The perils on the road to TTIP and the future of the Atlantic Century

The US Congress recently rescued President Obama’s trade agenda from a near-death experience, and the European Parliament reluctantly gave its blessing to move forward on the TTIP negotiations. The Parliament even tabled a constructive compromise on the thorny issue of investor dispute resolution (investor-to-state dispute settlement, ISDS).  President Obama finally exhibited a real concern for and expended considerable political capital on behalf of the two major trade agreements now being negotiated. It also appears that the TPP (Trans Pacific Partnership, potentially involving as many as 16 countries) process is nearing a resolution, which would clear a path to renewed momentum for TTIP.

Despite these tactical advances, however, the debates in the United States and Europe again revealed – in case we needed to be reminded – the serious internal divisions that stand in the way of completing the substantive agreement. Growing populist resistance to trade liberalization on both sides of the Atlantic, deeply rooted differences over food and environmental safety, old-style industrial competition, and newer issues like intellectual property protection, antitrust enforcement, and currency manipulation promise many long hours of work and tough political decisions. Presuming the EU has found a way forward on the Greek crisis, and the United States finishes off the TPP, the remaining issues can be addressed in the next year, hopefully before the US electoral cycle narrows the window of opportunity. Yet little sense of urgency on either side is apparent.

In this environment, some reflection over the role of trade liberalization might provide a deeper ground for moving forward. Tougher and even existential issues faced the world in the 1930s and 1940s, but the statesmanship that led to Bretton Woods, the Marshall Plan and the European Community (EC), along with the associated revival of trade opening under the General Agreement on Tariffs and Trade (GATT) after the war showed that vision, good will and the pressure of catastrophic failure can lead to wise and effective policy. The new Atlantic-centered economic and security order was explicitly grounded, to a large extent, on what was considered as an inextricable link between the two types of order. US Secretary of State Cordell Hull observed in his 1948 memoirs that: “…if we could get a freer flow of trade…so that one country would not be deadly jealous of another and the living standards of all countries might rise…we might have a reasonable chance of lasting peace.”[1] The EC project was an answer to centuries of war and economic strife in Europe. And a rising standard of living indeed followed from the new Atlantic order, not only in Europe and North America, but in many developing countries as they joined the Bretton Woods and GATT institutions. The peace that followed, hard as it was to maintain, enabled, as political economist Douglas North has argued, the flowering of economic prosperity. The fundamental principle of the efficiencies resulting from open trade, elaborated by Smith, Ricardo, and later by the Nobel Prize winning Paul Krugman, was behind the broadening of economic prosperity and growth in standards of living on an unprecedented scale.

Determined US-European cooperation to elaborate the new economic rules of the game since 1944 is indisputably the key element in this historic global achievement. TTIP represents the latest effort to renew this leadership role, after a series of disputes has called it into question. The last few years have also witnessed the emergence of competing economic models and institutions, especially in East Asia. China, Russia, various Islamic movements and perhaps some Latin American nations are increasingly aggressive in articulating different approaches to the politico-economic organization of national and regional societies. If TTIP is not completed in a timely manner, leadership will slowly (but not inevitably) flow to newly-confident competitors on the global stage, who generally espouse anti-liberal policies.

What is somewhat disheartening is that the disputes now dividing supporters and opponents of TTIP are grounded in an amorphous populism and anti-establishment tendency. Both Europe and the United States have achieved unprecedented levels of economic prosperity which, despite the laments of critics, is widely distributed. Differences are more about lifestyle choices and the further redistribution of prosperity (across economic sectors, nations, and classes) than in promoting additional economic freedom and growth. Michael Zantovsky recently argued that: “A specter is haunting Europe…today’s specter is certainly anti-establishment in every sense of the word. Its enemies are the traditional political elites, the Washington consensus, and the Eurocrats. It is anti-American if not anti-capitalist…and anti-Brussels if not anti-European.”[2] In the United States, confidence in established political and economic institutions is low, and isolationist and protectionist sentiment is growing. Adding to the lack of enthusiasm for TTIP, many US observers also anticipate continued slow growth in the European economy, weighed down by clear problems in the EU economic structure, as evidenced by the Greek crisis, and by demographic stagnation.

On both sides of the Atlantic, those favoring TTIP should consider it as one pillar of the general economic and security order it would enhance and adapt to 21^st century realities. They will have to do a better job of articulating both the local economic benefits and larger global importance of the agreement. The United States has taken a major step in passing trade promotion authority and in President Obama’s newly forceful advocacy for his trade agenda. But the United States may rest after TPP (and it will be a major battle to get any agreement on that through Congress), and it is not clear that the President is as committed to TTIP as he is toward TPP, which would cement his “pivot to Asia.” US observers also are unsure of the unity and ability of the EU to take the hard steps to complete TTIP in the wake of the Greek crisis and the growing anti-establishment movements. Hopefully, a larger vision of global leadership will win the day, as it did 70 years ago under more challenging circumstances.  Otherwise, we may be witnessing the waning days of the Atlantic Century.