Is free trade dead?
Even before the United Kingdom voted to leave the European Union, question marks hovered over Europe’s ability to conclude the mammoth transatlantic trade deals under negotiation. Talks with the U.S. regarding the Transatlantic Trade and Investment Partnership (TTIP) risked becoming bogged down over “irreconcilable differences,” with policymakers on both sides of the Atlantic under pressure from strong domestic lobbies and pockets of vocal grassroots opposition. The EU warned that unless the U.S. changes its stance, there will be no deal before Barack Obama leaves office.
Since then, the outlook has only gotten gloomier. Last week, the European Commission yielded to pressure from France and Germany, agreeing that national parliaments had to ratify CETA, the EU’s landmark trade deal with Canada, widely considered an “easy” and uncontroversial agreement. The agreement now faces delays, and possibly vetoes, setting an inauspicious precedent for TTIP, as the next round of negotiations begin Monday.
Political turmoil and growing protectionism are threatening to undermine one of the Commission’s core competences — and, arguably, the bedrock of the European project. Could free trade be dead? POLITICO asked experts, trade representatives and writers from across the political spectrum to weigh in.
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Expanded trade demonstrates Europe can withstand its crises
Michael Froman is U.S. Trade Representative.
Recent debates in the United States and Europe might lead you to think global trade is going the way of VCRs and floppy disks.
It isn’t. The future of global trade doesn’t depend on our participation. China, Russia and others are negotiating trade agreements left and right. We can either take the field, and take part in writing the rules of the road, or sit on the sidelines and watch others write them for us.
When it comes to TTIP our goal is to negotiate a 21st-century trade agreement that not only fosters growth, supports jobs and makes it easier for small- and medium-sized business to succeed, but also promotes high standards for consumers, labor and the environment. It’s not about deregulating or privatizing in our economies — it’s about launching a global race to the top.
President Obama has emphasized the world’s need for “a strong, prosperous and democratic Europe.”
Expanded trade is one way to make this happen. Europe is confronting monumental challenges: slow and uneven growth; persistently high unemployment, especially among youth; the worst migrant and refugee crisis in decades; geopolitical instability on its periphery that raises concerns about borders and energy security; rising Euroskepticism; and fundamental questions about the future of the European Union itself.
That is why we are working with heightened energy and focus to complete negotiations on TTIP this year.
The agreement will promote stability in a time of turmoil, predictability in a time of uncertainty, and democratic standards in a time of increasing competition and dwindling transparency. It will position the U.S. and the EU as standard setters, and promote a rules-based trading system that reflects our shared interests and our values.
The economic and strategic rationale for TTIP is even stronger today than when we launched negotiations three years ago. TTIP is a real opportunity to demonstrate that Europe remains capable of executing an important initiative that delivers for its people and positions it to become a leader in world trade.
We have a window of opportunity to bring TTIP to a close. Together we can, and should, get it done.
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Return to simple, focused agreements
Caroline Freund is a senior fellow at the Peterson Institute for International Economics.
With Europe and the United States unable to defend globalization at home, the outlook for big trade agreements is bleak. It is time for a change in strategy.
For 60 years an increasingly integrated Europe led the way in creating international rules to make trade both predictable and fair. The British vote to leave the EU reverses that process, with political parties in the Netherlands, Finland and Slovakia threatening to follow suit. The U.S. presidential election has made trade policy a central issue for the first time since 1992, with Donald Trump calling for renegotiating NAFTA and punitive tariffs on China.
There are strong similarities between Brexit voters and Trump supporters, arguably the most striking being the anti-integration rhetoric, centered on immigration in England and on trade with China in the U.S. The big surprise to policymakers is the large size of the disaffected groups.
Given the growing discontent with globalization, it is time to reconsider major trade liberalization. No progress was made in Doha after 14 years of talks. With strong and growing opposition in Germany, TTIP never had strong legs. And the Trans-Pacific Partnership (TPP), already a hard sell in Congress, has become an impossible sell in an election year centered around the dangers from open trade.
