The Transatlantic Trade and Investment Partnership

A Historical and Global context

The international system fundamentally changed with the collapse of the Soviet Union in the early

1990s. From a bipolar system, we had transited to what seemed to be a unipolar system with one

hegemonic nation: the United States of America. But this status wouldn’t last very long. New contenders

would emerge. Former chief executive of Intel, Andy Grove, has spoken of a titanic economic war for

global supremacy1, one whereby China is projected to ‘overtake’ the US by 2020, a view that has gained

majority in North America2. These new contenders are reaching capabilities that may soon rival the

hegemon.

Hoping for the best but preparing for the worst leaves us with a lot of imagination. Could the increasing

economic development of foreign states emerge as economic threats for our future? Indeed, what may

prevent them from obtaining control of the raw materials of the planet and dictate the norms and

standards of trade, in their favor, against our own? This idea may seem unrealistic or even too

pessimistic under the auspice of the US Navy, NATO, the UN, the WTO and other international

mechanisms, but the world is constantly changing. The US critical infrastructure is crumbling; military

campaigns in the Middle East have bled the giant dry and the political system is increasingly paralyzed

by polarization. The US has lost on many fronts and its loyal allies in Europe are in a dire existential crisis.

Adding to these challenges is the economic crisis of 2007 whereby the economies of the West and the

world have slowed down. As other nations grow in economic, political, energy and military power, the

1 Time to Start Thinking: America in the Age of Descent, Edward Luce, published by Atlantic Monthly Press in 2012,page 53, 2 Perception or reality, the PewResearch has released a poll on the image of the US in the world. 2013. Link: http://www.pewglobal.org/2013/07/18/chapter-4-global-balance-of-power/

global system is entering an age of multipolarity. And no emerging actor seems willing, nor capable, to

lead.

Understanding the balance of power in the 21st century requires an examination of trade. Trade patterns

must be diagnosed for a rational explanation of the international system.

Inheritor of the GATT, which saw its debut in 1948, the main body that is meant to shape the

international trade system is the World Trade Organization. Its purpose has been to open global markets

multilaterally by lowering tariffs and trade barriers and settling trade disputes between states. it has

been argued that this institution has reached stagnation as of late3. Since 2007 and even before then,

the Doha Round of global negotiations for more trade liberalization has stalled. U.S refusal to reduce

agricultural subsidies is considered the main culprit4 but one must understand the larger picture. From

1958 to 1999, the GATT/WTO was notified of 75 Regional/Preferential Trade Agreements. From 2000 to

2011 the organization was notified of an additional 156 RTAs. This means that in the past decade more

than double the amount of RTAs have been created than in the past half century since the organization’s

creation. 5 Regional/Preferential Trading Arrangements within the WTO may seem as a contradiction in

an institution meant to promote non-discriminatory members to lower their trade barriers with all. But

RTAs were originally meant as mere devices for bargaining leverage within the multilateral regime, make

the multilateral process smoother.

In this paper I will display why these arrangements, under the guise of regional trade blocs have taken

the principal role of trade over the WTO’s multilateralism. Of these arrangements, the Transatlantic

3 Globalization in Retreat by Walden Bello, Trading Blocs and Multilateralism in the World Economy by Wieslaw Michalak and Richard Gibb, or better yet Deadlock in the WTO: What is next? By Beginda Pakpahan, Is Multilateralism in Crisis? By Pradeep S Mehta, Emerging protectionism – Multilateralism as a remedy? Pierre Groning, Multilateralism: Time to rethink and react differently Siddharth Chatterjeeall agree to the diagnosis that the Doha round’s decade old stagnation is a sign of multilateral liberalism illness4 Globalization in Retreat, Walden Bello, Joseph S. Murphy institute, City University of New York, 2007 page 111 5 Deadlock in the WTO: What is next? By Beginda Pakpahan. 2012 link: http://www.wto.org/english/forums_e/public_forum12_e/art_pf12_e/art19.htm

Trade and Investment Partnership may become the largest and most important in history and speculate

on the motives for this particular agreement.

There exist two predominant schools of thought for explaining international relations. I shall disclose

their assumptions and the theories they have developed for comprehending trade.

