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 (sometimes defined as “anything you can’t drop on your foot”) and corporate rights. The UK Government is supporting the negotiations for FTAs that are currently underway between the EU and a range of other countries, treaties in which health services will be treated as things to be bought, sold and profited from. These agreements are largely negotiated in secret, but what we know from leaks and the release of very limited information is that we can expect disastrous consequences for the NHS. In these pages 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 (and increasingly, services) across national borders by reducing tariffs (e.g. import duty) and non-tarrif barriers (such as regulations and standards governing the quality of goods, the safety of chemicals and medicines, the treatment of the workforce etc). They also aim to establish rights to investment protection for transnational companies. The usual argument made for establishing FTAs is that, by removing restrictions on trade, it is easier for private companies to trade and so economic growth and jobs will increase. However, 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 encourage privatisation of the public sector.
- FTAs, by ‘harmonising’ the regulatory standards of the countries involved, will undermine many of our hard-won social, health and environmental regulations, and prevent new regulations where these interfere with transnationals’ profits.
- 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 costs to a national government defending an ISDS claim are considerable, even if they win the case. If they lose, 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 severely 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). ISDS is not available to domestic companies. Nor can the UK government use ISDS to sue a transnational corporation. Curiously, as the EU trade commissioner has admitted, there is no direct relationship between the inclusion of ISDS in a FTA and increased foreign investment, prompting questions about why governments agree to offer foreign investors a special court (http://www.euractiv.com/sections/trade-society/positive-effects-ttip-tribunals-investment-unclear-317665).
- In a recent development, FTAs may require that a Regulatory Cooperation Council is set up to ensure future coherence between the regulations of the different countries involved, giving new powers to corporations to re-negotiate existing regulations, or to challenge proposed legislation (even prior to this coming before Parliament), if this conflicts with their corporate interests.
- 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, or withdraw some of the commitments made. 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, and http://www.theguardian.com/commentisfree/2015/aug/31/transparency-ttip-documents-big-business.
The EU’s involvement in different FTAs
The EU is currently involved in agreeing a number of FTAs, including:
- The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. CETA is a so-called ‘new generation trade deal’ that goes beyond trade to target regulations. Secret negotiations were completed in September 2014. The agreement is now going through legal checks and translation: it could be presented to the European and Canadian parliaments for signing at any time now. Areas covered by CETA include domestic regulation, public procurement, all public services unless explicitly excluded, investment protection, ISDS, and the mutual recognition of professional qualifications. CETA is thought to raise many of the issues associated with TTIP, such as the inclusion of a Regulatory Cooperation Council, and that it will open the door to TTIP. However, unlike TTIP, there is no chance now to influence its content.
To see a 3 minute video about CETA and its relevance to TTIP, see https://www.youtube.com/watch?v=Zd_WQ21iKI8
For a statement from civil societies and trades unions that explains CETA’s aims and calls for the agreement to be refused, see http://www.s2bnetwork.org/wp-content/uploads/2014/11/UE-Can_DeclCommune_FINAL-Octobre11.ENG_.pdf.
See also http://www.s2bnetwork.org/issues/eus-free-trade-agreements/ceta-material/ for more information.
- The Trade in Services Agreement (TISA) is being negotiated between the countries of the EU and (currently) 25 others. Indications are that it will promote privatisation while reducing, if not removing, the ability of governments to regulate privately-delivered services. Any new services that develop in future (e.g. as a result of technological innovation) will automatically be included in TISA, without further negotiation. The treaty’s negotiations are highly secretive and the concessions being made by negotiators will only be publicised five years after TISA comes into force. (see http://www.world-psi.org/sites/default/files/documents/research/report_tisa_eng_lr2.pdf for more details)
- The Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated between the EU and the US (for more details, see below).
These FTAs are prompting widespread concern among civil society groups. Many of those actively opposed to these FTAs are not against trade as such, but argue for an alternative trade mandate, calling for democratically controlled trade and investment policies that, for example, allow human rights and issues like the protection of the environment and public welfare to be prioritised over the interests of corporations. For more details, see http://corporateeurope.org/sites/default/files/trade-time_for_a_new_vision-print.pdf.
The Transatlantic Trade and Investment Partnership (TTIP)
The European Commission (EC) is currently involved in negotiating TTIP, an FTA of unprecedented scale between the US and the member states of the European Union (EU), including, of course, the UK. It is not just – or even primarily – concerned with trade in goods, but also with trade in services. Its main aim is deregulation. The inclusion of a requirement to set up a Regulatory Cooperation Council means that TTIP is a ‘living agreement': it wont just reduce or ‘harmonise’ existing regulations, but will have a powerful influence on the kind of regulations that can be drawn up in future.
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 (not least because of public protest) mean that negotiators now aim to sign the treaty before US Presidential election campaigning starts in 2016. The likelihood of this happening increased recently when President Obama was granted ‘fast track’ authorisation by Congress – this allows him to negotiate international agreements that Congress can then either approve or not approve, but cannot amend.
Serious concerns about TTIP have been expressed by the public, trades unions and civil society groups, not least about the risks posed by the inclusion of ISDS. For example, under existing FTAs involving EU countries, 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 will have the right to use ISDS and – given the litigious nature of US companies – the sums claimed are likely to rise dramatically.