We need a change of strategy. Protectionism must be kept at bay. The World Trade Organization (WTO) has been effective in its role as global trade police and must continue monitoring trade policy and arbitrating disputes. Important parts of TTIP can be salvaged as sectoral agreements. European integration was born of an agreement on steel and coal. Returning to simple, focused agreements, from which countries can see the economic gains, regain trust, and maintain peace, is the way forward. The nearly complete EU-U.S. data transfer pact shows this can work.
Meanwhile governments must do more to get growth on track. Ultimately what people want is good jobs. Otherwise, support for nationalist policies will continue gaining strength. It is all too easy to blame foreigners.
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EU’s loss of British free trade voice is not a disaster
David Martin is a member of the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament.
In the narrow context of the EU global trade agenda, Brexit isn’t necessarily a disaster. For those striving for balanced and ambitious EU trade agreements — that take into account environmental sustainability, strong protections for workers and enforceable human rights provisions — Brexit may in fact strengthen their position by removing British Conservatives’ dogmatic pro-free trade voice from both the European Parliament and the Council.
In its current state of political turmoil, the trade deals Britain can expect to negotiate, either on its own or as part of the European Free Trade Association (EFTA), will not be as balanced or comprehensive as EU free trade agreements. But for the EU, trade may be a silver lining to a British exit.
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Roll back protectionism
Pieter Cleppe represents independent think tank Open Europe in Brussels.
For the first time since World War II, those arguing to remove barriers to trade are on the defensive in Europe. The ghost of protectionism haunts the Continent.
We see this play out in protests against EU trade deals with the U.S. and with Canada, where the agreements’ opponents consciously avoid the debate that lower tariffs benefit consumers, and choose to focus on side issues. They take issue with the use of private arbitration courts to settle disputes, despite the fact that the system has worked successfully since the 1950s. They also stir up fear that “regulatory cooperation” will endanger sovereignty, when in truth it’s no more than a burdensome process that identifies incompatible and protectionist elements in EU and U.S. legislation.
The debate over whether to grant market economy status to China, which would deprive the EU of possibilities to impose trade restrictions on the country, is also making waves. The European Parliament is very much on the protectionist side of this debate. Surprisingly, so is business.
All kinds of protectionist instincts surfaced in the campaign for the U.K.’s referendum on its membership in the EU. In the aftermath of the Brexit vote, some EU capitals are keen to restrict the City of London’s access to the EU, despite the fact the move would drive up the cost of financing big projects in the EU, and hurt consumers.
Likewise, some Brexit campaigners have discussed engaging in silly tit-for-tat protectionism strategies, such as threatening to impose tariffs on German car imports into the U.K. This, again, would hit consumers hardest.
Europe has enough debt, regulations and taxes already. It shouldn’t add protectionism to the mix. Consumers should be the focus of debates on trade agreements.
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Push forward on agreements to set workable precedents
Dan Costello is ambassador of Canada to the EU.
Free trade is not dead: It remains a critical source of good middle-class jobs, renewed growth and shared prosperity.
Concerns about free-trade agreements, however, are widespread and legitimate. Citizens are seeking reassurance that the terms of these agreements will not restrict states’ sovereign right to govern and regulate in the public interest. They want to know that these agreements will enable them to uphold strong public services and promote sustainable development, cultural diversity and high standards of health, labor and environmental protection.
Europe can demonstrate these benefits and advance its trade agenda by signing and ratifying CETA because it includes clear reassurance in these areas, along with a new, more transparent and impartial system for resolving any potential investment dispute.
Canada respects the choice of the people of the U.K. and is confident that the U.K. and the EU will make sound decisions in determining next steps. Both remain important strategic partners for us, with whom we share deep historical ties, common values and shared global interests. We will continue to build closer relations with both.
We remain committed to signing and implementing CETA as well as the Canada-EU Strategic Partnership Agreement, as soon as possible. By establishing a progressive new trade policy for the 21st century, CETA will reconfirm Canada and the EU’s shared commitment both to a strong role for governments and to expanding opportunity and prosperity for our citizens. Let’s get on with it.
