TTIP Update XXIX

In my last update, I introduced the secretive Trade In Services Agreement (TISA), currently being negotiated in parallel with both TTIP and sibling the Trans-Pacific Partnership agreement.  With rather nice timing, WikiLeaks has just released one of the key chapters from TISA, concerning financial services.  Since the text itself is pretty dry, WikiLeaks has asked one of the world's top experts on these trade agreements, Professor Jane Kelsey of the Faculty of Law, University of Auckland, New Zealand, to provide a detailed guide to what it all means.  I strongly recommend reading her analysis, since it really explains what all those innocuous-sounding phrases really mean.  Here is her summary of what the new leak tells us:

The secrecy of negotiating documents exceeds even the Trans-Pacific Partnership Agreement (TPPA) and runs counter to moves in the WTO towards greater openness.

The TISA is being promoted by the same governments that installed the failed model of financial (de)regulation in the WTO and which has been blamed for helping to fuel the Global Financial Crisis (GFC).

The same states shut down moves by other WTO Members to critically debate these rules following the GFC with a view to reform.

They want to expand and deepen the existing regime through TISA, bypassing the stalled Doha round at the WTO and creating a new template for future free trade agreements and ultimately for the WTO.

TISA is designed for and in close consultation with the global finance industry, whose greed and recklessness has been blamed for successive crises and who continue to capture rulemaking in global institutions.

A sample of provisions from this leaked text show that governments signing on to TISA will: be expected to lock in and extend their current levels of financial deregulation and liberalisation; lose the right to require data to be held onshore; face pressure to authorise potentially toxic insurance products; and risk a legal challenge if they adopt measures to prevent or respond to another crisis.

Although financial services are not currently part of TTIP, largely because the US government is unwilling to water down its standards, expect something very similar to the leaked TISA chapter to turn up in TTIP once the haggling begins.

Although not exactly a leak, because obtained through the US Freedom of Information Act, the publication of a letter from the US Chief Negotiator Dan Mullaney to EU Chief Negotiator Ignacio Garcia-Bercero is rather ironic, since it contains details of the efforts that the US will be making to keep TTIP as secret as possible.  It's in reply to a letter from the EU to the US outlining the measures in place there - although unfortunately we don't have this. 

The letter is easily summarised: the only people who will be granted access to TTIP documents are US government officials and "persons outside the US government who participate in its internal consultation process and who have a need to review or be advised of the information in these documents" - industry lobbyists, in other words.  No surprise there, given the US government's refusal to allow any relaxation of secrecy by the European Commission.  But the following section is something we didn't know before:

The United States will hold the TTIP documents in confidence for five years after entry into force of the TTIP Agreement, or if no agreement enters into force, for five years after the last round of negotiations.

So not only is the US doing everything in its power to stop the public seeing the negotiating documents while TTIP is being discussed, but it aims to keep them under lock and key for another five years after TTIP is agreed - or fails.  That really shows an extraordinary contempt for the US people who are not even allowed to see what their officials are doing for many years after its too late to do anything about it anyway.

Finally, a quick note about what the pro-TTIP camp have been up to recently.  Things aren't going to well for them, of course: resistance throughout Europe is growing by the day, as more people - and media - wake up to the deep problems of TTIP, not least ISDS.  Because of this pushback, momentum has been lost, and the negotiations aren't moving forward as fast as had been expected at the beginning.  In an attempt to get things going again, the Business Europe organisation has put together a Q&A page on TTIP.  Sadly, it contains the same old misleading claims, like this one:

For the EU, independent studies point out to an additional GDP growth of 0.5%, translating into EUR 120 billions annually. This compares to a GDP growth of 0.1% in the EU-28 and of 0.4% in the Eurozone in 2013.

Except, of course, as readers of this blog will know, that is comparing two completely different kinds of growth: the predicted cumulative extra GDP growth after *ten years* of TTIP (0.5%), with the *annual* growth in the EU-28 (0.1%).  A more honest way of putting that would be that the most optimistic forecast from the European Commission's research is that at best TTIP would add on average just 0.05% extra GDP growth per year.  The fact that Business Europe has to resort to this kind of obfuscation shows how weak the case for TTIP really is.

More interesting is a recent speech from Anthony L. Gardner, the US Ambassador to the European Union.  Here's the problem he's noticed:

Despite the benefits that would flow from a deal, the media coverage – especially in social media in certain EU member states – has started to turn negative.

