greed could all be considered “trade barriers”, and there probably will be legal cases which claim that they are. Although politicians deny that FTAs will have any impact on those issues, the language in use would pave the way for exactly that to happen. As activist Kevin Zeese notes: “The TPP creates a web of corporate laws that will dominate the global economy. It is a global corporate coup d’état. Corporations will become more powerful than countries. Corporations will force democratic systems to serve their interests. Civil courts around the world will be replaced with corporate courts or so-called trade tribunals. This is a massive expansion that builds on the worst of NAFTA rather than what Barack Obama promised, which was to get rid of the worst aspects of NAFTA.” ^[20] Zeese is referring to the North American Free Trade Agreement (NAFTA), which is often seen as a blueprint to TTIP. While NAFTA has been promoted on the same grounds as TTIP (growth and job creation), critics argue that the agreement has led to the exploitation of workers, suppression of wages and a loss of jobs.[21]

The European Parliament will be asked to vote on the TTIP. So far the European Parliament is still in favor of the agreement. ^[22] The example of the Anti-Counterfeiting Trade Agreement (ACTA), another Intellectual Property protection treaty that was in negotiation, has shown that people do have the power to influence whether or not trade agreements will be realized. The European Parliament has turned down the agreement after immense public pressure.^[23]. Another important factor will be the nations of Europe, which will also have to vote on TTIP.^[24] Given the number of countries who have turned critical of the EU, such as Greece and Poland, it will be difficult for the European Commission to convince those countries that TTIP is for their benefit.

Conclusion

This article only glimpses at the surface of the complexity that is underlying modern free trade agreements. The three perspective explained in this article are in reality deeply interconnected on many levels. Most corporations are in favor of the agreements, as they align with their economic interest. Many politicians are supportive as well, although a new wave of leaders is challenging the status quo. The US presidential candidates Bernie Sanders and Donald Trump for example are remarkably critical of free trade agreements. They are riding a popular wave, as most people have come to believe that TTIP, TPP and TISA are deals for the few, not for the many. Whether or not these agreements will be finalized will ultimately depend on how strong the resistance by the broader population will be against them.

The strategic dimension of FTAs brings complexity to the issue and could play a major role in future conflicts. How, for example, will Russia react if the EU finalizes its free trade agreement with the Ukraine,[25] a country which Russia perceives as being part of its “sphere of influence”? How will China react if countries like Vietnam start to loosen the economic ties and look to the West for making business? Under certain circumstances, these issues have the power to transcend their purely economic impact into the realm of peace and war.

The multilateral approach taken in the WTO has great benefits for the planet as a whole, because all nations are involved and able to communicate with each other. International cooperation paves the way for stable relationships and a more balanced global economy. However, WTO negotiations have been stuck for decades, because thematic issues like liberalization, deregulation and intellectual property rights are at the core of the WTO agenda, but do not reflect the interest of much of the developing world. Consequently, negotiations have shifted from a multilateral to a plurilateral approach. In order to make negotiations in the WTO fertile again, the organization must be reformed into a more pragmatic platform which can make ends meet. Agendas like liberalization and deregulation can be of interest for nations, but should not be pursued by the WTO as a whole.

Overall, it proves difficult to find any benefit for the average person in TTIP, TPP and TISA. The deals are constructed out of a merge of power and business interest, paying little attention to civil concerns like the environment and workers’ rights. However, these concerns have been addressed by the masses which seem to view FTAs more and more negatively. Those in power now need to the address the peoples’ interest in these treaties, or they will lose any legitimacy.

Treaties like TTIP, TPP and TISA are not problematic per se, but they surface what can be seen as a much larger structural problem. Globalization has entangled national economies more and more into one global economy, fueled by liberalization and deregulation. While this has done a lot of good to the world (i.e. create stability through economic ties), it has also created a system that continues to concentrate wealth into a few hands while it drives the middle and lower into economic struggle. TTIP, TPP and TISA seem to ignore social issues and human concerns and follow an agenda that has alienated large shares of the population.