According to liberalism the reasons for state behavior regarding trade vary under pressures and state

objectives. Liberalism assumes that states are indeed pressured by certain lobby groups to negotiate or

not certain agreements. Liberalism also assumes that the governance model of a state will affect its

behavior. A democracy does not behave as an autocracy or a military regime. Individuals such as

presidents or particular bureaucrats may also bring about changes in state behavior. Pressures are not

just domestic but foreign as well: international organizations such as the UN or the International

Criminal Court can influence a state’s decision as well. Hence states may be lead to sign agreements that

are not evidently economical or security focused, such as the Kyoto protocol which is an environmental

engagement, or better yet, the Universal Declaration of Human Rights of the United Nations which is

meant to uphold standards for the treatment of citizens.

Liberalism has states seeking absolute gains. This assumption portrays states as “rational egoists”

meaning they seek to further their self-interests through cooperating with other states. If a state

determines environmental protection as a goal, they will seek to establish cross jurisdictional norms

with other actors. If an environmentally clean planet is deemed an absolute gain by multiple state

actors, they will tend to create international organizations that further this goal, seek advice from NGOs.

Together, states will come to create international mechanisms to shape behaviors.

The liberal theory of economic interdependence is a powerful one. This theory prescribes trade as a

means not only to enhance wealth but to also lower the likelihood of war. Interdependent states would

value trade too highly to jeopardize it through conflict, thus trading would secure peace. Classical

Economist David Ricardo spoke of comparative advantage as the way to increase overall wealth. This

theory displays that two or more states that enter trade, specializing in their respectively most

productive sectors can share a larger total then they would have had had they developed their

economies independently. An underlying assumption of this theory is the low cost of transportation. The

closer two countries are economically, the more auto destructive war would seem, hence integration

ought to lead to peace. The Schuman Declaration of May 1950 for instance, was meant to prevent

another European war by creating “the European Coal and Steel Community” with the intent to make

war “not merely unthinkable, but materially impossible” as Robert Schuman said so himself.6

Realists disagree with liberals. They argue that the sole chief concern of states is their security. They are

suspicious of international initiatives and concerned about relative gains in the international system:

how much do other states gain compared to one another. In the absence of any higher authority

(anarchy) than the state, state actors seek to preserve their existence through the military. Any

international agreement that concedes more relative power to another state is to be avoided if not

halted, even at the cost of marginal gain.

The suspicion realists have of international trade is best reflected in the school of thought of

mercantilism. Mercantilism, although not as established a dogma as liberalism, interprets international

trade as a battlefield.

Realists retort this economic interdependence argument. Although trade was high among European

states at the onset of World War I, this did not prevent Europe’s dire fate. Realists see this

interdependence leading to vulnerabilities, tension, which incentivizes states to enter conflict as a

means to ensure their continued access to necessary resources for survival. 7

6 The Schuman Declaration of May 9th 1950 URL: http://europa.eu/about-eu/basic-information/symbols/europe-day/schuman-declaration/index_en.htm 7 Dale C. Copeland ‘Economic Interdependence and War: a Theory of Trade Expectations”. International Security. 1996. URL: https://www.mtholyoke.edu/acad/intrel/copeland.htm

But trade was relatively high for the previous thirty years before the war…. Thus vulnerability from trade

could not have been the sole cause of war as realists may lead us to believe, it may very well have been

just a condition. To clarify this, Copeland refers to World War II.

Prior to World War II, the multilateral trade system had collapsed and protectionism was on the rise for

much of the 1930s. The financial crisis taking place in the USA in 1929, had cast a shadow upon a

weakened international system. Suspicion and mistrust immediately took over the international system

as mutual interdependence took a turn for the worse. Germany and Japan’s (inter)dependence on trade,

namely for food and raw materials, in a time of enhanced protectionism (1930s’) by all, pushed these

states to a survivalist strategy which was to ensure access to these vital resources by any means

necessary. Hitler’s Mein Kampf mentions Germany’s “living space” meaning agricultural land, for future

population growth. It was believed that Germany couldn’t sustain population growth, possessed

insufficient raw materials for industrial strength, and because the words and actions of other states

could no longer be trusted given a previous decade of protectionism. Hitler’s nationalism would repair

lost pride and secure Germany’s future prospects. The Eastward Nazi invasion for securing the long term

strategic resources Germany would need appeared as a rational decision since it could not be obtained

through a collapsed the international trade system and bring back “retribution”.8

Dale C. Copeland solves this conundrum, by asserting that expectations from trade determine peace and

war. Liberals are correct! Trade translates to peace when states expect to gain in the future by trading.

But realists are correct as well! Trade translates to war when states expect to lose access to their vital

resources by trading.