Well, maybe the real problem is that there are *no* overall economic benefits, as the European Commission's own econometric models definitively prove.  But choosing to ignore that rather important fact, here's what Gardner says needs to be done:

I think our strategy has to change: I intend to take the debate to the critics, rather than accept speaking engagements only from the usual business federations where we preach to the converted. I intend to meet with representatives of civil society that have an open mind – including from labor, environmental and consumer groups; and I intend to focus in particular on rallying small and medium sized businesses because they struggle to spend the resources to deal with the bureaucratic red tape that we hope to reduce.

And here's how he intends to do that:

I believe this public diplomacy has to be centered on stories, not statistics: simple language that ordinary people can understand.

That's a wonderful admission that the facts about TTIP simply don't stand up to scrutiny, as I've shown in multiple previous updates.  Instead, what Gardner will offer is "stories", and "simple language that ordinary people can understand".  Isn't that consideration for the public's sadly-limited ability to understand complicated things like numbers just touching?  Thank you Mr Ambassador, you're a gent....

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TTIP Update XXVIII

The big news this week is an important leak detailing what the European Commission will offer the US in the fields of services and investments.  It's super fresh: the document is currently being circulated to the governments of the EU's Member States, and comments remain open until 30 June, so we are gaining important insights into real-time discussions that have hitherto been completely hidden from us. 

That makes this leak doubly important: not just for its content, but for the fact that it took place at all.  It shows that despite the European Commission's attempt to keep key negotiating documents out of the public debate, the Brave New World of leaking whistleblowers means that we will get to see some of them anyway.  The only difference is that the Commission looks arrogant and high-handed by refusing to release them officially.

The leak takes the form of three PDF files [.< ahref="https://data.awp.is/filtrala/2014/06/13/4.html">pdf

] - unfortunately they are scans, not searchable documents.  They were leaked to the European Federation of Public Service Unions, which apparently represents some 265 unions and 8 million public service workers.  Here's what it has to say about the content:

There is no general exclusion of public services and waste water services are committed for market opening. "Such an EU liberalisation agenda should be publicly debated at national and EU level, including the guarantees and rights that would accompany this agenda. Any discussion on water and sanitation services should include the realisation of the UN human right for water and sanitation in legislation, as demanded by the first successful European Citizens’ Initiative Right2Water and in which 1.9 million Europeans said no to inclusion of water and sanitation services in trade agreements. It is not clear if the national parliaments have agreed. The EP has not agreed the offers which apparently are also discussed with Canada and with other OECD countries (TISA)".

As that points out, services like water and sanitation are not excluded, and that's deeply problematic given the growing recognition that it makes no sense to privatise these natural monopolies.  That's because such critical monopolies allow companies to charge pretty much any price they like, since (a) we can't do without their services (b) we can't go simply turn to some rival provider.  That's led to a number of moves to put water services back into public hands, running them as the commons they obviously are.  The refusal of TAFTA/TTIP to recognise this issue is another reason why it is a poor fit for the realities of 21st-century European life.

The other important point to note from the comment quoted above is the mention of a mysterious TISA.  To my shame, I only heard about this about a month ago, and yet it has been around for a year.  The reason for the discrepancy is that TISA - which stands for "Trade in Services Agreement" - is yet another set of secret negotiations that are being conducted in our name, but about which we are not allowed to know anything important.

It turns out that TISA forms a kind of unholy trinity together with TTIP and the Trans-Pacific Partnership agreement (TPP).  Between the three of them, they aim to define the terms for world trade for the coming years: TTIP covers transatlantic trade and investment, TPP the transpacific trade, and TISA global trade in services.  TISA involves pretty much all the countries of TPP plus the European Union.  What TTIP, TPP and TISA have in common is the US, which seeks to use these three treaties to cement its position as they key player in trade and services.  The idea is obviously to set the terms for those before China takes over as the world's biggest economy.

If you're interested in finding out more about TISA - and you definitely should be - I've put together what little we know about in a post over on Techdirt.  The newly-leaked documents are important not least for the following statement:

As far as services are concerned, the attached draft offer mirrors the offer submitted by the EU in TiSA negotiations in November 2013 both in terms of format and substance

That confirms the extremely close relationship between TTIP and TISA, to the extent that TISA is pretty much being mirrored in TTIP.  Although we don't know much about TISA, and the levels of secrecy surrounding it are even greater than for TTIP, I expect that to change as more people wake up to what is going on, and whistleblowers start coming forward here too.

