TTIP is about geopolitics and trade block formations

Wang Wen

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TTIP is about geopolitics and trade block formations


Source:    Published: 2016-5-5



Protesters demonstrate against Transatlantic Trade and Investment Partnership (TTIP) free trade agreement ahead of US President Barack Obama`s visit in Hanover, Germany April 23, 2016. [Photo: China Daily]

TTIP talks in Europe are almost grinding to a halt as the French threatened on Tuesday to pull out if things continue in their present form. The French President François Hollande said that he is considering rejecting the Transatlantic Trade and Investment Partnership "at this stage" because France is opposed to any trade that is unregulated. France`s lead trade negotiator Matthias Fekl, the minister responsible for representing France in the TTIP talks, blamed Washington for this fresh crisis stating that while Europe had compromised a lot on this deal, it is still on the receiving end from Washington.

Ideally, all 28 EU member states and the European parliament will have to ratify the TTIP before it is operational, but it doesn`t seem very likely now, after three years of failed talks, despite American insistence to seal the deal within the course of the Obama presidency.

That brings an important question, why is the TTIP so controversial and what is it essentially about? The TTIP is a controversial trade talk between the EU and the U.S., which is apparently supposed to give gains to the EU at up to €119 billion a year and €95 billion for the U.S., according to the Centre for Economic Policy Research as reported by the BBC. However, the pact is arguably controversial, firstly because it has been negotiated completely in secret behind closed doors since 2013. The stated aim of the pact is to curb regulatory tariffs between the EU and U.S.; however, no one knows the details of the mechanisms that will help curb the tariffs. Secondly, the critics of the TTIP say that it will lead to massive job loss, and arbitrary employment rules leading to big concessions for big corporations. Even in Germany, there has been a massive protest against the TTIP which says that the pact might lead to a lowering of product standards and consumer protection.

Earlier this year, President Barack Obama, while touring Germany, strongly defended the TTIP alongside Chancellor Merkel, as thousands of Germans in a coalition of environmentalists and trade unions opposed and rallied outside the venue. Obama said it is "indisputable" that the TTIP will make the EU and the U.S. more competitive as opposed to other growing economies in the world, a clear dig at China and India. "The United States and the European Union need to keep moving forward with the TTIP," he said. Even though the European Commission dismissed the difference between the EU and the U.S. as negligible and not irreconcilable, the French, who had the strongest opposition to the TTIP, don`t seem convinced. Environmentalists are also extremely opposed with the recent Greenpeace leaks against the TTIP, although one needs to take anything that comes out of Greenpeace with a grain of salt.

However, the TTIP is not only about economics, and one cannot understand the need without understanding the geopolitical angle. The TTIP is about solidifying Euro-Atlantic unity, as much as solidifying trade. The pact negotiators understand that there is fundamental qualitative difference between European goods and American exports. But a successful TTIP would set up a global trade standard, and strengthen Euro-Atlantic and Western diplomacy against Russia, and arguably against China and India. It would help the EU strengthen the sanctions against Russia and also make Europe more energy independent and united in dealing with Russia. As a block, Europe will also be able to faceoff and make more standard impositions against China.

A very interesting point was taken up by Wang Wen of the Chongyang Institute for Financial Studies, when he said as quoted here, that "Fresh trade protectionism is taking shape in new forms, and the unnecessary internal friction in competition between developed countries and emerging economies continues to grow." As pointed out by Wang, in an era of global trade turmoil, and with increased protectionism in both the EU and U.S., among both the right and left wing leaders, this might lead to a block-based strategic miscalculation between China, the U.S. and the EU.

As China implemented the AIIB, it was realized that size matters as much in trade blocks as in geopolitics, and having a united Euro Atlantic trade block will set new standards for other geopolitical rivals to compete, and will provide more sanctions and economic leverage which the EU or U.S. might lack individually. As Obama said a couple of days ago, "China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk," as quoted by Reuters. That, in essence is the TTIP. It is not only about economics, and it is not even about creating Obama`s legacy. It is solely a block formation, like the early days of the 1990s Clinton administration, and in this tie of geopolitical turmoil, one can conclude there is a risk in trade blocks. Thus far, China has an open attitude about the TTIP as has India, but that might soon change, if standard impositions start taking place.

Wang Wen, Executive Dean of Chongyang Institute for Financial Studies, Renmin University of China, was quoted in this article.