The Transatlantic Trade and Investment Partnership (TTIP),
Cutting wages – bad as that is – does not necessarily translate into the creation of new jobs, debt-crisis countries in the EU periphery have shown. But then, who would win in the TTIP?
In a 1994 interview with Charlie Rose, the British billionaire financier James Goldsmith delivered a stark, eerily prescient warning of the state the world would be in today if it succumbed to the freer borders and more centralized, corporate-owned governance envisaged by trade regimes such as NAFTA and GATT (the predecessor to the World Trade Organization).
Goldsmith was spot on about just about everything, from the threats posed by derivatives – then in their infancy – to the risks of industrializing agriculture throughout the developing world [You can watch the full interview here]. Yet his warnings went unheeded, as laments the U.S. economist and former Assistant Treasury Secretary Paul Craig Roberts:
Sir James called it correct, as did Roger Milliken. They predicted that the working and middle classes in the US and Europe would be ruined by the greed of Wall Street and corporations, who would boost corporate earnings by replacing their domestic work forces with foreign labor, which could be paid a fraction of labor’s productivity as a result of the foreign country’s low living standard and large excess supply of labor.
Now, 20 years on from the signing of NAFTA and GATT, our governments’ enthusiasm for bilateral and multilateral trade agreements is undimmed, despite the social upheaval and economic destruction they have left in their wake. Indeed, our governments now seek to take “free” trade to a whole new level, far beyond what was originally envisaged for NAFTA and GATT.
If signed, the new generation of trade deals would sound the final death knell of what remains of nation-state sovereignty (as I previously warned here and here), while doing next to nothing to improve economic conditions on the ground. Of particular concern is the Transatlantic Trade and Investment Partnership (TTIP), which seeks to bind together the world’s two largest markets, the U.S. and the EU, under a homogenized regulatory and legal superstructure designed for the exclusive benefit of transatlantic corporations and banks.
Unsurprisingly, most of the official (i.e. European Commission-commissioned) assessments of TTIP predict gains, albeit negligible ones, in trade and GDP for both the EU and US. Some even predict gains for non-TTIP countries, suggesting that the agreement would be a win-win for just everyone.
However, according to a new study by Tufts University Professor Jeronim Capaldo, these rose-tinted forecasts rely on methods virtually unchanged from the models used to promote the liberalization of markets in the 1980s and 1990s. As then, they assume that the “competitive” sectors of the economy would benefit from the enhanced trade conditions while the losses racked up in the other sectors would be offset by falling salaries and rising employment.
This assumption is provably false. As recent experience in Southern Europe has shown, lower salaries do not necessarily translate into the creation of new jobs. In fact, according to Capaldo’s findings – based on the UN’s much more up-to-date Global Policy Model – not only would the TTIP not create new jobs in Europe, it would destroy in the space of ten years a net total of roughly 600,000 jobs.
It would also lead to the further erosion of workers’ earnings, a trend that would be most sharply felt in France (with average salary reductions of €5,500 per worker), Northern Europe (€4,800 per worker), the UK (€4,200) and Germany (€3,800).
But that’s just the beginning. The TTIP could have adverse effects in a host of areas, including:
- A significant net reduction in European exports for as long as a decade after it is signed. The economies of Northern Europe would suffer the biggest losses (2.7% of GDP), followed by France (1.9%), Germany (1.4%) and the UK (0.95%).
- A net decline in GDP, once again most keenly felt in Northern countries (-0.5%), France (-0.48%), and Germany (-0.29%).
- A continuing down-trend in the labour share of GDP – already one of the major contributing factors to Europe’s current stagnation. By contrast, profits and rents will take up an ever larger piece of the GDP pie; in other words, there will be a further transfer of resources from labour to capital, with the largest transfers forecast to take place in the UK (7%), France (8%), Germany and Northern Europe Europa (4%).
- A sharp decline in public revenues. The surplus of indirect taxes (such as sales taxes or value-added taxes) over subsidies will decrease in all EU countries, with France suffering the largest loss (0.64% of GDP). Public deficits will grow in each and every European country, pushing public finances close to, or far beyond, the limits set in the Maastricht Treaty.
- Increased financial instability and imbalances. With decreasing export revenues, dwindling salaries and shrinking public revenues, internal demand would have to be sustained through profits and investment – no easy thing at a time of weak consumer spending. Indeed, the only realistic way profits and investments (primarily in the form of financial assets) could be sustained – at least in the short term – would be through increased asset prices (i.e. new bubbles) with results that are already all too familiar.
Capaldo’s study should provide serious pause for thought on the old continent, for it shows that TTIP would unleash a full-frontal attack not only against labor rights, environmental regulations, food sustainability, and democracy, but also against the region’s already floundering economic health.
Ironically, by signing the TTIP, the EU could well be signing its own death warrant. Thanks to the myriad flaws in the single currency regime, the financial imbalances and instability in Europe are already so pronounced that they represent an existential threat to the region’s economic health, social cohesion, and political unity. As Capaldo’s findings suggest, any significant increase in trans-Atlantic trade can only be achieved at the expense of intra-EU trade, meaning that imports from the US and imports from non-TTIP countries through the US would replace a large portion of current trade among EU countries.
All of which makes you wonder: if the potential social economic costs of intensified integration are so great and its benefits so paltry – at least for the vast majority of people – why are our elected representatives so set on signing TTIP? It’s a question that all Europeans and Americans should be asking right now; unfortunately, most don’t even know it’s happening. By Don Quijones.
On the other end of the spectrum of the EU, extreme wealth is not just subject to virtually no tax; it is a magnet for public funds. Read… The Smiling Face of Austerity: More Welfare for Rich Landowners in the EU
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate “beer money.” I appreciate it immensely. Click on the beer mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.