Mises Wire

Free Trade Wins: The TTIP Is in Trouble

You have probably heard of the controversial TPP, the Trans-Pacific Partnership, the deal that Hillary Clinton can’t make up her mind on. However, you probably have not heard of the Transatlantic Trade and Investment Partnership (TTIP). It is referred to as a free trade pact between the United States and the European Union. I only recently read about it in European media sources. Negotiations have been going on for years and it only recently surfaced because top European officials have declared it a de facto dead deal.

The Problem with Trade Deals

Such trade deals are inherently suspicious by nature. They invariably benefit large corporations to the detriment of the average citizen. As political scientist Kerry Chase has concluded “When groups that rely on scale economies and production sharing networks” i.e., big multinational corporations, “have political clout trading blocs are likely to form.”

In the case of TTIP the contents of the negotiations are actually “classified” from the general public. However, several leaks from the negotiations indicate that the proposals would clearly benefit special interests and do harm to labor, the environment, and national sovereignty.

Germany’s Vice-Chancellor Sigmar Gabriel has said “In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it.” Even earlier French President Hollande said he would never accept the deal because of the rules it enforces, particularly in relation to farming and culture, are too beneficial to US business interests.

The death of TTIP should be celebrated. Trading blocs do not necessarily increase overall international trade, they only increase trade within the bloc. Trading blocs do not necessarily increase economic efficiency, either. Trading blocs are not a movement toward the free market; they are actually a movement in the direction of global conflict. So-called free trade pacts are a bad thing.

The European Union is a good example of how a “free trade” zone can go bad over time with costly regulations, bloated budgets, and threats to national sovereignty.

What Real Free Trade Means 

Free trade is a unilateral policy. A nation that adopts a free trade policy simply lowers its tariffs, eliminates quotas, and reduces all of its barriers to trade. There are no requirements for trade partners to adopt as free trade provides its own benefits for the nation that adopts it. Real free trade provides widespread benefits and does not create political conflicts.

Trade pacts like the North American Free Trade Agreement, i.e., NAFTA and the Trans-Pacific Partnership, i.e., TPP, are effectively trading blocs which are motivated by a combination of large corporate interests and global political interests. The United States government is pushing forward the interests of big American corporations, but is also seeking to isolate nations such as China and Russia who are organizing to challenge US global hegemony.

The combination of trade blocs and political alliances is what reduces trade, increases conflict, and can even result in horrific wars. This is an especially important consideration given the rising tensions in the eastern Pacific and the open warfare and conflict which is now engulfing the entire Middle East from Iran to Yemen to Turkey.

Why Free Trade Deals Are Failing

Now for the really good news.

Why are EU officials declaring the trade deal talks dead at this time? They have years of negotiations behind them, including 16 rounds of discussions. They really do not have any real deadline? There are several existing models to work from including TPP and CETA, i.e., the Canada and European Union (EU) Comprehensive Economic and Trade Agreement. Why kill TTIP now?

TTIP is not dead, it has only been taken off the negotiating table and declared dead. The reason for this maneuver at this time is Brexit and Donald Trump.

Brexit does two things. First, if Britain does exit the EU it takes the strongest European supporter of TTIP out of the equation and allows France to assert its opposition to the treaty. Second, Brexit is potentially just the beginning of EU disintegration. By shelving TTIP, EU officials hope to discourage any additional dissent from nations that expect to be harmed by US access to EU agricultural markets and European farmers generally.

Donald Trump is also a reason to put on hold TTIP. He has been very vocal in his opposition to TPP. TTIP is a very similar deal. The thing Trump is most familiar with and expert in is the art of the deal. He knows the difference between a bad deal and a good deal and he recognizes TPP as a terrible deal for Americans. If TTIP were to pass out of the negotiation committee, it would give Trump a new fresh deal to debate Clinton on.

It would also give Trump another issue with which to increase and solidify his supporters and to increase the likelihood of them voting for him in November. This is clearly an issue that clarifies the distinction between the interests of the establishment (especially big corporations and big agriculture) and the interests of the average middle class American. As such, the death of TTIP should be celebrated as a victory.

It is my hope that the power and influence of big corporations and other special interests have reached its peak. Events such as Brexit and the Trump campaign are indicators that ordinary people now realize what a bad deal big government has become.

Further Reading:

Mark Thornton is a Senior Fellow at the Mises Institute and the book review editor of the Quarterly Journal of Austrian Economics. He has authored seven books and is a frequent guest on national radio shows. Contact: email, twitter, and facebook.

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