Europe

A Case for Globalization in a World of Skepticism


In 2014, then-Prime Minister David Cameron promised to put rocket boosters behind talks to secure the Transatlantic Trade and Investment Partnership (TTIP). Now, Cameron is out of 10 Downing Street, the UK is out of the EU, and the momentum behind U.S.-EU talks has all but died out.

TTIP has become a casualty of rising populism and domestic politics. Trade liberalization needs a champion, but most politicians have skirted the role in response to a vocal, albeit small opposition.

A tide of anti-trade rhetoric now drives moves away from globalization and reflects a deepening disconnect between government action and public perceptions.

In a quote that reflects this divide, Austrian Economy Minister Reinhold Mitterlehner commented that shelving TTIP would facilitate the ratification process for Comprehensive Economic and Trade Agreement (CETA), the free trade agreement between Canada and the EU. Ratifying CETA would be easier, because, as he said, “the two treaties are often mixed up in the public debates.”

Mitterlehner’s remark illustrates how a misinformed electorate has influenced the anti-globalization trend. In the United States, nearly half of respondents said they did not know enough to voice an opinion on TTIP. The same is true in Germany, where a third of the population feels insufficiently informed on the issue.

Ironically, in Germany, where exports drive the economy and one in four jobs depends on the export sector, only about a half of the population has a positive opinion of trade. Just two years ago, that number was 88 percent. Clearly there is a growing mismatch in how the public perceives the benefits of trade.

The mismatch has enabled a vocal opposition to change the dialogue and call for abandoning TTIP altogether. “Anti-trade rhetoric is catchy,” remarked Roberto Azevedo, the head of the World Trade Organization. In the United States, the agreement is viewed as purely benefiting large multi-national corporations. In Europe, critics argue that TTIP will weaken regulatory standards, undercut consumer well-being, and undermine the authority of state governments. The concerns are real, but the basis for concerns, not so much.

By its nature, TTIP invites controversy. Harmonizing regulatory standards across the United States and the EU could require changing domestic laws. TTIP also tackles sensitive areas, such as access to public procurement, protections for agricultural products, and intellectual rights. So yes, the negotiation are fraught with challenges. But streamlining regulations across the Atlantic will strengthen standards, protect consumers, and benefit small businesses the most by lowering non-tariff barriers to trade.

cegoh, © 2014

cegoh, © 2014

Economists agree that free trade promotes competition, innovation, and economic growth. TTIP is no exception. Yet trade has an image problem. While trade promotes an overall increase in the standard of living, certain industries can suffer from foreign competition, with costs usually concentrated in sectors using low-skill labor. Manufacturing has thus become a poster child for the detractors of trade and is held up as an example of the alleged evils of globalization.

The success of populist movements highlights government failures to make the benefits of trade tangible. High-level claims that TTIP will strengthen U.S-EU ties, shape globalization rules around high standards, and increase economic growth have simply proved insufficient to convince the general public of the merits of free trade. Governments need to do more to communicate the concrete benefits of said agreements. As an example, policies that help displaced workers successfully transition to different sectors would counter the unequal distribution of benefits argument.

The lack of transparency about TTIP’s provisions represents another legitimate concern and likely played a role in decreasing public support for the agreement. Since the launch of negotiations in 2013, public opinion surveys rate the transparency behind the talks as largely unchanged. A more proactive public outreach campaign would close the gap between public perception and government action.

In a slow growth economic model, measures like trade liberalization should be welcomed as a spark for change. The political reality is such that TTIP will not be finalized until after the U.S. elections. However, an active campaign to shift public opinion now can result in a more favorable political environment when the negotiations resume next year.

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