TTIP Update XLV
The TTIP negotiations are in trouble. After 18 months of talks, the EU and US have precious little to show. And external factors such as the imminent Presidential race in the US means that time is running out to get the deal signed and sealed. Against that background, there is signs of a (rather feeble) attempt to put “rocket boosters” under the negotiations, as David Cameron likes to phrase it - although he forgets that rocket boosters can also explode on take-off, destroying their cargo completely.
For example, earlier this week the UK government published a Web page entitled "Transatlantic Trade and Investment Partnership (TTIP): benefits and concerns". Rather surprisingly, it consists entirely of re-heated numbers that I've debunked in earlier TTIP Updates. Is that really the best they can do? Curiously, TTIP proponents are calling for a political debate based on "facts" and "hard evidence". I say: bring it on, because the facts are actually pretty damning for most of the hyperbolic claims made by the European Commission as pro-TTIP governments like the UK's.
Always in search of facts about transatlantic trade, I was delighted to come across a publication [.pdf] from the American Chamber of Commerce to the European Union among others, detailing the transatlantic economy 2013. These are figures from a strongly pro-trade group, and surely represent precisely the kind of "facts" and "hard evidence" that supporters of TTIP are calling for. So let's take a look at some of the key areas.
US-EU merchandise trade totaled an estimated $650 billion in 2012, up 68% from $387 billion in 2000.
In other words, transatlantic trade is already huge, and growing. So the idea that we desperately need TTIP to make that happen seems curious to say the least. What about US investments in Europe? Some figures from the report:
The US and Europe are each other’s primary source and destination for foreign direct investment.
Europe has attracted 56% of US global foreign direct investment (FDI) since 2000.
On a historic cost basis, the US investment position in Europe was 14 times larger than the BRICs and nearly 4 times larger than in all of Asia at the end of 2011.
Here's European investment in the US:
European investment in the US, on historic cost basis, was $1.8 trillion in 2011, 71% of total FDI in the US.
even in bad year 2011 Europe’s investment flows to the US were 7 times larger than to China.
In 2011 total assets of European affiliates in the US were an estimated $8.6 trillion. UK firms held $2.2 trillion; German firms $1.5 trillion; Swiss and French $1.3 trillion each; and Dutch firms $959 billion.
So, the "facts" and "hard evidence" suggest that transatlantic trade is booming; in particular, transatlantic investment is at dizzyingly-high levels - and all of that has taken place in the absence of ISDS. The argument that TTIP "must have" ISDS in order to keep the investment flowing is not just wrong, but an insult to our intelligence.
Another area where I would like to see some facts and hard evidence involves claims about the alleged boost that TTIP will give to the EU and US economies. I've debunked the 119bn euros figures regularly trotted out by the European Commission - but without explaining that this is a best-case result in 2027 - on a number of occasions. I've also noted that there is criticism of the basic modelling technique used in the CEPR study paid for by the European Commission, something known as "Computable General Equilibrium" (CGE). But I have recently come across a fascinating document from the European Court of Auditors, which describes itself as "Guardians of the EU's finances". Here are a couple of things that august body has to say about the use of CGE models [.pdf]:
Both the Commission and the external consultants have also highlighted the inherent limitations of the CGE model:
(a) the CGE model can only be used for simulation purposes and not for forecasting and its simulation of long‑run effects is tenuous ;
(b) its somewhat tautological construction, i.e. all results are implicitly linked to the assumptions and calibra tion made
In other words, not only is it impossible to make forecasts with CGE models - let alone ones out to 2027 as the CEPR model does for TTIP - but the results are more or less built in to the assumptions of the model anyway. That 119bn euros GDP boost cited endlessly by the European Commission is looking shakier than ever. But there's actually an even more profound problem with the quantification of the claimed benefits of TTIP. These are explored in a brilliant blog post by Martin Whitlock, whose analysis of TTIP I have cited before.
The post is entitled 'The E.U. needs to learn the true meaning of "wealth" ', and Whitlock begins by referring to recent moves by the new European Commission:
Reports emerging from the European Commission last Thursday suggest that two key environmental proposals may be dropped from its programme. The object is to reduce the number of regulations with which businesses must comply.
If true, the associated losses could be considerable. The Clean Air package could deliver “monetised air quality benefits” of up to €151 billion per year by 2025, according to the E.U.s impact assessment. The Circular Economy package, which is focused on recycling, offers net savings to businesses of a staggering €604 billion through “resource efficiency”. To put that in context, the controversial Transatlantic Trade and Investment Partnership (TTIP) promises a boost to E.U. GDP of €120 billion by 2027 in the best case scenario.
Why would the Commission want to drop widely-supported proposals for clean air and recycling worth a potential €755 billion between them, while pursuing a controversial trade deal worth €120 billion at best? The answer lies in the provenance of those numbers, all of which are measuring different things.
His post then goes on to analyse this situation, and shows how much of the problem is that the debate around TTIP tends to focus selectively on a few misleading numbers - like 119bn euros. Doing so ignores the broader context - and the availability of other, rather different, solutions:
A clean environment ... provides direct social benefits for everybody. The additional costs incurred by business will be repaid in spades by improvements in quality of life and human wellbeing. In this scenario, corporate profits may grow less quickly, but the totality of human wealth has greater potential for sustained increase in the longer term.
Whitlock concludes:
If the E.U. is keen to assert leadership on these issues, it could do worse than reflect upon what “wealth” really means for its 500 million citizens. Higher corporate profits extracted from an increasingly “flexible” labour market is probably not the answer to this question. Among possible alternatives: clean air to breathe; an affordable place to live; a fair share in the wealth that society produces and the time to enjoy it. All things that GDP can’t measure and which form no part of what "economic growth" currently means.