In September 2015, public disquiet about ISDS (e.g. 97% of those taking part in an EU consultation rejected ISDS outright) led the European Commission to propose a new system called Investment Court System (ICS): if this is agreed (the proposal has not gone down well with the US business community), investors wishing to settle a dispute will be able to choose between using ICS or the relevant domestic legal system. ICS may bring more transparency to the legal process – initial information suggests that cases will be heard by randomly assigned judges, all documents will be available on line, hearings will be open to the public, and there will be a right to an appeal. But ICS is seen by sceptics as little more than an attempt to put lipstick on a pig: it would do nothing to resolve the fundamental problems of ISDS, such as giving special privileges to foreign investors; undermining national laws, and allowing national domestic courts to be by-passed. And judges would be paid a percentage of any final settlement made – raising concerns that this could lead to inflated damages being awarded to investors (and there are no limits on the amount that can be awarded).
The EC claims that one of the main aims of TTIP is the reduction of tariffs. This is misleading, given that, at 3%, tariffs 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’) ‘non-tariff’ or regulatory barriers that restrict profitable trade between the US and EU. Very often, countries have different regulations or standards governing the production of goods or provision of services. This can mean additional costs for exporters if they are to comply with the regulations of the country of import. However, 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 principles: in the US, producers can assume that products are safe until shown to be harmful, while in the EU the Precautionary Principle is used. This means that 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 protecting, 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). At the same time, the voice of those objecting to TTIP is suppressed. For instance, the 97% of respondents to an EC consultation mentioned earlier who opposed ISDS included parliamentary and public bodies, academics, trades unions, businesses, the EC’s own advisors, as well as many members of the general public. However, the opinions of those critical of the treaty and ISDS were dismissed as ‘uninformed’ http://corporateeurope.org/international-trade/2015/02/ttip-investor-rights-many-voices-ignored-commission.
The negotiation process is also undemocratic as, despite a recent move towards greater transparency, the substance of on-going negotiations is largely kept from our MPs and MEPs, as well as the public. For a graphic illustration of the restrictions that MEPs face if they want to see TTIP documents, see http://act.sumofus.org/sign/ttip_transparency_infographic/.
Once the treaty is signed by negotiators, the European Parliament (and subsequently the parliaments of EU member states) will only be able to accept or reject the treaty as a whole: they will not be able to amend it in any way (see http://arstechnica.co.uk/tech-policy/2015/05/ttip-explained-the-secretive-us-eu-treaty-that-undermines-democracy/). This ‘all or nothing’ approach will put huge pressure on our MPs and MEPs to accept the treaty.
What are the benefits of TTIP for UK citizens?
The main political parties argue, on the basis of figures given by the EC, 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). This research has to be viewed with caution. Its value is undermined because of potential bias: the CEPR is funded by the same international banks that are keen to see TTIP signed. The quality of the research is also weak, drawing on inappropriate research methods and models with a poor forecasting record.
Even the summary of the research report misrepresents its own findings. The section of the report on key findings 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: if this is taken into account, 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 version of the treaty is agreed (i.e. almost total removal of regulatory barriers), an achievement thought to be highly unlikely.
Independent research suggests TTIP will lead to losses in terms of net exports and growth (http://ase.tufts.edu/gdae/Pubs/wp/14-03CapaldoTTIP.pdf) and that, 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). Some research suggests that TTIP would lead to 600,000 job losses in the EU alone (http://ase.tufts.edu/gdae/Pubs/wp/14-03CapaldoTTIP.pdf), mirroring what seems to have happened following other free trade deals. For example, it’s estimated that the North American Free Trade Agreement (NAFTA) led to the loss of over 682,000 jobs in the USA, mostly in manufacturing (see, for example, http://www.epi.org/publication/nafta-legacy-growing-us-trade-deficits-cost-682900-jobs/).
The EC suggests that TTIP, through removing barriers to trade, will reduce costs to businesses wishing to export and this may be true to some extent for some sectors, such as car manufacturing. But TTIP will also create costs. Potentially, these include loss of government income from at-the-border taxes; loss of trade within the EU as a result of a shift to trading with the US; the negative economic impact of additional imports from the US; costs of strengthened intellectual property rights protection (such as higher costs for medicines due to increased patent protection); and costs associated with Investor-State Dispute Settlement cases (even when the UK successful defends a claim).
Those in favour of TTIP have also downplayed the social costs of TTIP, resulting, for instance, from unemployment or the effects of less rigorous safeguards for food, chemicals and so on following the ‘harmonisation’ of US and EU regulations (see http://www.oefse.at/fileadmin/content/Downloads/Publikationen/Policynote/PN10_ASSESS_TTIP.pdf).
TTIP and public services
A further concern about TTIP is the threat it poses to public services in Europe. The EU’s initial offer on public services was leaked in June 2014. This suggested that medical, health and social services, along with postal, financial, environmental, and cultural services, telecommunications, transport, water, and energy are all on the table.
For a detailed and clear video interview explanation of the nature and implications of FTAs, including what these mean for public services and utilities, see http://www.waronwant.org/media/ttip-ceta-tisa-and-public-services . The video explains why, despite assurances from the European Commission, the NHS is not excluded from the terms of these treaties.
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
War on Want’s 2015 update on TTIP: http://media.waronwant.org/sites/default/files/TTIP%20booklet%20for%20RLS%2C%202015%20update.pdf?_ga=1.139872563.1840083393.1386322749
Updated September 2015