TTIP and the Winners and Losers From Trade - by Christina Sickinger

Although the Transatlantic Trade and Investment Partnership (TTIP) did not receive much press in the United States, this proposed trade agreement serves as an interesting example from which we can learn a lot about attitudes toward free trade in the era of Brexit and Donald Trump. This trade agreement, which would potentially govern trade between the United States and the European Union, has received plenty of backlash on both sides of the Atlantic. This is in spite of the fact that economists are strongly united behind the idea that free trade is beneficial for both sides. So, what are the objections to free trade, and do they have merit? And how have they become more relevant and revealing in the past year?


Like all free trade agreements, the most basic purpose of TTIP is to reduce both tariff and non-tariff barriers to trade. Tariffs refer to taxes on imports, while non-tariff barriers include regulations such as standards for imports, quotas, subsidies, or bureaucratic red tape, and tariffs are taxes on imports. Proponents of the agreement tote the opportunity to increase trade between the closely related US and EU, and stimulate both economies in the process. According to these supporters, the TTIP would reduce red tape, increase investment, increase exports and imports, and allow businesses to expand on both sides of the Atlantic.


However, the agreement has hardly managed to escape criticism. In the United States, the worries about free trade are familiar: the US will lose jobs, and bargaining multilaterally with the EU (as opposed to with a single country) means there are more actors at the negotiating table, which could make it harder to advance US national interests. Free trade is often seen as a job-killer and a process that weakens the global position of the US.


In Europe, people have different worries about free trade and specifically TTIP. A major concern is the removal of non-tariff barriers. Europeans worry that a trade agreement with the United States will mean letting in American goods that are often seen as inferior, as restrictions on many goods in the United States are less strict than those in Europe. Additionally, TTIP is seen as unfairly benefiting large corporations, which in turn can result in more inequality, more mistreatment of workers, environmental destruction, and a lack of transparency about how disagreements are resolved. Whether or not these critiques are valid, they have a significant effect on public opinion.


The European Union is governed through the principle of subsidiarity, which means that matters should be handled by the lowest and most local level of government possible. International agreements like TTIP bring out the fear that international interests will overcome local interests, or that they will encroach upon the sovereignty of the state or even of the European Union. This fear of loss of agency was mirrored in the Brexit decision, as British citizens voted to leave the European Union amidst anxiety that membership in the EU harmed Britain’s ability to make decisions for itself, and that the decisions of the EU were often harmful to the wellbeing of British citizens. Such anxiety is mirrored in the United States, where the specter of “globalization” threatens to change lives, with or without the consent of those who are affected.


In fact, one of the biggest fears in the United States regarding free trade agreements and globalization in general is the loss of American jobs. This can be extended into the fear of losing a certain way of life, a declining middle class, and growing inequality. And this fear isn’t without justification – trade does lead to lost jobs. Although most economists agree that trade has overall net benefits, it’s commonly said that globalization and trade create winners and losers. Some sectors decline, and some grow. But according to most economic thinking, over time, people who worked in the declining sectors should be able to shift into regions and fields that have grown due to trade.

But is this really the case? For many people, it is not. It is not totally fair to expect people to be able to learn new skills, move away from a place they consider home, and embark on a new career. Retraining programs in the United States seem inadequate at providing this necessary support.  Many people have argued that dissatisfaction with globalization and its uneven effects is the reason behind the election of Donald Trump. Whether or not this is true, it is true that benefits from trade are not equally distributed. Most people recognize this, but there has been minimal effort to make tangible changes to address these concerns. While there is still disagreement over the best way to help people during this time of job insecurity, the worst thing that we can do is nothing at all.

Christina Sickinger