8 Dale C. Copeland ‘Economic Interdependence and War: a Theory of Trade Expectations”. International Security. 1996. URL: https://www.mtholyoke.edu/acad/intrel/copeland.htm

States that are too dependent upon trade will resort to “survivalist” policies once the trade system is

jeopardized in order to safeguard their citizenry. 9

Given the spur trade has had since the end of the war, there must therefore be a reason for states to

expect gains from trade and therefore to engage in it. “Globalization” is a testimony of this.

The Hegemonic Stability Theory may be the reason to believe in gains from trade. Under the realist

assumption of anarchy, the hegemon is the closest actor to a higher authority that governs the behavior

of states. This state has the power to rule over other states’ behavior.

International trade is at the core of hegemonic stability theory. The ascendency of a hegemon correlates

with the liberalization of international trade and their eventual decline with the reemergence of

protectionism/regionalism within trading nations of the world. This correlation allows trade to be a solid

medium through which one may trace the hegemon‘s dominance on the international system. Putting

this theory to practice, history displays cycles: periods of liberalism and periods of protectionism that

would coincide with hegemonic leadership. Hegemonic ascendency pushes the system towards greater

liberalism and hegemonic decline reverts the world economy back to regionalism and protectionism. 10

Although this theory may not seem familiar at first, I shall put it into historical context and it will become

evident that this is what is in the hearts and minds of those who refer to the US as the “indispensable

nation”11.

9 Dale C. Copeland ‘Economic Interdependence and War: a Theory of Trade Expectations”. International Security. 1996. URL: https://www.mtholyoke.edu/acad/intrel/copeland.htm10 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 73 by Bruce E. Moon11 Madeleine Albright interview on NBC “But if we have to use force, it is because we are America; we are the indispensable nation. We stand tall and we see further than other countries into the future, and we see the danger here to all of us. I know that the American men and women in uniform are always prepared to sacrifice for freedom, democracy and the American way of life.” URL: http://fas.org/news/iraq/1998/02/19/98021907_tpo.html

In the liberal cycle, the hegemon uses its economic, political and military power to create a multilateral

system that ensures its dominance. States are reluctant to open their economies to trade without the

assurance of reciprocity. The hegemon guarantees this assurance through said powers. Through

incentives or coercion, the hegemon can bend state behavior. The hegemon may provide the

institutional mechanisms (fund and operate the costs of such institutions) to coerce free rider nations

who export to “defenseless” (low trade barrier) nations whilst maintaining their own tariffs or other

trade barriers.

The decline of the hegemon in military, economic or political domains reduces the reliability of the

multilateral trade system. Indeed, a powerful state, for x reason may decide not to respect the rules.

One simply needs to look at the long list of trade disputes that has blossomed since the dawn of GATT,

including the hegemon itself! Disputes lead to mistrust and fruitless negotiations which may very well

bring the multilateral project to an end.

Applying the theory:

1800-1900 Liberal- hegemon ascendency: British Empire

Starting with Great Britain in the second half of the 19th century, decisively with the repeal of the Corn

Laws in 1842 the British leadership rose through economic and military power. The empire sought to

create trade agreements with other nations such as the Cobden-Chevalier Treaty of 1860 with France12

or the Treaty of Balta Liman with the Ottoman Empire. The British Sterling became an accepted

international medium of exchange and London offered extensive credit13

12 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 73 by Bruce E.

Moon

13 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 73 by

Bruce E. Moon

1900- 1945 Protectionism- hegemon decline: British Empire

Early 20th century, relative decline of British hegemonic power with World War I the international trade

system resorted to regionalism and protectionism as a result of uncertainty. The world had to wait the

ascendency of a new hegemon to uphold the mantle of global liberalization. Europe’s economy was in

dire shape, the treaty of Versailles was considered too harsh by several economists.

1945- 1970s Liberal- hegemon ascendency: US leadership

Bretton Woods in New Hampshire, U.S.A, creates the General Agreement on Tariffs and Trade (later

evolves into WTO in 1994) IMF, World Bank. Under cold war premises the U.S sought to contain

communism and the most famous action for doing such in Europe was known as the Marshall plan. This

plan redeveloped Western European economies but in the process created some (inter)dependence on

the US economy (aid in terms of capital, commodities as well as investments)14, paving the way for this

hegemon to create the liberal order. European diplomats, fearing that their (inter)dependence to the US

economy would lead to yet another Great depression, insisted for the creation of an institution, The

International Trade Organization, to guarantee full employment. Their demand was never accomplished.