I'd like to finish this update with a couple of separate developments, which though small in themselves, give a sense of the growing problems for TTIP.  First, in France, where the French bank BNP is accused by the US authorities of breaking sanctions against Iran, Sudan and Cuba, and therefore liable to a huge fine - £6 billion is being mentioned.  Here's the TTIP angle:

Michel Barnier, the EU's internal markets commissioner, said any penalty on the giant French bank must be "fair and objective".

There are reports that the US may hit BNP with a fine of $10bn (£6bn) for allegedly violating sanctions rules.

France has expressed alarm at the fine, warning that it could hurt trade talks.

That makes sense, because the benefit that France will obtain each year from TTIP is likely to be far smaller than £6 billion, even under the most optimistic forecasts.  That means that fighting this fine is a far better use of its politicians' time than bothering with a trade agreement that may or may not bring any long-term benefits.

The other TTIP story comes from Germany, where the US Embassy in Berlin tweeted about a revealing little project it is running.  The original tweet is in German, and roughly translated reads thus:

Are you for #TTIP and annoyed over the negative coverage? Send us your idea and we will support you.

Here's the kind of idea and support the US Embassy has in mind:

The U.S. Mission to Germany Public Affairs Section (PAS) is soliciting proposals from not-for-profit, non-governmental organizations, think tanks, and academic institutions that focus on the Transatlantic Trade and Investment Partnership (T-TIP).  The goal is to keep our publics informed about the negotiations and offer meaningful opportunities to shape the respective negotiating objectives.

What are the facts behind T-TIP, and how will it impact you? What are some of the concerns in the European Union and the United States?  What are some of the benefits? What impact will T-TIP have everyday life?  Facts and figures are needed, and we look forward to working with partner institutions to develop a final product which informs about the agreement and which combats misinformation.

The activities funded with a Federal Assistance Award (Grant) ranging from $5000 to $20,000

Given its tweet calling for those "annoyed over the negative coverage" to get in touch, and the requirement that the "final product...combats misinformation," I don't somehow think the US Embassy will be funding anyone with serious doubts about TTIP.  In other words, this is a desperate attempt to buy some "independent" support for a treaty that nobody is willing to support because they genuinely believe in it.

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TTIP Update XXVII

It is nearly a year since the TTIP negotiations were launched, and yet things still feel strangely preliminary.  Partly that's because everything is taking place behind closed doors, so the public is not actually kept fully up to date with what is going on.  Partly, too, that's because things have gone rather more slowly than people probably expected when the talks were started.  Indeed, some institutions are still coming to grips with the whole business - like the House of Lords, one of whose sub-committees has just published a major report on TTIP. 

It's decent enough as a background document, although I don't think that anyone who has been reading these updates will learn much that is new.  Instead, they will recognise many of what have already become rather tired TTIP tropes:

The Transatlantic Trade and Investment Partnership (TTIP) is the most ambitious trade and investment pact ever attempted, due both to its scale—the European Union and the United States together account for nearly half of world GDP—and because in tackling non-tariff barriers to trade, a deal could set the template for a new generation of 21st century trade and investment agreements.

The report also quotes the by-now standard figures:

In their written evidence, the UK Government pointed to the CEPR studies commissioned by the Department for Business, Innovation and Skills (BIS) and the European Commission to suggest that an ambitious, comprehensive TTIP deal could over the long-term be worth up to £10bn (or 0.35 per cent of GDP) annually to the UK, up to £100bn (or 0.5 per cent of GDP) annually to the EU, and up to £80bn (or 0.4 per cent of GDP) annually to the US.[28] The GDP gains would be relative to projected GDP levels without TTIP in place.

However, to its credit, the report also notes some critical voices:

28.  The AFL-CIO [American Federation of Labor and Congress of Industrial Organizations] expressed sympathy with the views of Dean Baker, of the Center for Economic and Policy Research, who had noted that the projected GDP increases in the study produced for the European Commission would not materialise in full until 2027, and that they reflected a best-case scenario. In a less ambitious, and "presumably more realistic" scenario, the GDP gain for the US by 2027 would be "roughly equal to a normal month's growth" and thus in Mr Baker's view, "too small to notice".

