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The EU-US free trade agreement (TTIP): giving rights to firms, taking jobs from modest communities

If global corporations gain rights, do citizens also? We now know the answer: No.

The many free trade agreements that followed the making of the WTO have left a clear mark: together they have granted multiple rights to global corporations. There is a parallel history that I have researched since the 1990s: if global corporations gain rights, do citizens also? I now know the answer: No, citizens actually lost rights, even if eventually they gained a few rights (notably for same-sex marriage) but these were not linked to the free-trade treaties. Overall, in most of the western world, citizens lost rights.

The Transatlantic Trade and Investment Partnership, which I focus on here, will not help. It will give a whole set of new rights to corporations and further dilute the rights of citizens, as workers and as small business-owners. But there is a major new indirect loss of rights for citizens: the global firms who stand to gain the most from this treaty want to limit the role of national law and governments by proposing a sort of private parallel legal system under their control to handle disputes.[1]

This is the dichotomy we need to keep in mind when we discuss the new generation of free trade agreements, now nicely renamed “partnerships.” To put it in a nutshell: they give even more rights to what are now a growing number of global corporations. In this process they reduce the rights of particular groups of citizens—manual workers, transport workers, and low-level service workers directly or indirectly connected to international trade. And they push particular sectors of governments, notably the executive branch of government, into becoming their ‘partners’, so to speak.

All of this takes on added importance if we consider that this transatlantic pact (T-TIP) between the world's two biggest economies, the EU and the US, would cover almost 50 percent of global GDP. I first discuss the question of corporate rights. And then the second major issue: creation or loss of jobs in the countries of the partnership.

Corporations demand more rights via TTIP

The logic guiding the free trade agreements that take off in the 1990s is the making of a global operational space for corporations.[2] The data make it quite clear that the gains have gone to firms that operate globally. The possibility of losing or gaining jobs is the key subject for public discussion in the diverse countries involved. It is critical to many workers and, though a mixed picture, to governments. But it is a bit irrelevant to these global firms. It is not their issue because what they want is easy access to the particular labor supply or regulatory environment that works to their advantage. 

These firms have worked hard at persuading governments to enable the making of an operational space that allows them to do what they “need” to do. Governments have basically helped, even though they have understood, because it is increasingly clear, that where the jobs are lost or gained is quite secondary to these firms. 

The United States data are disturbing: it has basically lost 2.7 million jobs since the mid-1990s through trade agreements –and 40,000 linked directly to the new US-South Korea free trade agreement.[3] The politicians know this, but only a minority is concerned, with the rest happily accepting the self-serving analyses of the corporations themselves. [4] 

The agreements for the T-TIP and the TPP seem to contain particular clauses that are more extreme than prior major agreements. In fact, workers organizations were not part of the consultations, nor were consumer organizations. Most extreme is perhaps the new right for corporations to contest and sue governments. This is a first; in its sharpest version it might lead, according to some analysts, to a parallel legal system under the control of the corporations. Thus specialized lawyers will handle the arbitration courts and represent the corporations. There is no accountability to a higher court, or a body that represents the people of a country or of a sub-national jurisdiction.

This is clearly an aggressive move by the corporations to avoid interference in their modus operandi or to get compensation for future profit losses due to decisions detrimental to their interests.

The beacon of German renewables

A wind turbine in Germany. Wikipedia. Public domain.

An example in Europe that is brought up by critics of the proposed T-TIP treaty is the fact that Germany’s program to move to renewable energy could be subjected to these new corporate rights, which might take the form of Germany having to pay for missed profits due to the move to renewables.[5]

A potentially troublesome first step has emerged:  a major energy firm, Vattenfall, is aiming at using precisely such an option to sue Germany for future profit losses due to its energy shift. To do so the firm invoked an energy agreement with such a provision; the agreement includes about 40 states in Central Asia and Europe. This makes it an expensive option for a state to pass national policies that go against the interests of global firms –said differently, it becomes a significant incentive for governments not to “interfere” with the profit-making options of such firms.