1970s- xxx Protectionism- Hegemonic decline: US leadership

By the 1970s, key American industries, namely steel and autos were in fierce competition with foreign

manufacturers. These industries abroad would promote protectionist policies as best they could. In

foreign countries, namely Japan and European countries but also emerging economies such as China and

India, industrial policies existed to aid their national sectors. Nowadays the debate for reinvigorating

protectionism exists in the US as well.

14 The Marshall Plan: Origins and Implementation by William F. Sanford, Jr. Bureau of Public Affairs, Dept of State. May 1982. Link: http://marshallfoundation.org/library/documents/marshall-plan-origins-implementation-bulletin-june-1982/

As this graph from the St Louis Reserve Bank archives portrays, the US had a low growth in exports in

between the two wars. This low participation is a symptom of a weakened international trade system.

Post WWII shows a strong increase in GDP growth and export growth that correlates with the

Hegemonic status of the US in a prosperous trade environment. From the Oil crisis of 1973 onward, the

US has been exporting and growing its economy at a slower rate.

The Hegemon liberalizes, but in protectionist fashion.

A key aspect to remember about hegemons is that they are states. Although they may preach the

benefits of liberalization, they are not de facto immune to protectionist tendencies. 15 To the contrary, a

hegemon may create international organizations to “harmonize” international trade with norms that

itself will not respect.

Indeed, the U.S leadership created these multilateral institutions (GATT, WTO) to liberalize world trade,

but since its inception the US has infringed the rules and has engorged mercantilist behavior.

Protectionist tendencies which are not uncommon from realist thinkers go back to the very creation of

the country. Alexander Hamilton first coined the term “infant industry”, a protectionist argument meant

to defend the nascent American industries against foreign competition. Hamilton is also responsible for

forming the “Report on Manufactures” in 1791. It is stated in this report given to the House of

Representatives that “The Secretary of the Treasury in obedience to the order of the House of

Representatives, of the 15th day of January 1790, has applied his attention, at as early a period as his

other duties would permit, to the subject of Manufactures; and particularly to the means of promoting

such as will tend to render the United States, independent on foreign nations, for military and other

15 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 72 by

Bruce E. Moon

essential supplies.” 16 Although these concerns may appear as justified for a nascent nation or

transitional economies such as China, the fact that the United States continues to apply mercantilist

policies even at the height of its power is a testimony to the resilience of this school of thought. “Indeed

it was precisely because of its power over the world economy and within its managing institutions that

the United States was able to take the initiative in justifying protection under the GATT, first in the early

1960s, when the cotton industry was in trouble, subsequently in the 1970s, when the problem had

extended to man-made fiber, and lastly in the 1980s, when other natural fibers were brought under the

regulatory framework created in GATT for such discriminatory restrictions. …There have been marginal

differences-if any at all- in the US policy process in times of undisputed primacy and in times of waning

hegemony.” 17 Furthermore… “The first voluntary export quotas of postwar trade history were

implemented by Japan in response to requests from the United States in December 1955. By January

1957, Japan had delineated a five-year plan of export restriction to satisfy U.S pressure. Although the

United States was not the sole country to feel the competition from lower-cost countries, it was the only

one that could and did turn its own need for protection into a global regulatory framework to manage

trade.”18

Since then, the WTO has recorded a multitude of complaints on behalf of states. The list is virtually

endless as countries accuse others of unfair competition. As Moon puts it: “Of course, when the United

States asks another nation to restrict its exports and threatens retaliation if it does not agree, the

agreement is voluntary in exactly the same sense that one hands over one’s wallet to a gun totting

16 Report on Manufactures, Alexander Hamilton, December 5th 1791, http://www.constitution.org/ah/rpt_manufactures.pdf 17 The New International Political Economy, Craig N. Murphy & Roger Tooze, Lynne Rienner Publishers, 1991, page 8318 The New International Political Economy, Craig N. Murphy & Roger Tooze, Lynne Rienner Publishers, 1991, page 83

mugger voluntarily.”19 Thus Japan accuses the US of liberalizing those industries in which it has the

competitive advantage, but to adopt ad hoc mercantilism in those where it does not.

Both liberalism and realism provide insights that assist us in understanding state behavior. Yet as one

may come to notice, states do not adhere to a single school of thought. States perceive at times

liberalization as means for achieving certain goals, but at times the control and protection of certain

industries is deemed necessary.