29.  Professor Baldwin advised us to treat the figures with caution for a different reason, pointing out that figures were projected against a "status quo" world, and that experience—for example with predictions on the effect of the North American Free Trade Agreement (NAFTA)—had shown that the status quo world "was nothing like what actually happened, because a thousand things happened". It was consequently "very difficult" to sort out what NAFTA did, and it might in future be similarly difficult to disentangle the effects of a TTIP agreement from other factors. He nonetheless judged that the numbers "will be realistic, but over a medium run."

30.  With regard to income gains for consumers, Professor Baldwin told us that it was "basically impossible to say how much this will add to people's income" and suggested that we "take with a large grain of salt any particular numbers on the overall numbers".

In its summary, the House of Lords report contains the rather striking comment:

We observe that, insofar as a public debate on TTIP exists, EU member states are losing it. Proponents have yet to articulate the purpose or possible gains from TTIP in a compelling way, or to offer convincing responses to legitimate concerns.

All-in-all, the House of Lords report is a thorough piece of work that shows good awareness of what is going on.  Alas, the same cannot be said for a TTIP debate in the House of Commons, which took place a few months back, but which has only been published recently.  Again, the usual misleading figures are trotted out, but this time without the balancing caveats provided by the House of Lords.  However, one novelty did catch my eye - the fact that Which? was invoked twice by MPs:

Given that the European Union and the United States account for 40% of global economic output and that their bilateral economic relationship is already the world’s largest, the opportunities are clear for all to see. Between them, they contain more than 800 million consumers, and the TTIP has significant potential for them as well. It is clear from the helpful briefing sent to all Members by Which? that there will be big prizes for them if we can get this right.

And:

let us remember that trade deals do benefit consumers, which is why consumer groups such as Which? are in favour of this trade deal.

Given this invocation of Which? to sanctify TTIP, I was naturally intrigued to know why it was in favour.  I contacted Which?, and asked to see the briefing document mentioned in the first extract above.  Which? pointed me to a blog post by Peter Vicary-Smith, the organisation's Group Chief Executive, published in the UK edition of the Huffington Post.  Sadly, Mr Vicary-Smith has no compelling reasons for supporting TTIP, just the familiar old exaggerations:

It has been estimated that reaching an agreement could boost the EU economy, through growth and job creation, by £99 billion per year - that's £475 per household, hardly an amount to be sniffed at!

But of course, we should sniff at it, because it doesn't pass the smell test, as BEUC, the European consumer organisation, makes plain in a letter addressed to Karel De Gucht, the Commissoner responsible for the TTIP negotiations [.pdf]:

The possible effects of the Transatlantic Trade and Investment Partnership (TTIP) currently u nder negotiation are an important matter for public debate. It is essential that the expected cons equences of an agreement are communicated clearly and in easily understandable language to Europe’s citizens to enable and encourage this debate. People need to be well informed about the range of possible outcomes.

Our belief in the importance of clear communication of the cons equences of a TTIP seems to be shared by the European Commission. Official statements by the Commission have repeatedly stressed the need for a fact - based dialogue. In January 2014 you said yourself that the debate on TTIP should be “based on facts, not f ear or hyperbole.” Unfortunately, we have noticed that the European Commission has not communicated the r esults of its own economic assessment clearly. We would like to draw your attention to the follo wing examples of imprecise communication by the Comm ission.

It then goes on to raise four specific problems:

Exaggeration of the effects of the TTIP : Instead of communicating the full range of results that the Centre for European Policy Research (CEPR) study on the economic impacts of a possible TTIP delivered, the European Commission has almost exclusively used the e stimates for the highest scenario, without mentioning the other scenarios also included in the study.

...

Lacking information on the time scale :  In many instances, the European Commission makes no reference to the time that it would take for the full effects (of the best case sc enario) to be felt. It has even been suggested that these effects could materialise by the end of the negotiations, for example: “When negotiations are completed, this EU - US agreement would be the bigg est bilateral trade deal ever negotiated – and it could add around 0.5% to the EU's annual economic output,” rather than in 2027 as predicted by CEPR.

...

