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’) that grant privileged access to the markets of the countries concerned. FTAs aim to ease the trading of goods and, increasingly, services across national borders by

  • cutting tariffs on goods (e.g. import duty),
  • reducing non-tarrif 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),
  • establishing rights to investment protection for transnational companies.

For the past 40 years, the UK’s trade policy has rested exclusively with the European Union (EU). This will change when the UK formally leaves the EU, a process that may take some years. For now, as with other EU member states, it’s the EU’s European Commission that negotiates international trade agreements on behalf of the whole EU. The EC is also expected to work in close cooperation with the European Council and European Parliament, who have to approve an agreement once the negotiations have concluded.

For some FTAs, the EU has the legal power or ‘exclusive competence’ to agree a treaty on behalf of EU member states. In contrast, where an FTA is a ‘mixed agreement’ (i.e. where it is decided that some aspect of the FTA goes beyond the EU’s ‘common commercial policy’ – for example, it encroaches upon a member state’s national law), the EC does not have exclusive competence. This means that once the treaty is agreed by the European Parliament (EP), those parts of it that fall outside common commercial policy have to come before each of the member states’ Parliaments as well. This process can take as long as two years. However, what is little mentioned is that once the EP has agreed a mixed treaty, those parts of the agreement for which the EC has competence (such as investment protection measures like ISDS) may be ‘provisionally implemented’ without member states’ agreement. And if member states don’t ratify the agreement, it’s unclear how provisional implementation is reversed!

If a treaty is mixed, and therefore has to be agreed by all the EU member states, these can only accept or reject the treaty in its entirety – the treaty cannot be amended. (The recent skirmish to get the EU-Canada deal (CETA) signed suggests that some changes can be made after the negotiators have packed up and gone home – but there is some question at the moment about whether such compromises are worth the paper they are written on).

In the UK, we have been assured that our Parliament will be able to scrutinise treaties like TTIP. In reality it seems that it can do little more than that: unlike most other EU countries, the UK Parliament can debate a treaty but it is unable to decisively veto trade deals – there is no process that allows this to happen. As things stand, if a resolution is passed to veto a trade deal, the government can lay a statement before Parliament saying why they wish the treaty to be ratified, and it is then up to opponents to have a further debate and put forward another resolution to veto …. and so on, and so on in an endless round of debate.

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/

The arguments for FTAs

The arguments usually made for FTAs are on the grounds 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 substantially all 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 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. A recent development is for FTAs (like the Transatlantic Trade and Investment Partnership or TTIP) that are predominantly concerned with deregulation – i.e with removing or reducing non-trade barriers (such as regulations) 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 this means accepting the regulatory standards of other countries could 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.

FTAs encourage the privatisation of public services where there is already any 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 that will affect corporate profits, even if these are laws to protect health and safety – 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 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 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 and our national sovereignty.

FTAs like TTIP are prompting widespread concern among civil society groups across the EU. For instance, Cecilia Malstrom is currently the EU’s Trade Commissioner and in charge of trade and investment policy for all 28 EU member states, including – for the moment – the UK. In a recent interview, she made it clear that the huge public opposition to treaties such as TTIP (such as the 250,000 strong demonstration in Berlin in October 2015, or the petition signed by over 3 million European citizens against the treaty) is irrelevant: despite officially in post to follow the wishes of the elected governments of Europe, she said that she does not take her mandate from the European people http://www.independent.co.uk/voices/i-didn-t-think-ttip-could-get-any-scarier-but-then-i-spoke-to-the-eu-official-in-charge-of-it-a6690591.html. Instead, research has shown that her agenda is strongly influenced by lobbying on behalf of corporations http://corporateeurope.org/sites/default/files/attachments/public-services-under-attack.pdf.

An alternative trade mandate

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. See for example https://corporateeurope.org/sites/default/files/trade-time_for_a_new_vision-print.pdf.

 FTAs and public services

There is a fundamental tension between public services and 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.

Generally speaking, 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 http://www.world-psi.org/sites/default/files/documents/research/en_tisaresearchpaper_final_web.pdf.

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

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

updated November 2016

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