TTIP: INTERNATIONAL MEGA-CORPORATIONS PREVENT THE SOCIAL AND ECOLOGICAL ORGANIZATION OF GLOBALIZATION
By Rudolf Hickel
[This article published on February 13, 2014 is translated from the German on the Internet, http://www.nachdenkseiten.de/?p=20685. Rudolf Hickel is an economist at the University of Bremen.]
The planned “Transatlantic Trade- and Investment Partnership” between the US and the EU is intensely controversial. The abbreviation TTIP (Transatlantic Trade- and Investment Partnership) already appears on placards not only of globalization critics. Two positions face one another rather irreconcilably. The supporters of a deregulated free trade emphasize the prosperity gains for everyone through falling prices, more economic growth and new jobs. The critics of this globalization with melting labor-, consumer-, social and ecological minimum standards fear international conglomerates gaining power against the protection of consumers and employees. The advantages of a border-crossing liberalization of markets through dismantling protectionist hurdles and declining prices are seen and sketched as a model. In the reality of international monopolist competition, narrow economic profit interests dominate to the disadvantage of broad prosperity gains.
How should the transatlantic opening of markets first suspended by the EU be evaluated? Is there an alternative to this globalization pushed by the interests of international corporations to downward competitive pressure on minimum standards/
THE FOCUS OF THE PLANNED US-EU MARKET OPENING
What is central? Within the transatlantic mega-zone, the regulations of foreign investments in their home countries should be in force in the host country. If the standards in the homeland turn out lower, these must be recognized in the partner country. The planned reduction of trade barriers through tariffs, shares and expensive border-crossing multiple controls is also on the agenda. Since the relative tariffs between the US and the EU only amount to 5.2% on average in the EU and 3.5% in the US, the liberalization need is comparatively low apart from a few higher tariffs (EU-agricultural products up to 205%, US 43% on textiles and 56% on shoes and leather). Rather the so-called non-tariff trade barriers are at the center of border opening. Politically intended regulations on product quality and production conditions are included in the non-tariff trade barriers. The often cited examples reveal the goal. The meat treated with hormones in the US and the chickens disinfected with chlorine are now prohibited to protect consumers in the EU. Unlike the US, the EU prescribes an identification duty on packaging for food and genetically engineered plants. The approval of genetically-modified corn threatened by the EU commission with support of the German chancellor fits in this concept of transatlantic deregulation. If this concept of boundless trade should be realized, these controversies will not exist any more. According to the intended mutual acknowledgment, US corporations in the future will offer their lower standards in Europe. Lower prices with US products can be expected because of the suspended EU quality standards, a competition where more expensive protected products are pushed off into the EU is on the horizon. The price for cheaper products is the health risks. This competing-down of product standards will not stop at industrial laws, social and ecological minimum regulations. Here is one example: products with low price prices because of right-to-work employees in the US threaten to force out German goods and services on the basis of their higher wage agreements. In some areas where regulations are stronger than in the EU, the US will come under pressure to lower standards (banking sector).
The opening of the public employment sector is part of the agenda of transatlantic liberalization. The consequences for this kind of competition are immense in the US-EU-area. The big businesses will prevail. Small and medium-sized domestic and regional businesses come under massive pressure through the monopolistic competition without borders. Where are the defenders of a de-concentrated social market economy as a model of globalization?
POLITICAL REGULATIONS SCOLDED AS “INVESTMENT BRAKES” IN THE WORLDWIDE MARKET DEREGULATION
The planned transatlantic agreement goes far beyond opening tariff and non-tariff trade barriers. A transatlantic “investment partnership” has a positive ring. “Direct” and “indirect” expropriation of foreign investors are distinguished in the host-country. While a business is expropriated in the direct case of the state, a business can feel indirectly expropriated by state limitation of its decision-making autonomy. For example, the control over business property is consciously restricted in a political-democratic way through social and ecological production conditions referring to employment. Policy change in the energy realm can also be a basis of a legal suit. Thus the business model of past energy corporations changed with the energy turn. That is the reason why Vattenfall is suing the Federal Republic of Germany for 1 billion euros for its energy turn and definite exodus from nuclear power. In the case of indirect expropriation, foreign corporations in the EU can at least sue for compensatory damages. Free enterprise mega-investors from abroad resist nation-state business production rules or rules negotiated domestically on the EU plane. A flood of lawsuits can be expected as many conflicts show today. In the transatlantic alliance, national jurisdiction or EU justice does not decide over the lawsuits. Rather independent justice-free arbitration boards are provided. If the TTIP should come about, future lawsuits against the prohibition of fracking for the ecologically controversial production of gas in rocks will be on the docket. According to the logic of this arbitration jurisdiction, wage determination with the German collective wage system, minimum wages and entrepreneurial joint-determination are suspected of being “investment barriers” for US investors against which lawsuits will be filed. Notorious critics of these regulations in Germany and the EU that emphasize neoliberal market deregulations draw great hopes on this roundabout way through the transatlantic market economy.