Use of unsubstantiated figures regarding the job creation potential: The study which has looked most thoroughly at e mployment effects expects only 400,000 jobs across Europe for the extremely ambitious single market scenario that goes beyond anything evaluate d in the CEPR study. Yet, you stated in a speech in October 2013 that an agreement “would likely translate into millions  of new jobs for our workers.”

...

Use of obfuscating language : In many publications the Commission has use d language that is very difficult to understand for lay persons and can easily create misunderstan dings. For example, the sentence: “Latest estimates show that a comprehensive and amb itious agreement between the EU and the US could bring overall annual gai ns of 0.5% i ncrease in GDP for the EU and a 0.4% increase in GDP for the US by 2027” is ambiguous at best. It can easily be read as if the agreement could create a yearly increase in GDP of 0.5%. This misinterpretation has indeed occurred even among gover nment off icials and renowned think tanks. A balanced presentation of the results would point out that the annual additional growth expected from TTIP amounts to roughly 0.05% between 2017 and 2027, and that no additional growth is expected after that.

Although couched in the politest terms, this is a real slap-down for the Commissioner.  It exposes quite clearly how the European Commission has been playing fast and loose with its own research - not only failing to mention that it always talks about the best-case scenario, and that the full benefits will not be until 2027, but glossing over the fact that those benefits are *extremely* small - despite what all the TTIP cheerleaders would have us believe.

The House of Lords report discussed above mentioned a comment from the economist Dean Baker.  His latest blog post on the TTIP negotiations has the provocative title: "Why Is It So Acceptable to Lie to Promote Trade Deals?"  Here's what he has to say about predictions of the European Commission-funded study:

Implying that a deal that raises GDP by 0.4 or 0.5 percent 13 years out means "job-creating opportunities for workers on both continents" is just dishonest. The increment to annual growth is on the order of 0.03 percentage points. Good luck finding that in the data.

In addition, there are reasons to believe the growth effect could go in the opposite direction. The model used by the London CEPR does not assume any negative growth impact from higher prices for drugs or other goods that might be more costly due to stronger patent and copyright protections coming out of the deal.

These will likely be a drag on growth. Economists tend to like patents and copyrights (probably because their friends and family members benefit from them), but that doesn't change the fact that they lead to market distortions and have major economic costs. If the price of a drug rises by 1000 percent because we imposed stronger or longer patent protection it has the same effect in the market as if we imposed a 1000 percent tariff on the drug.

In fact, the situation is even worse than that analysis implies.  All these claims are based on just two pieces of research, both carried out for the European Commission.  At the heart of them lies an econometric modelling technique called Computable General Equilibrium (CGE).  An important paper from a pair of economists has this to say about the approach in general, and its application here in particular [.pdf]:

Our central argument in this paper, drawing on the insights from the economic sociologist Jens Beckert, is that these CGE models – and the figures they have produced – represent an important exercising in the ‘manageme nt of fictional expectations’. Beckert’s notion of ‘fictional expectations’ implies that although these models are shrouded in uncertainty, as the social world is too contingent to be modeled in terms of the assumptions of neoclassical economics, they are presented as reliable predictions of future outcomes. In this vein, we show how the models make overly optimistic predictions about the ability of the EU and US to eliminate regulatory barriers to trade – which are unlikely to be realized in the face of co nsiderable political opposition. Rather than act as a reliable guide to future outcomes, we show that these models serve the pro - liberalisation agenda of the European Commission and other advocates of the TTIP. These actors are engaged in an exercise of ‘m anaging’ these fictional expectations by presenting them as incontrovertible evidence in favour of the agreement. Moreover, by glossing over the differences in impact that different forms of liberalization will have – a mutual recognition of standards is m ore likely to lead to a potential ‘downgrading’ of standards across the Atlantic than regulatory harmonization – and focusing simply on the gains of ill - defined regulatory ‘liberalisation’, the economic studies have been used to privilege the interests of t hose calling for market access gains over those concerned with a stricter regulation of the market .

In other words, not only does the European Commission use the figures from this research in a highly misleading way, as BEUC's letter spells out in detail, but those figures are not so much an objective prediction of what *will* happen, but a re-statement of what the European Commission would *like* to happen, re-fashioned as an economic model.  This means that there is simply no basis for the repeated assertions by supporters on both sides of the Atlantic that TAFTA/TTIP represents a "once-in-a-generation prize".  One year in to the negotiations, we still have no evidence whatsoever that TTIP will produce any real benefits for either the EU or US.

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