After global liberalism, Regionalism

With these difficult trade dilemmas, states have found a middle ground with regional integration. By

having free trade within a region and impose trade barriers for those outside, countries have found a

strategic middle ground between liberalism and mercantilism in which domestic industries can expand

and yet benefit from protection against outsiders. It is assumed that regional integration shortens the

scope of possible trade disputes among signatories and that the will to negotiate a trade agreement

infers certain shared values or objectives, allowing for a multilateral governance body to mitigate

dislocation and manage disputes to a smaller degree than the WTO. 20 Given the apparent impasses at

the WTO, it seems states have been leaning in this direction, meaning they expect future gains from

regionalism rather than the WTO. This makes sense since the Doha round has stalled. Free trade areas

are allowed under the WTO’s 24th article as stated previously, albeit as a device for further multilateral

concessions. These agreements do contravene the liberal spirit of the WTO: the nondiscrimination

principle of the Most Favored Nation clause. 21

19 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 113 by Bruce E. Moon20 Dilemmas of International Trade: Hegemonic Stability Theory and American Global Leadership p. 125 by Bruce E. Moon21 Article XXIV: Territorial Application – Frontier Traffic – Customs Unions and Free-trade Areas. WTO. Link: http://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm

The EU’s ‘success’ as a common market is the premise to a shift in the global political economy. The

open world of free trade liberalism created by the US hegemon, namely GATT (WTO) is closing to

become a more regionalist one. According to the bicycle theory, as long as the free trade agenda moves

forward, even if this means global trade patterns become regional, the momentum will prevent

nationalistic drifts towards protectionism.

This EU regional liberalism isn’t new. The Treaty of Paris which created the European Steel and Coal

Community in 1951 was only the beginning. European integration has not stopped since. Even when

referendums tend to oppose further EU integration.22

The EU’s engagement to regional integration led to trade diversion that could only be interpreted as

mercantilism for the exterior countries. Countries within have witnessed growing unemployment and

dwindling industries , fueling nationalist political parties eager to blame free trade led by Brussels and

demand nationalist protectionism. Domestic interest groups (from exporting industries) will continue to

push for liberalization. Hence as previously stated, states must navigate their economic trade policies

with awareness of foreign pressures and domestic pressures as well and this has led to the middle

ground of regional integration, also known as trade blocs.

In 2012 the European Commission published its ninth Report on protectionism. This report stipulated

that emerging economies, namely Argentina, Brazil, India, Indonesia and Russia were particular in so far

as they “appear more inclined to apply potentially trade-distorting measures.” The Report confirms the

trade restrictive measures of third countries’ previously reported. These countries, notably Brazil, China,

India, South Africa and Ukraine “have recently introduced large stimulus packages to promote specific

industrial sectors, combined with trade distortive measures.” These countries do these industrialization

policies with the aim of shielding their domestic markets from international competition. Even though

22 Maastricht Treaty by BBC. April 30th, 2001. Last seen December 4th 2014. Link: http://news.bbc.co.uk/2/hi/in_depth/europe/euro-glossary/1216944.stm

global trade is recovering from the crisis, the EC is concerned that the pace of protectionism has

accelerated. 23 The example of YPF’s expropriation by the Argentine state received a lot of media

coverage.

Meanwhile, to protect themselves from the emerging markets’ mercantilism in a system whose

multilateralism has halted, one could infer that the advanced economies will create a mercantilist

barrier of their own: the Transatlantic Trade and Investment Partnership.

The early 21st century’s transition from an international system characterized by the US hegemon that

had established the WTO, IMF and the World bank, to a multipolar system with rising contenders and

mercantilist trade blocs is a historical inevitability that the US must abide to. Indeed, under the

supervision of Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff of the US military, two

strategic experts have published a new National Strategic Narrative that assumes a new century in which

the United States is no longer the hegemon and must adapt to a new environment with contending

stakeholders24. This assumption of a declining US has not been expressed in this paper alone and is a

shared statement.25

The “Transatlantic Trade and Investment Partnership” seeks to reduce trade barriers between the US

and the EU. Furthering the economic interdependence between these two markets is expected to boost

23 Ninth Report on Potentially Trade Restrictive Measures by the European Commission. September 2011- May 2012 http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149526.pdf24 “It is time for America to re-focus our national interests and principles through a long lens on theglobal environment of tomorrow. It is time to move beyond a strategy of containment to astrategy of sustainment (sustainability); from an emphasis on power and control to an emphasison strength and influence; from a defensive posture of exclusion, to a proactive posture ofengagement. We must recognize that security means more than defense, and sustaining securityrequires adaptation and evolution, the leverage of converging interests and interdependencies.” National Strategic Narrative by “Mr. Y”. 2011. Woodrow Wilson Center, Princeton University. http://www.wilsoncenter.org/sites/default/files/A%20National%20Strategic%20Narrative.pdf 25 Time to Start Thinking again by Edward Luce, 2012 http://www.nytimes.com/2012/04/08/books/review/time-to-start-thinking-by-edward-luce.html?pagewanted=all ; The Post-American World by Fareed Zakaria, 2008, http://www.nytimes.com/2008/05/06/books/06kaku.html?pagewanted=all

economic growth. It is also an ambitious agreement on high standards for trade and investments by two

of the world’s strongest economic poles.

