4 November 2014

Free trade with the US is a godsend for Europe


Trans-national trade is generally a force for good, fostering international relationships and generating wealth. There are, though, exceptional circumstances in which this is not the case. The slave trade, for instance, created huge prosperity for some but abject misery for others and, in some quarters, apologies are still being demanded for these past misdeeds.

The sins of the slave traders, however, do not detract from the vast benefits that international trade has delivered. And if trade is good, then free trade, trade that can flow without the hindrances of tariffs or undue regulatory obstacles, has to be even better.

So the prospect of a free trade zone between two of the world’s great trading blocs, the European Union and the United States, should surely be welcomed. Yet the negotiations to create just such a nirvana are being greeted by a level of hostility which might suggest that the slave traders were being invited to set sail all over again.

The Transatlantic Trade and Investment Partnership has been a long time coming. The Transatlantic Economic Council was established in 2007 with just such a brave aim in view. But now that negotiations are getting serious, and could even be concluded next year, objections are reaching near hysterical levels. A deal which could enhance living standards on both sides of the Atlantic, generating growth at a time when it is sorely needed, is being heralded as a potential threat to the safety and health of European citizens.

So vehement is the opposition now being voiced to the proposed partnership that there are genuine concerns, both in the EU and the US, that a deal will never be signed. The scare-mongering is extreme, led by a tribe of the usual suspects: trade unions, green activists, animal rights campaigners, and those who believe that Britain’s National Health Service should be preserved as an unchanging deity and worshipped by all.

On the other side, those who really want the deal are the big businesses who are characterised by the objectors as the evil perpetrators of the great crash: greedy, self-interested, uncaring goliaths out to trample down ordinary people. These corporate giants, it is said, want to see the Transatlantic Trade and Investment Partnership materialise because it will make their lives easier, allowing them to rip off customers on an even greater scale than their critics say they do already.

It should be up to the politicians to bring some sense to bear on the situation but they have not, so far, proved hugely effective at doing so.

Plenty of numbers have been bandied around. This would be the biggest trade deal ever, we are told, and could boost the EU economy by €120 billion a year, equivalent to €545 per household. The benefit to the US economy is estimated at €90 billion. The balance in favour of the EU might be expected to sway Europeans in favour of the deal but, far from it, they are far more hostile than the Americans.

Lord Livingston, the UK’s trade minister, has defended the project, making the case that it is not merely big business that would benefit from a removal of trade barriers but small firms and consumers.

But those opposed to it are not prepared to consider the potential benefits of easing some of the regulatory burdens that currently hamper transatlantic trade. Car manufacturers, for instance, have to comply with one set of safety standards in the EU. If they wish to export to the US, then they have to go through another set of tests, albeit very similar, before they can access that market. Having one set of standards, and only one set of tests that had to be undertaken, would be a major cost saving. The likelihood is that that saving would be passed on to consumers.

Opponents of the treaty do not see it that way. Instead, they see a uniting of standards as, inevitably, equating to a diminution in standards. The Centre for International Environmental Law has gone so far as to say that the treaty would undermine public interests such as the right to a healthy environment.

This somewhat extreme view is based on the fact that standards on chemicals and fertilisers are different in the EU than they are in the US. Yet it has already been spelt out that sustainability will be an over-arching objective of the treaty.

Far from a diminution in standards, what might result from joint EU/US standards is a move towards universal standards, which could potentially bring great benefits to other countries.

There may be exceptions which would have to be carved out to accommodate very different views on either side of the Atlantic. The EU does have different standards for animal welfare than those that prevail in the US. The interests of feeding America’s huge population may continue to trump any notion of making life comfortable for the animals that will eventually be meat on US plates. It should not be impossible within the scope of such a hefty treaty to allow for these differences of view to persist in specific areas.

The overall aim is surely worth striving for even if it becomes apparent that there are some areas on which agreement and compromise is impossible.

Yet the totem of the National Health Service is being invoked as a reason why the entire project should be consigned to the vast receptacle which holds abandoned EU plans. The siren voices which threaten the end of civilisation as we know it as soon as any change to the NHS is mooted are at it again. They are adamant that all public services should be entirely excluded from the treaty, thus precluding US companies from competing to deliver care in the state-owned NHS.

This is to misunderstand how the slowly modernising NHS functions. The promise is that care will be delivered free at the point of need. The hope should be that it would be delivered by the best people for the job. Protectionism is no guarantee of quality, and usually the reverse.

Those who wish to NHS to flourish should be encouraging it to look for those who can operate it most effectively and efficiently. A treaty that enables the best to win the work is exactly what we need.

Baroness Wheatcroft is a Conservative member of the House of Lords. Her other articles for CapX can be found here.