EU/US Free Trade Agreement (or TTIP)

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 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), 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. 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 will lead to the weakening of existing social, health and environmental regulations, or the prevention of 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 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).
  • In a recent development, FTAs may require that a Regulatory Cooperation Council is set up to ensure coherence between the regulations of the different countries involved, giving new powers to corporations to re-negotiate existing regulations, or to challenge proposed legislation, 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

The EU is  currently involved in agreeing a number of  FTAs, including:

  • The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. Areas covered include domestic regulation, public procurement, investment protection, ISDS, and the mutual recognition of professional qualifications.  CETA has already been agreed and signed, and is now going through what is called ‘legal scrubbing’ of the text, and translation. It will then be put before the European and Canadian parliaments, and subsequently (if it gets this far), the Canadian provinces and the individual national parliaments of EU member states for their endorsement. CETA is thought to raise many of the issues associated with TTIP  – but unlike TTIP, there is no chance now to influence its content.  However, it seems that CETA won’t be voted on by the European or UK Parliaments before the end of TTIP negotiations.  (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.
  • 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) between the EU and the US (for more details, see below).

These FTAs are currently 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 European Union (EU). 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. The likelihood of this happening increased recently when President Obama was granted ‘fast track’ authorisation – 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 the risks posed 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 will have the right to use ISDS and – given the litigious nature of US companies – the sums claimed are likely to rise dramatically.

The EC claims that one of the main aims of TTIP is the reduction of tariffs. This seems 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 – the different ways of doing things that make it difficult to sell the exact same product or service 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. 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 European Commission ran a public consultation in 2014 in which 97% of respondents (including parliamentary and public bodies, academics,  trades unions, businesses, the EC’s own advisors, as well as many members of the general public) opposed the inclusion of ISDS. 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. 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/).

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 the 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 section of the research report misrepresents its own findings. 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 (i.e. the maximum 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. But it 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.

See also our pages on how TTIP would affect the NHS and why the NHS must be exempted from TTIP.

Further information

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 August 2015

 

 

 

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