Free trade agreements (FTAs) might seem a million miles from the NHS. However, FTAs are not just about the trading of goods. They also cover services and corporate rights. The Coalition Government is keen to negotiate a FTA between the EU and the USA in which health services will be treated as things to be bought, sold and profited from. This will have disastrous consequences for the NHS. In this section of the website we attempt to explain why.
What are Free Trade Agreements (FTAs)?
FTAs are treaties set up between the governments of two or more countries on behalf of large commercial companies with global operations (‘transnationals’). FTAs aim to encourage the trading of goods across national borders by reducing tariffs (e.g. import duty) and non-tarrif barriers (such as regulations), and establishing rights to protection for transnational companies that wish to invest in services (including public ones). The usual argument made for FTAs is that, by removing restrictions on trade, it is easier for private companies to trade and so economic growth and jobs will increase. But some analysts say that these benefits are considerably overestimated and outweighed by the threats that FTAs pose. For example, for the UK:
- FTAs give transnational corporations the right to enter the UK market and operate without limits on their activities.
- FTAs give transnationals the right to the same if not better treatment (including access to government subsidies) as domestic companies.
- If an FTA includes what a mechanism known as investor-state dispute settlement (ISDS), transnational corporations have the unique right to use a secretly-run, international tribunal of three corporate lawyers to directly sue the UK government if it introduces any new regulation that might, even unintentionally, damage the corporation’s investment, including its expected future profits. The awards that these tribunals can make are colossal. For example, the American company Renco sued Peru for $800 million because its contract was not extended after the company’s lead smelting operations caused massive environmental and health damage. ISDS also limits the ability of governments to move public services out of markets in which investors have substantial interests. (For more information on ISDS see https://www.youtube.com/watch?v=spBdTcaY3_Q#t=235).
- Overall, FTAs involve irreversible commitments made at a level of international trade law that trumps national law: once signed, it is almost impossible for a national government to cancel an FTA. In other words, FTAs give far-reaching rights to transnational corporations while severely undermining the power of democratically elected governments.
For further general information on TFAs see http://www.econlib.org/library/Enc/InternationalTradeAgreements.html
The Transatlantic Trade and Investment Partnership (TTIP)
The European Commission (EC) is currently involved in negotiating an FTA of unprecedented scale between the US and European Union (EU). This is the Transatlantic Trade and Investment Partnership (or TTIP). It is not just – or even primarily – concerned with trade in goods, but also with trade in services. Initially negotiators hoped that the deal would be concluded at great speed (or ‘on one tank of gas’) by the end of 2014, but unforeseen delays mean that negotiators now aim to sign the treaty before US Presidential election campaigning starts in 2016.
One difficulty has been the concerns expressed the public, trades unions and civil society groups about the implications of TTIP. These include a growing awareness of the risks posted by the inclusion of ISDS. For example, under existing FTAs, only 8% of US-owned firms operating in the EU (mainly in Central and Eastern European countries) are covered by ISDS, but these firms have already claimed more than 30 billion euros against EU member states under ISDS. If ISDS is included in TTIP, a further 92% of US-owned firms would have the right to use ISDS and – given the litigious nature of US companies – the sums claimed are likely to rise dramatically. A public consultation on the inclusion of ISDS in TTIP resulted in 97% of respondents (including some business organisations and elements of government) rejecting ISDS. Despite this, it is becoming clear that the EU has dismissed public opinion, has not ruled out ISDS and is not suggesting any meaningful changes to how it will operate (http://corporateeurope.org/sites/default/files/s2b-on-ec-isds-reforms.pdf).
One of the stated aims for TTIP is the reduction of tariffs although, at 3%, these are already very low between the US and EU. The real priorities are
- to increase protection for transnational investors (for example through ISDS, although many argue that this is an unnecessary measure in a treaty between countries which already have established and respected legal systems), and
- to remove (or ‘harmonise’) ‘not-tariff’ or regulatory barriers – the different ways of doing things that make it difficult to sell the exact same product on both sides of the Atlantic – that restrict profitable trade between the US and EU. In many cases, different national regulations demand different types of tests and standards that mean additional costs for exporters. But the move to create a common transatlantic standard could mean a race to the bottom, with the least demanding standard being adopted. The tests for safety in the US and EU are based on very different principle: in the US, producers can assume that products are safe until shown to be harmful, while in the EU the Precautionary Principle is used, whereby companies must prove their products are not harmful before they can be sold. Many fear that the removal of ‘non-tariff barriers’ between the US and EU will often mean the removal of our most prized and hard-won regulations and standards that protect, for example, our labour rights, environment, food safety, digital privacy, and banking standards.
The way this treaty is being negotiated is, in itself, cause for concern. Transnational corporations have had frequent opportunities to lobby the EU Trade Department about the treaty but the same opportunities have not been extended to trades unions or civil society groups. For example, of the 560 meetings that the Trade Department held in preparation for negotiations, 520 were with business lobbyists and only 26 (4%) were with public interest groups. (for more details, see http://www.corporateeurope.org/international-trade/2014/07/who-lobbies-most-ttip).
The process is also undemocratic as the substance of on-going negotiations – despite a recent move towards greater transparency – is largely kept from our MPs and MEPs, as well as the public. Once the treaty is signed by negotiators, the UK parliament (like other EU member states) will only be able to vote to accept or reject the treaty as a whole: they will not be able to amend it in any way.
The main political parties argue that TTIP will bring increased growth and jobs. There is little credible evidence for these claims, which rest largely on an assessment made by the Centre for Economic Policy Research (CEPR). Not only should the CEPR research be viewed with caution because of its poor quality (not least, the summary of the research report misrepresents its own findings), but because the research cannot be seen as unbiased: the CEPR is funded by the same international banks that are keen to see the TTIP signed. The key findings section of the CEPR research report states that growth from TTIP will bring a family of four an extra 545 euros each year. However, the main body of the research shows that this gain is not per annum but would be cumulative over 10 years: the more accurate figure is about 60 euros per year (equal to about one cup of coffee per person, per month).**And this very small gain is only predicted if the most optimistic, ambitious scenario is achieved in which there is the maximum removal of regulatory barriers.
Independent research suggests TTIP will lead to losses in terms of net exports; growth and government revenue (http://ase.tufts.edu/gdae/Pubs/wp/14-03CapaldoTTIP.pdf).
In addition, while TTIP will bring little in the way of economic growth, it may result in actual job losses in the UK. Even EC-funded research suggests that at least 1.3 million European workers would lose their jobs as a result of TTIP, without necessarily being able to find new employment (http://trade.ec.europa.eu/doclib/docs/2013/march/tradoc_150737.pdf). Alternative research has estimated that TTIP would lead to 600,000 job losses in the EU alone (http://ase.tufts.edu/gdae/Pubs/wp/14-03CapaldoTTIP.pdf) and certainly, job losses have been typical of other free trade deals, such as the North American Free Trade Agreement (NAFTA).
The social costs of TTIP, such as unemployment or the effects of less rigorous safeguards for food, chemicals and so on following the ‘harmonisation’ of US and EU regulations, have generally been downplayed. (http://www.oefse.at/fileadmin/content/Downloads/Publikationen/Policynote/PN10_ASSESS_TTIP.pdf).
To see how the different political parties stand on TTIP, see http://www.waronwant.org/news/latest-news/18306-ttip-where-the-parties-stand
A useful 2 minute video outlining the issues can be found at https://www.youtube.com/watch?v=AmKzYg84nNA
And see our page on how TTIP would affect the NHS