THE UNDEMOCRATIC ARBITRATION BOARDS GET THE TABLE READY
On closer inspection the protection of foreign mega-investors before indirect expropriation leads to a dispossession of nation state democracy. This appears in the planned establishment of arbitration courts for earmarked conflict regulation. These arbitration boards outside of national and international law should be formed with a representative of the affected corporation, a representative of the state and a neutral third party. In addition a linked system of law offices arises. The over 500 arbitration boards already active worldwide have become independent and serve investors in the aggressive competition.
PROMISED WELFARE EFFECTS NEGLIGIBLE
A person hardly occupied with the theme recognizes the great risks of this liberalization. Therefore there are massive attempts to dilute the effects through higher economic growth and more jobs increasing prosperity. The many macro-economic studies in the commission of the EU and the US show that the welfare effects turn out extremely trifling. The US think tank, the “Center for Economy and Policy” come to striking miniscule growth- and employment effects. Calculated for a time-period of 15 years, the long term growth effect will be an addition al 0.48% (average per year 0.034) for the GDP in the EU and an additional 0.39 percentage point in production (annual average 0.028). The strikingly optimistic Bertelsmann study estimates job growth in Germany in 15 years at 181,092 new jobs (12.935 per year). The total growth according to the macro-economic study of the ifo institute is reduced to only 68,590 new jobs (1801 per year). The different span of the results on the growth- and job effects show a great uncertainty exists here. The losses of jobs through the displacement of past production are not properly registered. Firstly, an important loss in quality arises in the gain in aggregate economic production: hormone-treated beef by its low price displaces products regulated in the past according to health requirements. Quantitative growth goes along with losses in quality for consumers. Therefore the overall economic prosperity effects promised from the transatlantic partnership are also not significant.
WHO ARE THE LOSERS? WHO ARE THE WINNERS?
The losers and winners can be clearly identified. The losers are employees, consumers, the environment and the public sector standing outside the competition. Only multinational corporations face the losers as winners. They rely on risky and enormous sales markets and the possibility of unlimited direct investments in the transatlantic trade- and investment area. The one-sided interest policy pursued here against defensive social and ecological rights also explains the exclusion of unions, consumer- and environmental associations and other non-governmental organizations from the decision-making centers. Their role is reduced to the right of a hearing. Deficient democratic legitimation, intransparency and powerful official secrets marked the decision-making process in the past. The official consultations are pushed by over 600 representatives of the economic lobby together with political representatives. A globalization will be carried out in which big investors dominate the product- and production conditions. Labor-referring, social and ecological standards will be decimated as cost-factors.
GLOBALIZATION: ORGANIZATION INSTEAD OF DEREGULATION OF MARKETS
The political model of fair trading and investing beyond the borders stands against this globalization under the pressure of monopoly competition. The harmonization of labor-, social- and environmental rights is desired in a rule system for the world economy. In a first step minimum uniform standards should be identified so no country can fall short.
After massive criticism, the EU stopped the project. However this stop demanded by the Greens and Die Linke (Left Party) in Germany was not enough… The Transatlantic Trade- and Investment Partnership deserves the fate of the “Multilateral Agreement on Investments” (MAI). The 1996 attempt of the OECD successfully dismantled an agreement to protect profitable investors of democratically legitimated nation state governments.
NOTE BY JENS BERGER: Rudolf Hickel – completely rightly – names numerous examples in which US corporations could profit from the free trade agreement. However this is only a half truth and can quickly be misunderstood as though the planned free trade agreement one-sidedly favors US corporations.
1. What is true for US corporations on the EU market is also true for EU corporations on the US market. Pharmaceutical approval is regulated more sharply and in a consumer-friendly way in the US than in the EU. A harmonization here would be a gift of billions for the European pharmaceuticals GlaxoSmithKline (GB), Sanofi-Avantis (F), AstraZeneca (GB) and Merck (D). A harmonization of the product liability would be a special gift for German exporters. Businesses like the mechanical engineer Stihl expects a decline amounting to 15% of US sales for product liability lawsuits – if a free trade agreement should lower US product liability to the EU level, this would be a gift of billions to EU businesses, above all to German exporters. Thus it is not true that only US corporations would profit. The two cited examples speak volumes and are much more significant than the often-quoted chlorinated chicken. Why don’t they appear in any TTIP-critical articles?
2. Lowering consumer protection benefits corporations from one’s economic zone and not only corporations from the other economic zone… Whether US corporations could prevail with their chlorinated chickens against the Dutch chicken barons is another question. US corporations would profit on their home markets from a lowering of US product liability and a dilution of the pharmaceutical approval criteria.
The question whether US or EU corporations profit is not central with the TTIP. Both profit at the end of the day. The line of conflict is businesses against consumers, not US against EU. Whether the falling costs are passed on to consumers or only registered as an increased profit is more than questionable with the supply oligopolies. Rudolf Hickel very correctly mentions this.
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