That's a truly profound reflection that the European Commission should really take to its heart - but won't.
Full list of previous TTIP Updates.
Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+
For example, earlier this week the UK government published a Web page entitled "Transatlantic Trade and Investment Partnership (TTIP): benefits and concerns". Rather surprisingly, it consists entirely of re-heated numbers that I've debunked in earlier TTIP Updates. Is that really the best they can do? Curiously, TTIP proponents are calling for a political debate based on "facts" and "hard evidence". I say: bring it on, because the facts are actually pretty damning for most of the hyperbolic claims made by the European Commission as pro-TTIP governments like the UK's.
Always in search of facts about transatlantic trade, I was delighted to come across a publication [.pdf] from the American Chamber of Commerce to the European Union among others, detailing the transatlantic economy 2013. These are figures from a strongly pro-trade group, and surely represent precisely the kind of "facts" and "hard evidence" that supporters of TTIP are calling for. So let's take a look at some of the key areas.
US-EU merchandise trade totaled an estimated $650 billion in 2012, up 68% from $387 billion in 2000.
In other words, transatlantic trade is already huge, and growing. So the idea that we desperately need TTIP to make that happen seems curious to say the least. What about US investments in Europe? Some figures from the report:
The US and Europe are each other’s primary source and destination for foreign direct investment.
Europe has attracted 56% of US global foreign direct investment (FDI) since 2000.
On a historic cost basis, the US investment position in Europe was 14 times larger than the BRICs and nearly 4 times larger than in all of Asia at the end of 2011.
Here's European investment in the US:
European investment in the US, on historic cost basis, was $1.8 trillion in 2011, 71% of total FDI in the US.
even in bad year 2011 Europe’s investment flows to the US were 7 times larger than to China.
In 2011 total assets of European affiliates in the US were an estimated $8.6 trillion. UK firms held $2.2 trillion; German firms $1.5 trillion; Swiss and French $1.3 trillion each; and Dutch firms $959 billion.
So, the "facts" and "hard evidence" suggest that transatlantic trade is booming; in particular, transatlantic investment is at dizzyingly-high levels - and all of that has taken place in the absence of ISDS. The argument that TTIP "must have" ISDS in order to keep the investment flowing is not just wrong, but an insult to our intelligence.
Another area where I would like to see some facts and hard evidence involves claims about the alleged boost that TTIP will give to the EU and US economies. I've debunked the 119bn euros figures regularly trotted out by the European Commission - but without explaining that this is a best-case result in 2027 - on a number of occasions. I've also noted that there is criticism of the basic modelling technique used in the CEPR study paid for by the European Commission, something known as "Computable General Equilibrium" (CGE). But I have recently come across a fascinating document from the European Court of Auditors, which describes itself as "Guardians of the EU's finances". Here are a couple of things that august body has to say about the use of CGE models [.pdf]:
Both the Commission and the external consultants have also highlighted the inherent limitations of the CGE model:
(a) the CGE model can only be used for simulation purposes and not for forecasting and its simulation of long‑run effects is tenuous ;
(b) its somewhat tautological construction, i.e. all results are implicitly linked to the assumptions and calibra tion made
In other words, not only is it impossible to make forecasts with CGE models - let alone ones out to 2027 as the CEPR model does for TTIP - but the results are more or less built in to the assumptions of the model anyway. That 119bn euros GDP boost cited endlessly by the European Commission is looking shakier than ever. But there's actually an even more profound problem with the quantification of the claimed benefits of TTIP. These are explored in a brilliant blog post by Martin Whitlock, whose analysis of TTIP I have cited before.
The post is entitled 'The E.U. needs to learn the true meaning of "wealth" ', and Whitlock begins by referring to recent moves by the new European Commission:
Reports emerging from the European Commission last Thursday suggest that two key environmental proposals may be dropped from its programme. The object is to reduce the number of regulations with which businesses must comply.
If true, the associated losses could be considerable. The Clean Air package could deliver “monetised air quality benefits” of up to €151 billion per year by 2025, according to the E.U.s impact assessment. The Circular Economy package, which is focused on recycling, offers net savings to businesses of a staggering €604 billion through “resource efficiency”. To put that in context, the controversial Transatlantic Trade and Investment Partnership (TTIP) promises a boost to E.U. GDP of €120 billion by 2027 in the best case scenario.
Why would the Commission want to drop widely-supported proposals for clean air and recycling worth a potential €755 billion between them, while pursuing a controversial trade deal worth €120 billion at best? The answer lies in the provenance of those numbers, all of which are measuring different things.
His post then goes on to analyse this situation, and shows how much of the problem is that the debate around TTIP tends to focus selectively on a few misleading numbers - like 119bn euros. Doing so ignores the broader context - and the availability of other, rather different, solutions:
A clean environment ... provides direct social benefits for everybody. The additional costs incurred by business will be repaid in spades by improvements in quality of life and human wellbeing. In this scenario, corporate profits may grow less quickly, but the totality of human wealth has greater potential for sustained increase in the longer term.
Whitlock concludes:
If the E.U. is keen to assert leadership on these issues, it could do worse than reflect upon what “wealth” really means for its 500 million citizens. Higher corporate profits extracted from an increasingly “flexible” labour market is probably not the answer to this question. Among possible alternatives: clean air to breathe; an affordable place to live; a fair share in the wealth that society produces and the time to enjoy it. All things that GDP can’t measure and which form no part of what "economic growth" currently means.
That's a truly profound reflection that the European Commission should really take to its heart - but won't.
Full list of previous TTIP Updates.
Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+
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