What are Free Trade Agreements (FTAs)?

FTAs are treaties set up between the governments of two or more countries, largely on behalf of large commercial companies with global operations (‘multinationals’ or ‘transnationals’), granting these  privileged access to the markets of the countries concerned. Ostensibly, FTAs aim to ease the trading of goods and (increasingly) services across national borders. For example, they may

  • cut tariffs on goods (e.g. import duty),
  • reduce or bring into line (‘harmonise’)  non-tariff barriers (such as regulations and standards governing the quality of goods and services, the safety of chemicals and medicines, the treatment of the workforce etc), and
  • establish rights to investment protection for transnational companies.

They may also do something more fundamental. For example, some argue that the deal currently under negotiation between the UK and the US is less about exporting more goods and services to the US or importing more American products, and more about importing the American economic model.

For the past 45 years, the UK’s trade policy rested exclusively with the European Union (EU). This is changing with Brexit. Until now, the EU’s European Commission (EC) negotiated international trade agreements on behalf of the UK and all other EU member states. Now, with the UK exiting the EU, the trade deals already negotiated by the EU on its members behalf  (representing about 8% of UK trade) are being ‘rolled over’ and will continue to govern the UK’s trade with the partners to those deals. Other deals that the EU had not already agreed – for example a deal with the US – and a deal between the UK and the EU are  currently under negotiation but cannot be finalised at least until the UK has formally left the EU at the end of 2020.

In the UK, we have been assured, both pre- and post-Brexi, that our Parliament is able to scrutinise treaties. In reality Parliament can do little more than that: some committees can call for evidence from stakeholders such as companies and civil society groups, and make reports and recommendations. The UK Parliament can also debate a treaty (although there is no requirement for it to do so), but it’s unable to decisively reject a trade deal – there is no process that ultimately allows this to happen. As things stand, the Government makes a statement about a treaty to Parliament, to which MPs can respond. However, while MPs can respond by passing a resolution to veto a trade deal, the government can respond in turn by simply laying a further statement before Parliament saying why they wish the treaty to be ratified. It is then up to opponents to call for a debate, and put forward another resolution to veto …. and so on and so on, in an endless round of debate. Unless there is a change in UK law – and the Johnson government has so far rejected such a proposal – this lack of veto will persist after Brexit.

For details of the overall process, see 

http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06688#fullreport

http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149616.pdf.

https://stop-ttip.org/blog/good-bye-democracy-hello-ceta/

https://www.waronwant.org/media/ttip-ceta-tisa-and-public-services

Corporate lobbying

While multinationals and other commercial organisations have opportunities to lobby the Department of International Trade (DIT) on what they want to see in a trade deal, this is not the case for groups representing civil society. In fact the DIT has recently purged public interest groups from its main advisory groups. Expert Trade Advisory Groups (ETAGs) set up by the DIT were already heavily biased towards corporations, with only one or two representatives from unions or civil society groups. Now, ETAGs have been dismantled and replaced by Trade Advisory Groups. (There were two ETAGs that focused on development and sustainability with membership largely comprised by public interest groups. These have been told they will still be consulted, but only informally, suggesting that their advice will be given little weight.)  The new Trade Advisory Groups not only exclude civil society organisations but also mean that corporate lobbying is now built into the actual structure of trade negotiations.

The arguments for FTAs

The arguments usually made for FTAs are that they create better trading opportunities for commerce by:
– Opening new markets for goods and services;
– Increasing investment opportunities and protection of investments;
– Making trade cheaper by eliminating or reducing customs duties and cutting ‘red tape’;
– Making trade easier by setting common rules on standards and regulations; and
– Making the policy environment more predictable by having joint commitments on areas that affect trade such as intellectual property rights, competition rules and the framework for public purchasing decisions.

However, the most common argument put to the public is that, by removing restrictions on trade and so making it easier for private companies to trade, FTAs will increase economic growth and jobs.

Arguments against FTAs

Many analysts say that the benefits claimed for FTAs, such as economic growth, are considerably overestimated (US negotiators for the US/UK deal have even said this will bring no economic advantage for the UK), 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.

Many FTAs (like the Transatlantic Trade and Investment Partnership or TTIP, for example) are largely concerned removing or reducing non-trade barriers (such as regulations and standards) or ‘harmonising’ these so that each party to the treaty accepts the standards of the other, or sees their standards as equivalent (‘mutual recognition’). In many instances, accepting the regulatory standards of other countries could undermine many of our hard-won social, health and environmental protections, and prevent new regulations where these interfere with transnationals’ profits.

FTAs give transnationals the right to the same treatment as domestic companies (including access to government subsidies).

FTAs encourage the privatisation of public services where there is already some commercial involvement (as with the NHS). If a public service has been ‘liberalised’ (or opened up to the market), unless it has a cast-iron exemption, this liberalisation will be fixed by an FTA, preventing the return of that service to public provision in future. (See also ‘FTAs and Public Services’ below.)

FTAs may also include an investment protection measure, such as investor-state dispute settlement (ISDS) or Investment Court System (ICS), allowing corporations to sue national governments for actions such as new legislation (such as laws to protect public health and safety) that will affect corporate profits – see our section on ISDS for more details.

FTAs may also require that special measures are put in place to ensure future coherence between the regulations of the different countries involved (i.e measures that will govern the introduction of new regulations after the agreement has been signed) – for more details, see our section on Regulatory Cooperation.

Overall, FTAs involve irreversible commitments made at a level of  international trade law that trumps national law: once signed, it is hugely difficult 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 and our national sovereignty.

An alternative trade mandate

Many trade deals have met with strong opposition from civil society groups and trades unions. These groups 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.

FTAs and public services

There is an incompatibility between the ethos underpinning public services and the driving force behind FTAs concerned with trade in services. Public services aim to meet basic social needs on a universal and not-for-profit basis. They are usually associated with regulations that limit commercialisation and they don’t treat basic services as pure commodities. In contrast, FTAs deliberately promote commercialisation and consider services in terms of the opportunities that they offer transnational corporations.

On the whole, free trade treaties do not force governments to privatise public services. But they do promote privatisation and commercialisation in a number of ways. While governments retain the right to expand or create public services, FTAs make it more difficult or more expensive to do this. Through investor protection measures like ISDS, FTAs give considerable power to foreign investors to challenge new public provision or any changes to existing public services that may affect investors’ profits. And FTAs make it almost impossible for future governments to reverse any privatisation of public services, so locking in privatisation.

For further general information on TFAs see http://www.econlib.org/library/Enc/InternationalTradeAgreements.html,

http://www.theguardian.com/commentisfree/2015/aug/31/transparency-ttip-documents-big-business.

https://www.youtube.com/watch?v=EriEOWHPqcU

https://www.unison.org.uk/content/uploads/2015/02/On-line-Catalogue229952.pdf

For information on regulatory co-operation, see http://www.globaljustice.org.uk/sites/default/files/files/resources/race_to_the_bottom.pdf

For information on how FTAs are negotiated and agreed, see http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149616.pdf

For an example of an alternative trade mandate, see https://corporateeurope.org/sites/default/files/trade-time_for_a_new_vision-print.pdf.

See also our pages on CETA, TTIP,  and TiSA .

updated March 2020

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