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Stop evading broader economic and social issues
Mark Wu is assistant professor of law at Harvard Law School.
A backlash against free trade and economic integration has been brewing in advanced economies worldwide. Europe is no exception, as the Brexit vote made clear. But the reaction we are witnessing is as much against globalization and immigration as it is against free trade.
If the project is to move forward, political leaders will have to make a more convincing case about the benefits of greater integration.
Two big questions plague the current debate. The first concerns the scope of trade agreements. Which issues should be addressed, and which should be left out? To what extent should behind-the-border regulatory policies be harmonized across countries? Citizens are concerned that trade agreements could have a chilling effect on their ability to regulate local issues. The backlash against investor-state dispute settlement (ISDS), concerns over food safety, and insistence on strong environmental protections all reflect this common theme.
The second question relates to economic gains made from trade liberalization. Dividends are not evenly shared on national or EU level. How do we ensure that a positive economic effect is felt more broadly? What responsibility do institutions have toward those who lose out? Europeans are understandably anxious about their economic future. Even if they know that trade, in theory, leads to a more prosperous future, they worry that they may end up grasping the short end of the stick.
Reviving support for trade agreements requires a more robust public debate. But this is not enough. Europe also needs to find solutions to its broader economic and social problems. Europe isn’t doing itself any favors by evading these questions. Difficult as the challenges may be, Europe should seek real solutions to forge ahead and remain competitive.
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Europe needs more serious debate on trade
Alberto Alemanno is Jean Monnet Professor of EU Law at HEC Paris and global professor of law at NYU School of Law.
Free trade is an essential part of the European Union’s founding principles. Even Brexit cannot change this. And yet the negotiation of a new generation of trade agreements has become highly politicized across the Continent.
Many EU international agreements are “mixed agreements,” meaning they cover subject matters that fall both under EU and national competence. Amid growing public hostility to free trade, several countries have claimed the right to subject agreements that fall under exclusive EU competence to the vote of their national parliaments. But is this really necessary?
The legal answer is a resounding no. The political one, unfortunately, is an unqualified yes.
The mismatch between European law and political reality has more to do with the unprecedented scale of these new agreements than a full rejection of free trade.
These new trade agreements touch on a wider scope of policy areas. Given their rather intrusive approach to domestic regulatory autonomy, the interests at stake are now also of constitutional significance. They affect private companies, civil society organizations, individual citizens, and third-party states.
Opposition to these deals comes from a resistance to unprecedented forms of deep, economic integration. Even in the post-Brexit political debate, the most contentious issue is not trade — the Leave camp want to remain in the internal market — but the free movement of people. The options on the U.K.-EU negotiating table will be lighter forms of economic integration, such as the U.K. becoming a member of EFTA and/or the European Economic Area.
Although negotiations for new-generation trade agreements require more parliament involvement than in the past, the current framework does not adequately address growing public demand for greater transparency and civil society involvement. The time has come for a more informed public reflection on the pros and cons of deeper forms of economic integration.
This is especially crucial given that these deals are not purely economic but — in some cases more than others — also have strongly geopolitical and cultural ambitions. Unfortunately, an increasing number of political leaders appear to be captivated by the vocal protesting minority instead of engaging in more serious reflection about the meaning and purpose of free trade in Europe.
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Invest in people to revive support for trade agreements
Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, he was chief economist to U.S. Vice President Joe Biden and a member of President Obama’s economic team.
Free trade is not dead, but it’s in serious need of a progressive overhaul.
In advanced economies across the globe, expanded trade and globalization face an existential crisis: for large swaths of the European and American electorate, the current trade model is non-representative, undemocratic, and perceived — often justly — as contrary to their economic interests.
For decades, arrogant economic elites have told voters and communities negatively impacted by free trade deals that they simply failed to appreciate the benefits of the global economy. Out-of-touch trade advocates ignored the growing divergence of economic outcomes. They failed to forecast the predictable backlash by those unwilling to accept low wages and the loss of factory jobs as a fair price to pay for the benefits of free trade.
