EU politicians may soon realise they should get rid of TTIP, the EU-US trade agreement under negotiation. I will explain why they may reach this conclusion and how to use ISDS as a deal breaker.
TTIP has two main objectives: creating jobs and growth, and setting global rules.
Jobs and growthVarious studies show that TTIP will create jobs and growth. All these studies use the Computable General Equilibrium (CGE) model, which assumes that the market will solve unemployment problems through lower wages. However markets are less flexible than assumed in the CGE model, and the model does not include that lower wages lead to less demand. (The EU commission is silent about the lower wages.)
Jeronim Capaldo assessed the effects of TTIP using the more realistic United Nations Global Policy Model. The
study projects that for the EU TTIP will lead to less net exports, a contraction of GDP and personal incomes, and 600.000 lost jobs. This would seriously harm the EU.
RealismIf Capaldo's study stands scrutiny the EU has a
problem. In Brussels, not losing face often seems the most important
aspect of politics. With all the political capital invested in TTIP, it
will be hard for politicians to change course. And special interests may
lobby for TTIP regardless. The public and the press will have to
monitor the process, and press for realism.
ISDS as a deal breakerAs I have explained earlier, investor-to-state dispute settlement (ISDS) is rigged to the advantage of the US (
blog,
html).
The US position is vulnerable as they want to roll out a rigged system.
It is fair for EU politicians to say: we do not want a rigged
adjudicative system imposed upon us. ISDS is a deal breaker.
In the long term, this is beneficial for the US as well. The president of the World Bank plays an
important role in ISDS; the bank
will not for ever be headed by the American candidate.
To
use ISDS more convincingly as a deal breaker, the trade agreements with
Canada and Singapore should not contain ISDS. To keep their options
open, the commission is well advised to acknowledge in the presentation
of the
ISDS consultation results that ISDS has shortcomings.
The strategic goalHow
about the strategic objective, setting global rules? A trade agreement
isn't needed for this. Actually, a trade agreement isn't the right
instrument.
A brighter futureIf Capaldo's study
stands scrutiny the EU will have to change course. No one can expect the
EU to accept less net exports, less GDP, and minus 600.000 jobs. And
neither Europe in decline nor a rigged ISDS system that can turn against
them, serves the US. With ISDS out and better forums for setting rules, Europe can put its feet back on the ground, and let TTIP go.