TTIP was announced as of June 2013 by the US and EU heads of state, namely the US President, the

President of the European Council and of the European Commission. Both actors wish to reinforce what

is already a strong historical bond by furthering their strategic economic interests with TTIP26. As of

October 2014, the agreement had already finished its 7th round of negotiations. 27

Atlantic relations have a long history. Indeed, TTIP is merely the continuation of a relationship that

existed at the onset of the post war unipolar system. The Marshall plan, NATO, the Atlantic Council are

international organizations and bonds that predicate common values, interests for both sides of the

Atlantic. In 1995, the TTIP’s predecessor TAFTA (Transatlantic Free Trade Agreement) was accompanied

by the New Transatlantic Agenda and the Joint EU-US Action Plan28. A free trade agreement between the

US and the EU fell short and what came to being discussed was a “New Transatlantic Marketplace”. In

this case the wording matters, the decision to use “marketplace” rather than “free trade” may very well

reflect the unease state officials had with committing vital resources to competition to one another

despite their strong relationship. The term “free trade” has precedence; it has come to connote strict

interdiction of state intervention whereas “marketplace” is a broad, vague term that implies the

possibility of including state intervention. In politics, any departure from vagueness leads to

26 “And that broad support, on both sides of the Atlantic, will help us work through some of the tough issues that have already been mentioned. There are going to be sensitivities on both sides. There are going to be politics on both sides. But if we can look beyond the narrow concerns to stay focused on the big picture -- the economic and strategic importance of this partnership -- I’m hopeful we can achieve the kind of high-standard, comprehensive agreement that the global trading system is looking to us to develop. “ –Remarks on TTIP by the President of the US, June 17th 2013, http://www.whitehouse.gov/the-press-office/2013/06/17/remarks-president-obama-uk-prime-minister-cameron-european-commission-pr , Bold added by author of this paper27 Report of the Seventh Round of Negotiations by EU Chief Negotiator Ignacio Garcia Bercero. Link: http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152859.pdf28 New Institutions for Transatlantic Trade? By Brian Hindley. Royal Institute of International Affairs, Jan. 1999. Link:http://www.jstor.org/discover/10.2307/2625462?uid=3739696&uid=2&uid=4&uid=3739256&sid=21105348318223

inconvenient corners. In this sense, the liberal cooperation was superseded by realist suspicions. The

NTM nonetheless failed because France vetoed the deal in April 1998. It was reported that the French

vetoed because the treaty “did not offer the guarantees we desire” declared French president Jacques

Chirac. 29 This veto was belittled by German Minister of foreign affairs Klaus Kinkel and Jay Ziegler,

spokesperson for the US representative of Commerce Charlene Barshefsky: “the political orientation

towards further liberalization of commerce must be maintained” and “The US and EU will work together

to further liberalize their two services markets and to pave the way for WTO services negotiations. The

two sides also will try to ensure that any new policies do not have an adverse impact on business

conditions for service providers” and “The US and EU will work together to consider complementary

steps to eliminate market access restrictions and to establish disciplines in sectors where this is needed

in order to generate new business opportunities” 30

A sector that has been source of much debate is that of agriculture31. The objectives of the US in this

matter are clearly stipulated, in fact it is the first objective of the US to "eliminate all tariffs and other

duties and charges on trade in agricultural, industrial and consumer products between the US and the

EU, with substantial duty elimination on entry into force of the agreement, transition periods where

necessary for sensitive products, and appropriate safeguard mechanisms to be applied if and where

necessary.” 32 Whereas on the EU side, where the actual debate is taking place, the high commodity

