Thursday, June 20, 2013

TTIP of the Iceberg

For the last couple decades European and American governments have been flirting with the idea of a trade agreement known as the Transatlantic Trade and Investment Partnership (TTIP). Several times over this period some ambitious politician has attempted to initiate negotiations and bring the decades of courtship to an end. Most recently this politician has been Barack Obama, and it seems he has the interest of the European leadership as well.

If you haven't heard of TTIP before you're probably curious why it's worth talking about. After all, trade between the Americas and Europe is already relatively easy. There are two factors, one positive and one negative, which merit giving TTIP your attention.

Firstly, there are some significant potential economic gains to be had. One of the primary goals of TTIP is to harmonize regulations between North America and Europe. Currently there is a great deal of regulatory effort duplicated on both sides of the Atlantic.  If I wished to produce fine Serrano hams for consumption in the United States and the European Union I would have to comply with the regulations of both governments. Given that either set of regulations likely produces a safe ham, why impose extraneous regulations upon the producer and require two sets of enforcement agencies?

Having to investigate and comply with multiple sets of regulations also increases the difficulty of market entry for smaller firms. If I'm a small ham producer in the United States I'm likely already complying with US guidelines. However, if I wish to expand my market into the EU I must revise my production methods to comply with their regulations as well. For many small businesses the costs of compliance will be prohibitive.  TTIP would possibly allow these smaller firms to be able to sell their products more freely on either side of the Atlantic.

There are dozens, if not hundreds of products with similar stories. Food, drugs, transportation, and even entertainment all have differing regulations which require businesses to expend effort and funds in order to reach dual compliance. Reportedly, one of TTIP's main goals is to reduce the burdens of such redundancy on producers.

I do not use the word "Reportedly" in the previous paragraph without forethought. The largest concern with TTIP at this point is a total lack of transparency.  There is, at least at this point, no known plans to make TTIP negotiations public. Likely, this very important trade agreement will be discussed behind closed doors and without much input from populations on either side of the Atlantic.  Those privileged few who will be asked for their opinions will likely be industry insiders and lobbyists, individuals with a vested interest in putting their industries wishes ahead of the public good.  For this reason TTIP may very well turn into a feeding frenzy for special interest groups.

Imagine for a moment that as a lobbyist for a sea salt manufacturer you managed to have a provision added to the agreement that cured hams must be preserved with natural sea salt.  Even if such a provision does not directly pay into your firms coffers it's clear that in this case a rising tide would lift all sea salt producer's boats. Not only that, such a provision would be of far more benefit to coastal nations than to landlocked countries.  The potential for similar self serving regulation abounds in such an expansive trade agreement that is not subject to public scrutiny.

This is not the first attempt at a TTIP like trade agreement. Nor is the adoption of TTIP by any means a foregone conclusion at this point.  However, if the negotiations are conducted fairly and with a degree of transparency there is the potential for large economic gains.  Hopefully politicians on both sides of the Atlantic exercise a degree of wisdom and prudence as they move forward with discussion.

Until next week, stay safe and rationale.

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