^[1] European Commission. (n.d.). TISA – Questions and Answers. Retrieved September/October, 2015, from http://ec.europa.eu/trade/policy/in-focus/tisa/questions-and-answers/

[2] New Zealand Foreign Affairs & Trade. (2016, February 04). Trans-Pacific Partnership signed. Retrieved from https://www.mfat.govt.nz/en/media-and-resources/news/trans-pacific-partnership-signing/

^[3] Movcom.gov.cn. (n.d.). China-ASEAN FTA. Retrieved from http://fta.mofcom.gov.cn/list/enasean/chianaseannews/1/encateinfo.html

^[4] Tutorialspoint. (n.d.). Liberalization Vs Deregulation. Retrieved from http://www.tutorialspoint.com/international_business_management/liberalization.htm

^[5] Investment Policy Hub. (n.d.). Vattenfall v. Germany (II). Retrieved from http://investmentpolicyhub.unctad.org/ISDS/Details/467

^[6] European Commission. (n.d.). Factsheet on Investment protection in TTIP. Retrieved from http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153018.5 Investment.pdf

^[7] European Commission. (2012, October). Protection of Intellectual Property in Free Trade Agreements. Retrieved from http://trade.ec.europa.eu/doclib/docs/2012/november/tradoc_150081.pdf

^[8] Unknown Author. (n.d.). English Statute of Monopolies of 1623, 21 Jac. 1, c. 3, The Original Source of the Anglo-American Patent Law. Retrieved from http://www.ipmall.info/hosted_resources/lipa/patents/English_Statute1623.pdf

^[9] World Trade Organization. (n.d.). Overview: The TRIPS Agreement. Retrieved from https://www.wto.org/english/tratop_e/trips_e/intel2_e.htm

^[10] Corporate Europe. (2015, July 14). TTIP: A corporate lobbying paradise. Retrieved from http://corporateeurope.org/international-trade/2015/07/ttip-corporate-lobbying-paradise

^[11] Kelsey, J. (2015, April 24). TISA: THE LEAKED ‘CORE TEXT’. Retrieved from https://wikileaks.org/tisa/core/analysis/page-1.html

^[12] Agazzi, I. (2014, October 23). TTIP, TISA and TTP – world trade revolution? Retrieved from http://www.alliancesud.ch/en/policy/trade/ttip-tisa-and-ttp-2013-world-trade-revolution

^[13] BBC News. (2016, February 04). Trans Pacific Partnership trade deal signed in Auckland. Retrieved from http://www.bbc.com/news/business-35480600

^[14] Ahn, C. (2014, January 14). Open Fire and Open Markets: The Asia-Pacific Pivot and Trans-Pacific Partnership. Retrieved from http://fpif.org/open-fire-open-markets-asia-pacific-pivot-trans-pacific-partnership/

^[15] Glaser, B. S. (2012, April). Armed Clash in the South China Sea. Retrieved from http://www.cfr.org/world/armed-clash-south-china-sea/p27883

^[16] Gerson, J. (2012, September 13). Reinforcing Washington’s Asia-Pacific Hegemony. Retrieved from http://fpif.org/reinforcing_washingtons_asia-pacific_hegemony/

^[17] Li, X., & Yanzhuo, X. (2016, January 08). A Preview of China-Southeast Asia Relations in 2016. Retrieved from http://thediplomat.com/2016/01/a-preview-of-china-southeast-asia-relations-in-2016/

^[18] European Commission. (2015, August 18). How TTIP would affect you. Retrieved from http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/impact/

^[19] Reuters. (2016, April 21). Survey shows plunging public support for TTIP in U.S. and Germany. Retrieved from http://www.reuters.com/article/us-europe-usa-trade-idUSKCN0XI0AT

^[20] Hedges, C. (2015, November 07). Chris Hedges: TPP Is the Most Brazen Corporate Power Grab in American History. Retrieved from http://www.alternet.org/economy/chris-hedges-tpp-most-brazen-corporate-power-grab-american-history

[21] Amadeo, K. (2016, April 30). Disadvantages of NAFTA. Retrieved from http://useconomy.about.com/od/tradepolicy/p/NAFTA_Problems.htm

^[22] RT News. (2015, July 09). EU Parliament backs TTIP resolution. Retrieved from https://www.rt.com/news/272563-eu-parliament-ttip-trade/

^[23] European Parliament. (2012, July 04). European Parliament rejects ACTA. Retrieved from http://www.europarl.europa.eu/news/en/news-room/20120703IPR48247/European-Parliament-rejects-ACTA

^[24] European Commission. (2015, August 18). How we’ll make TTIP happen. Retrieved from http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/process/

[25] European Commission. (n.d.). EU-Ukraine Deep and Comprehensive Free Trade Area. Retrieved from http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150981.pdf