A Race to the Bottom or a Race to the Top?

On July 9, AICGS hosted a roundtable discussion on the Transatlantic Trade and Investment Partnership (TTIP) with a delegation from the German Bundestag as well as representatives of the AFL-CIO and the German trade union IG Metall. The discussion revolved around the question as to whether TTIP would represent a race to the bottom or a race to the top for the two parties involved in the proposed free trade agreement, the EU and the U.S.

Most Americans have a positive impression of Germany and look favorably on a free trade deal with the EU. American businesses are generally strong advocates of TTIP. Virtually all major American firms are already present in Europe but a free trade agreement would further facilitate business with Europe, and would allow small and medium enterprises (SMEs) to find new markets for export.

However, several bones of contention remain from American businesses’ perspective, specifically on the European precautionary principle and a few sensitive sectors. For example, excluding agriculture and the investor-state dispute settlement (ISDS) from TTIP is a deal-breaker for the U.S.

The AFL-CIO represents a divergent position by being strongly opposed to the fast-track authority (TPA) and to ISDS. The organization fears that TTIP enshrines trade rules that will promote a race to the bottom in wages, rights, and regulatory promotions. The AFL-CIO believes that ISDS is anathema to democracy by allowing foreign investors to sue governments in private arbitration panels. Given that the U.S. has higher standards for financial regulation, specifically since the passing of the Dodd-Frank Act, the organization argues that TTIP could have the capacity to put downward pressure on financial regulations on both sides of the Atlantic.

From a German and European perspective, the sensitive points are mostly about agriculture (or food safety) and regulatory cooperation. Europeans fear that TTIP could undermine the precautionary principle, which is a general principle of EU law. They are also opposed to a regulatory cooperation that would affect the welfare state and their orientation in terms of food safety and consumer protection. However, Europeans want to see oil and natural gas exports from the U.S. to Europe included in TTIP. The energy sector represents a key strategic and national-security element in favor of TTIP.

There is currently a massive anti-TTIP campaign in Germany. Virtually all civil society organizations are opposed to a free trade deal with the U.S. A big demonstration against TTIP has already been planned for October 2015 by IG Metall, Germany’s biggest trade union.

Other participants of the roundtable discussion underlined that TTIP remains the most ambitious trade agreement that has ever been negotiated. The strength of TTIP is that it is not a typical free trade agreement. The political environment in the U.S. currently looks favorable but the European negotiators still have a long way to go before they convince their European audiences of the benefits of TTIP.

Summary written by Alix Auzepy