Tips for the TTIP

Ana Palacio MADRID – Three years ago, the United States and the European Union launched negotiations on the Transatlantic Trade and Investment Partnership (TTIP), promising to complete them on “one tank of gas.” But now the talks are running on fumes, with sniping on both sides and the political window for an agreement closing fast. The obstacles that the TTIP negotiations have run up against are not exclusive to that agreement. They reflect a broader trend – one that demands a fundamental rethink of the prevailing approach to trade and free-trade agreements. It is no secret that the backlash against such agreements has been gaining traction in recent years. In the US, both presumptive nominees for the presidency – the Democrats’ Hillary Clinton and the Republicans’ Donald Trump – have espoused anti-trade views, with Trump projecting a mercantilist approach unseen in mainstream US political debate since before World War II. Moreover, it looks increasingly unlikely that the Trans-Pacific Partnership, which the US has negotiated with 11 other Pacific Rim countries, will receive congressional support. Politicians in Europe are also following voters in turning against the TTIP. French President François Hollande, in particular, has intensified his opposition to the agreement in the run-up to next year’s presidential election. Support for the agreement has weakened so significantly, in fact, that European Commission President Jean-Claude Juncker has called for leaders to reaffirm their commitment to the deal at this month’s European Council. Driving this trend is the sense that globalization has gone too far, and is now squeezing ordinary citizens, while enriching a select few. And that sense is not unreasonable; some groups do reap higher rewards from economic liberalization while others suffer. But the reality is that free trade, guided by international rules and standards, has a net positive macroeconomic impact. To avoid losing these benefits, much more must be done to recapture public support for growth-enhancing deals like the TTIP. The key will be to smooth out free trade’s negative impacts and prepare societies better for increasing economic openness. Placing a high priority on support programs – trade adjustment assistance in the US and the European Globalization Adjustment Fund in the EU – with a focus on groups that are negatively affected by agreements is one obvious imperative. But these are just stopgaps. Given the fundamental challenges to society posed by the free flow of goods, services, and capital – and compounded by rapid technological progress, most immediately in robotics – structural reforms must also be undertaken. One area that will require special attention is education. With entire industries coming under threat, workers increasingly face the need to switch careers. In this context, curricula that have defined education for the last half-century must be rethought, with a view toward ensuring that workers are equipped with higher-level “meta-skills” that can be adapted easily to a broad array of industries. Given the political pushback, there have been rumblings that US and EU leaders will settle on a narrow TTIP, covering only areas where there has already been agreement. Such a deal would be a missed opportunity, because the TTIP has the potential to do much more. A TTIP with wider regulatory convergence could facilitate a significant increase in trade. Moreover, a TTIP that establishes a joint project in which the EU and the US (with GDPs of $18.5 trillion and $17.5 trillion, respectively) are essentially equal partners could reinvigorate the bilateral relationship. For Europe, the deal would be even more beneficial, as it would amplify the EU’s voice in global standard setting at a time when it is increasingly being talked over. A limited agreement would not only fail to bring these benefits; it could actually undercut the weight and influence of the transatlantic community, by signaling weakness and ceding rulemaking to other forums. Given current political constraints, developing a TTIP with maximum impact will not be easy, and it will require some creative thinking – like that which facilitated the Paris climate agreement last December. That deal represented a leap forward in how international agreements are made, as it wove together hard rules, non-binding pledges, and overarching frameworks to enable an agreement among 195 countries. Taking inspiration from this innovative approach, the US and the EU should move on from areas in which they have already agreed on binding standards, and adopt broad principles and frameworks for ongoing negotiations on knottier issues, such as health and food safety. Such a mechanism is already envisioned in the TTIP, in a proposed chapter on regulatory cooperation, but in an indefinite and limited way. While an approach that rests more heavily on non-binding cooperation would have a weaker immediate impact, it could be the key to overcoming immediate political hurdles, without giving up on the TTIP’s longer-term potential. Furthermore, it could help to reinforce America’s place at the forefront of international rulemaking, while propelling Europe back to America’s side. After three years of negotiating, the TTIP is simply not where it needs to be – and, without public support, it never will be. Shifting popular opinion will take a lot more than slick messaging; it will require changes in how trade is conducted and how society adjusts to openness and progress. That will take time. The US and the EU should find a gas station. Ana Palacio, a former Spanish foreign minister and former Senior Vice President of the World Bank, is a member of the Spanish Council of State, a visiting lecturer at Georgetown University, and a member of the World Economic Forum’s Global Agenda Council on the United States. Copyright Project Syndicate.

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Tips for the TTIP