Those of us who recognize these social costs and yet still value globalization must introduce a new model, or yield to the atavism of Trump and Brexit.
Working people, not corporate and investor interests, must be at the center of this model. Trade deals must enforce labor and environmental standards, eschew patent extensions and intellectual property rules that are more in line with protectionism than free trade, and block currency manipulation.
We should eliminate provisions that allow investors to challenge sovereign laws, and make the negotiating process more transparent. We must also invest in those people hurt by free trade agreements. In the European context, this means targeting unemployment and wage stagnation as opposed to fiscal austerity.
By putting working people at the center of our trade regimes, we may be able revive support for them.
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Free trade was never really ‘free’
Peter Chase is a senior fellow at the German Marshall Fund. He previously served as the U.S. Chamber of Commerce vice president for Europe and as minister-counselor for economic affairs in the U.S. Mission to the European Union.
Ask not if “free” trade is dead; ask if it ever lived.
Nation states are and remain sovereign. They set the rules for all goods sold in their territory, and determine the taxes foreign products must pay for the privilege. Even the biggest multinational must obey a host country’s laws. These can be more or less comprehensive, more or less stringent, more or less enforced, but no foreign trader or investor ever has “free” access to another country.
What we misleadingly call “free” trade today is the decision of two or more countries to agree to freer trade between them. But even here foreign products and investors must still obey domestic laws. No government ever yields this sovereign power.
Liberalizing trade and investment under the rule of law brought hundreds of millions in the developing world out of poverty, even as it displaced millions of workers in developed countries. Governments failed in their duty to help those workers adapt. While some may pause on further liberalization, protectionist measures that undermine the rule of law for trade and investment cannot be the answer.
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Benefits of free trade are not equally distributed
Tyson Barker is senior research fellow at the Brandenburg Institute for Society and Security in Potsdam, Germany.
The free trade agenda — with mega-deals TPP and TTIP at its heart — is on life support. These agreements have become the proxies for the grievances, frustrations and anxieties of EU and U.S. citizens regarding globalization.
In reality, trade is just one of many disrupters of post-Cold War globalization. Look at the massive labor supply shock that came with bringing China, India and the countries of the former Warsaw Pact into the global labor market. Look at how automation and the industrial internet pit unskilled labor against technology. Look how the elimination of capital controls allowed capital to move rapidly around the globe and facilitated new investment abroad rather than at home.
None of these developments are bad in themselves. But their benefits — like those of free trade — have not been equitably distributed. And, like trade, they have displaced unskilled labor, put downward pressure on wages and tipped the scale away from workers on both sides of the Atlantic.
If the free trade agenda is to survive, policymakers must deal with these issues with more energy, imagination and engagement.
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Britain can’t rewind the clock on trade
Emily Redding is a research consultant at the Legatum Institute and author of the recent report “Trading Up: New Ideas for U.K. Exports.”
Free trade is not dead, but the U.K. government’s response to Brexit will determine whether it is dealt a serious blow.
There were two competing narratives in Britain’s campaign to leave the EU. Some see it as an opportunity to create an even more open Britain, negotiating free trade deals with the rest of the world, outside of EU strictures. Others see it as a chance to reset immigration levels and create a more protectionist culture in the U.K.
If current levels of immigration are considered too high a price to pay for openness then global free trade will be damaged. A retreat by one of the world’s largest economies into protectionism would be a huge step backwards.
Given its heavy reliance on services exports, the U.K. would suffer the most. Trade tariffs on goods have been steadily reducing for decades but the barriers facing services are unprecedented. It is more important than ever that the U.K. commit to an open approach to trade in order for its exports not to suffer unnecessarily and reduce the potential negative impact on overall global trade.