29 “Veto français annoncé contre le NTM” in the newspaper l’Humanité. 1998. http://www.humanite.fr/node/493577#sthash.1nCa2wtb.dpbs 30 United States and European Union Conclude Joint Action Plan for the Transatlantic Economic Partnership” by Jay Ziegler . Office of the USTR press release. November 9th 1998. Link: http://www.clintonlibrary.gov/assets/storage/Research-Digital-Library/clinton-admin-history-project/101-111/Box-102/1756308-history-ustr-press-releases-november-december-1998.pdf31 EU under pressure to allow GM food imports from US and Canada by The Guardian 2014. link: http://www.theguardian.com/environment/2014/sep/05/eu-gm-food-imports-us-canada; Monsanto Agritech Lobbying for the TTIP: Britain Spearheads Campaign to Make European GMO regulation Meaningless by Colin Todhunter. Published on GlobalResearch.org. 2014. Link: http://www.globalresearch.ca/the-monsanto-agritech-lobbying-for-ttip-britain-spearheads-campaign-to-make-european-gmo-regulation-meaningless/5410706 ; An open door for GMOs? – take action on the EU-US Free Trade Agreement published by the Corporate Europe Observatory. 2013. Link: http://corporateeurope.org/trade/2013/05/open-door-gmos-take-action-eu-us-free-trade-agreement 32 U.S. Objectives, U.S. Benefits In the Transtlantic Trade and Investment Partnership: A Detailed View by the Office of the US Trade Representative. March 2014. Link:

prices and ongoing reform of the Common Agricultural Policy are given as reasons for negotiating these

markets.33 The concern raised with opening the agricultural markets revolves over the question of

consumer protection regarding GMOs. Many Europeans have expressed their discontent with GMOs and

the EU has taken note of this 34.

Therefore, from a liberal perspective, as long as both parties respect their previous commitments, TTIP

will be an opportune agreement that is mutually beneficial to both sides as they seek to further their

common goals.35 The economies of the US and EU are witnessing slow growth if any at all36 and this

agreement will bring down barriers, saving millions for exporters and importers alike, creating jobs and

enhancing the consumer welfare on both sides of the Atlantic hence furthering the goals of states and

non-state actors.

It is difficult to perceive any realist inspiration in these negotiations, more so when it is stated that “In

every case, the overall outcome for the EU was positive; but what was clear was that the more

liberalization there was, the better the overall result.” 37 Hence, if the official position openly promotes

http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Objectives-US-Benefits-In-the-TTIP-a-Detailed-View33 Q&A TTIP by the European Commission on Trade “The decision to start negotiations was in large part due to the continuing economic crisis and the stalling of the multilateral trade negotiations in the World Trade Organisation - the so-called Doha Development Agenda. In addition, the reform of the EU's Common Agricultural Policy and high commodity prices meant that both sides were ready to discuss agriculture and negotiate opening their markets” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/ 34 Q&A TTIP by the European Commission on Trade “Will the EU be forced to change its laws on Genetically Modified Organisms? – No, it will not.” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/35 Q&A TTIP by the European Commission on Trade “An independent study by the London-based Centre for Economic Policy Research (CEPR) suggests the EU's economy could benefit by €119 billion a year – equivalent to €545 for an average EU household - and the US' by €95 billion a year.” And “The economic growth and increased productivity created by the agreement will benefit workers in the EU and US, both in terms of overall wages and new job opportunities for high- and low-skilled workers alike.” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/

36 Quarterly National Accounts: Quarterly Growth Rates of real GDP, change over previous quarter by the OECD. Appendix 37 Q&A TTIP by the European Commission on Trade “What’s in it for the EU?” Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/

liberalization, what are we to think of? Any realist interpretation may de facto lack official backing and

therefore fall into conspiratorial conundrums.

But if one were to read in between the lines, realist/mercantilist notions do stir up. The current context

is one of a collapsing multilateral system, no perceivable hegemon, rising economies and rising trade

blocs and fears of dwindling natural resources38 all of which may lead to international crises39. In this

context, leverage will be of crucial importance for the new international system as possible frictions

arise between the geo-economic objectives of nation states and their trading blocs. These objectives

may vary from control of rare natural resources such as minerals or energy, to transportation standards

(a matter of security) to the usual quarrels of trade disputes, barriers and diversion. As the Director-

General of the WTO stated himself: “regional agreements are becoming more and more important in

terms of trade rules, and for the political weight they represent in international negotiations.”40

For realists, the most important statement about TTIP may very well be the following: “The harmonizing

of EU and US technical standards could well provide the basis for global standards: the size of the

transatlantic market is so big that if it had a single set of rules it would be in the interest of other

countries to adopt them too. That way, they would only have to produce goods to one set of

specifications, making trade throughout the world easier and cheaper.” This is not the only writing on

the wall for realists though41. These statements assert that the US and the EU together can reach a