Elsewhere I have argued that one of the major effects of globalization on the national state was on the executive branch of government, which emerges more often as a partner than a contester of the projects of powerful global firms (2008: ch5; 2014: ch 2).  In fact, in early 2014, a panel of experts of a government-commissioned committee on research and innovation in Germany has called for the abolition of the Renewable Energy Sources Act (EEG). They argue that maintaining growth in the renewables sector has led to price hikes, but hasn't promoted climate protection. [6] In fact, renewables have gone from 4 to 16% of all energy.

The other ‘free-trade’ question: jobs

To reassure citizens, the US and the EU argue that these partnerships would stimulate trade and the economy, and that “an average European household could gain 545 euros every year.”

This is the same argument that has been given by the US in its long history of free-trade agreements. But that long history has generated a lot of data, and the numbers are not pretty. Looking at the larger picture it is clear that what free trade has often meant is simply lower prices via cheaper imports. In this narrow sense, the household gains because they pay less; the famous example of this is of course low-cost Chinese imports. But the larger question is whether the economy in which this household exists also gains so that it does not lose jobs or lead to lower wages, which would then in turn, and with time, negatively affect households. And this negative boomerang effect is of course what has happened.

We know from prior treaties that over time the winners are global firms and the losers are national economies and particular segments of their workers. So if I were Europe I would want to know what are the goods and services that will become cheaper because we are importing them from lower cost production sites.

It may be good for some countries and not for others. Europe is a mixture in its economic space because in the East you have quite a few low wage countries. Poland, for one, has thrived keeping its own currency, but exporting to the EU; this arrangement has been a boon for them. I can imagine those countries winning much more than Germany.

But for the global firms involved all of this is secondary: they have that operational space and it has been constructed in their image and that means to ensure their profits.

A more general good could in principle come out of such agreements, but it would take a radically different type of treaty and partners. It would be keen on treaties that are honest and where the logic organizing the benefits of the treaty is not only the logic of corporations. It should be a benefit to a whole economy –as I mentioned earlier just cheaper products for households is not necessarily a positive as it can slow down and downgrade a whole economy. I am all for a well run fair trade system, for enabling small agricultural producers in poor countries to be able to sell to rich countries, and enabling workers and modest firms in the countries involved. All countries need all kinds of imports. But along with that I would insist on a ‘localize the economy’ logic – localizing whatever we can localize.

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[1] See USTR (Office of the U.S. Trade Representative). 2014a. “Transatlantic Trade and Investment Partnership (T-TIP).”

The other major trade agreement under discussion is the Trans-Pacific Partnership - see USTR (Office of the U.S. Trade Representative). 2014b. “Trans-Pacific Partnership (TPP).” 

[2] I develop this in Territory, Authority, Rights, (Princeton Univ Press 2008) ch 5 and 8; see also ch 4 for a longer history leading up to the making of a global operational space that takes off in the late 1980s; and in Expulsions, ch 2. (Expulsions: Brutality and Complexity in the Global Economy  Harvard University Press 2014)

[3] See http://www.epi.org/blog/statistics-spin-foreign-goods-considered/ http://www.epi.org/blog/transatlantic-free-trade-agreement-job-claims/

[4]  For parallel information on the German case see, for instance the work at the International Center for Development and Decent Work (ICDD). 

[5] This program aims at exiting nuclear power generation, in about ten years. In the past nuclear power supplied Germany with about 30% of its energy needs. The turn to renewables is supported by generous subsidies, and it has worked: renewables have become a real branch of industry in just a few years.

[6] http://www.dw.de/government-advisory-panel-frowns-on-german-energy-reforms/a-17463784

About the author

SS

Saskia Sassen is professor of sociology at Columbia University, New York. Her latest book is, Expulsions: Brutality and Complexity in the Global EconomyCambridge, Mass: Harvard University Press/Belknap, June 2014. 

Expulsions


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