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Brexit can’t slow Europe’s ambitious free trade agenda
Gabriel Siles-Brügge, lecturer in politics at the University of Manchester, and Ferdi De Ville, associate professor in political science at Ghent University, are co-authors of “TTIP: The Truth about the Transatlantic Trade and Investment Partnership.”
Many have said that Brexit represents a “rejection of globalization.” But while the Leave campaign can certainly attribute its success to anti-migrant rhetoric and a backlash among the economically disenfranchised, the drivers of the Brexit agenda are elsewhere.
As Alan Finlayson wrote, the true winners of the referendum are the Leavers of the libertarian right who see the EU as intervening too greatly in the economy.
To them, Brexit is a chance to pursue an even more globalist trade agenda, free of the shackles of Brussels-imposed regulation and the customs union. This means Britain will likely want to pursue an even more ambitious free trade agenda after Brexit, even if it is constrained by its lack of negotiating expertise and the need to renegotiate its membership with the WTO.
At the EU level, we are already seeing signs that — while agreements like TTIP may be delayed — there is a real appetite to salvage the EU’s ambitious free trade agenda. The EU’s Trade Commissioner Cecilia Malmström recently emphasized the continuing relevance of TTIP and indicated a willingness to compromise in the interests of striking a deal.
While the Commission eventually bowed to member countries’ demand that the EU-Canada trade agreement require ratification by national parliaments, it argued that this will allow for a swift signature. Now member countries cannot claim that CETA should be rejected because of procedural reasons.
Expect free traders to argue that concluding these deals is necessary to prove Europe’s unity and the EU’s ability to deliver post-Brexit.
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Free trade reinforces power at the top, makes citizens powerless
George Monbiot is a writer and journalist. He is the author of “How Did We Get into This Mess?” (VersoBooks, 2016).
What we call trade agreements are often nothing of the kind. Proposed agreements such as the Transatlantic Trade and Investment Partnership (TTIP) or the Comprehensive Economic and Trade Agreement (CETA) are really charters for corporate rights, granting transnational companies freedom from democracy. If many Britons voted to leave the EU as a result of their sense of powerlessness and alienation from the political process, trade deals have certainly played their part.
Though I voted Remain, I see Brexit as an opportunity for renegotiating the contract between people and corporations. Let us have trade treaties but let them be balanced. Let us demand something in return for the rights we grant.
We must insist that companies operating here offer proper contracts, share their profits, cut their emissions and pay their taxes. New treaties should not be opportunities to make unpopular privatizations irreversible, avoid taxes, drive down standards and strip away the protections of democracy.
When politicians speak of free trade, we must ask who that freedom is for.
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Make trade deals fair and transparent
Luca Visentini is general secretary of the European Trade Union Confederation (ETUC), representing 45 million members of 89 trade union organizations in 39 European countries, as well as 10 European trade union federations.
The European Union could revive its free trade policy if it started listening to European workers and citizens.
Public alarm about current trade negotiations comes from widespread perception that deals are stitched up for the benefit of wealthy, multinational companies at the expense of ordinary people. Hence the fierce opposition from swathes of civil society — and our trade union members.
ETUC is not against international trade deals. We are against bad deals that undermine workers’ rights in Europe and elsewhere, endanger vital public services or bypass EU environmental standards.
For years we have reiterated simple demands. We don’t just want free trade — we want fair trade.
Agreements should not harm the European economy and jobs, and should include enforceable labor rights based on International Labor Organization conventions. Investors should not be given special privileges — such as investor-state dispute settlement mechanisms. Workers’ rights should be equally protected, and public services should be safeguarded, not sold for profit.
ETUC opposes the CETA agreement between the EU and Canada in its present form, as does the Canadian Labour Congress. We are working with trade union allies in the U.S., in the Mercosur region and in Japan, to demand human rights, decent jobs, sustainable development and democratic values in all ongoing negotiations.
The European Commission’s trade strategy is supposed to deliver “more responsible trade” — so let’s have it. Fair trade agreements are not out of reach, and greater transparency in negotiations could help restore public trust. But if the European Commission continues on its current path then yes, free trade agreements could very well be dying.