38 Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production by the Government Accountability Office. February 2007. Link: http://www.gao.gov/new.items/d07283.pdf39“Accordingly, the decline of commitment to multilateralism may lead to a break-up of the global trading system and promote protectionist trading blocs whose competing geoeconomic objectives could to lead to an international crisis. In Trading Blocs and Multilateralism in the World Economy by Wieslaw Michalak and Richard Gibb. Publishers are Taylor & Francis, Ltd on behalf of the Association of American Geographers. June 1997. Permalink: http://www.jstor.org/discover/10.2307/2564370?uid=3739696&uid=2134&uid=2&uid=70&uid=4&uid=3739256&sid=21105369943123 40 The global challenge: opportunities and choices in the multilateral trading system speech by DG Renato Ruggiero. October 16th 1995. Link: http://www.wto.org/english/news_e/sprr_e/harvar_e.htm 41 “And, as it brings together the world’s two major economies, the TTIP will set standards for the future”; “Likewise, the TTIP could also encourage others to revive the WTO negotiations. Furthermore, if the EU and US are able to harmonize many of their regulations and standards, this could act as a basis for creating global rules with all

critical mass making TTIP the trade bloc juggernaut that can replace the WTO all together, effectively

imposing their will upon the global trading system. As discussions over the Trans Pacific Free Trade

Agreement continue, state officials throughout the developing world ought to pay close attention to the

ongoing TTIP negotiations as its concluding norms and standardizations may very well become the ones

imposed upon them during later TPFTA negotiation rounds. The environmental and transport norms

particularly may affect states whose economies depend on exporting to the EU and US markets such as

China or Russia. Even though the EU asserts that “no, harmonization is not on the agenda”42 the

unspoken implications and promises of trade liberalization should sound the alarm for any realist who

pays attention to relative gains. If the US and the EU succeed in making “trade” and “investment” more

transparent, easier through bridging regulatory redundancies and overall form a trade bloc partnership,

then the word “harmonize” will have fulfilled all its meaning without having ever been employed.

Whether realist or liberal one must pay tribute to the historical inevitability that Klaus Kinkel, Jay Ziegler

and Charlene Barshefsky incarnate so well.

Conclusion

The Transatlantic Trade and Investment Partnership is born from a decades old relationship. It has

emerged time and time again in the past. It appears to be the latest vehicle of a stubborn spirit: that of

the Atlantic Identity. Given the powers involved, this agreement may become the trade bloc juggernaut

that will come to define the post-WTO world.

the cost savings and economic benefits that would bring.” Q&A TTIP by the European Commission on Trade. Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/ 42 “Are the EU and US going to harmonise their standards? – No, harmonization is not on the agenda” Q&A TTIP by the European Commission on Trade. Last update Nov. 12th 2014. Link: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/

This post-WTO world, a world the US hegemon created, has now been abandoned by its creator

who has rationally accepted to return among the ranks of ordinary states and play into the balance of

power paradigm. TTIP’s accelerated process (2-3 years for expected completion) must be put into

context: the development of the Trans Pacific Free Trade Agreement in which the US has been

outreaching to Asian states, notably China. The US-EU partnership may offer both parties the critical

mass they seek to bring leverage in their negotiations with other trade actors.

Currently, an interesting development that provides a certain “TTIP appetizer” is the “Canada-

E.U Comprehensive Economic and Trade Agreement” (CETA) that is already completed and awaiting

approval from the EU parliament. It too has caused controversy.

The era of certainty that a hegemon provides through multilateralism is coming to an end; the

era of strategic partnerships has begun. It is an era characterized by balance of power struggles and

uncertainty as states seek to fulfill their objectives but also guarantee their own survival.

APPENDIX

Economic Report of the President, February 1992, URL: http://fraser.stlouisfed.org/

One can see the export trends correspond to the rise and decline of hegemonic presence in the

international trade system.

The fear of energy depletion is omnipresent given the assumption of resource scarcity. Realism provides

the framework in which to conceptualize (relative gains) these fears into proper policy

recommendations.

Economic Growth in U.S.A and E.U and Euro Area from 2011 to 2014. OECD Stats.

Low economic growth is a burden that state officials try to resolve. In the past states would resort to

industrial policies to develop their economic capacities. Nowadays the neoliberal approach has

promoted the free reign of markets instead, limiting state intervention. States have played a secondary

role in the economy, after markets, seeking other states with whom to make trade agreements in order

to enlarge their common market base.

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