January 23, 2017
The apparent enthusiasm of US President Donald Trump for a trade deal with the United Kingdom in its post-Brexit state should be regarded with considerable scepticism. The UK’s Brexiteer enthusiasts, currently suffering from the delusion that every major trading nation in the world is ‘queuing up to strike deals’ with London, should look at the US’s current international trading arrangements. The North Atlantic Free Trade Agreement (NAFTA) and the failing TTIP and Transpacific negotiations should be sufficient to provide more than enough warning of what they are getting into.
NAFTA, involving preferential trading between the US, Canada and Mexico, has been running since 1994. So far as Mexico is concerned, most of the benefit from this agreement has accrued to the larger partner. The US has developed a substantial trade surplus with Mexico over recent years. In total US-Mexico trade was $356 billion in 2015, a positive trade balance for the US of $182 billion. At the same time however, the structure of Mexico’s agriculture industry has been largely destroyed by heavily subsidised US maize and other agricultural exports. Mexico is estimated to have lost 1.3 million farm jobs as a result. The US 2002 Farm Bill subsidized US agriculture by as much as 40% of net farm income. When NAFTA removed trade tariffs, US companies exported maize and other grains to Mexico at below cost.
And now the new occupant of the White House wants to build a wall to shut off the part of the NAFTA agreement which America does not like – the flow of economic migrants into the US. But nowhere is the predatory nature of US trade agreements more clearly demonstrated than in the attempt to establish a free trade agreement with the European Union. Widespread European objections to US demands has ensured that the putative Transatlantic Trade and Investment Partnership (TTIP), if not already sunk, is likely to be torpedoed in the current political turbulence within the Union.
In a nutshell, TTIP is about reducing the regulatory barriers to trade for large multinational corporations. It should be remembered that modern FTAs are less about tariffs and essentially about the removal of non-tariff restrictions on access. These barriers consist largely of legislation which protects consumers, such as food safety law, environmental legislation, banking regulations, as well as the sovereign powers of individual nations. In their worst form, they are the means of protecting uncompetitive domestic industries – this is where the Trumpist doctrine clicks in.
Alternatively, the most aggressive would-be member of an FTA negotiation will seek to challenge and dilute the market regulations of would-be trade partners. The so-called Investor-State-Dispute-Settlement (ISDS) clause demanded by the US in all its free trade negotiations is an outstanding example. Acceptance of the ISDS by the EU or potential Asian trade partners of the US would grant foreign investors (i.e. US companies) the right to sue European states if they believe that laws or measures of or any partner are likely to damaged their investments and reduce their expected profit.
More specifically, if accepted, the US version of TTIP would lower EU food quality standards and weaken consumer protection. US regulations are substantially weaker. US laxer restrictions on the use of pesticides, use of growth hormones in beef production and the hosing down of poultry carcases with chlorine are all examples. Brussels and Washington have been at war in the WTO on these issues for more than two decades.
A particular concern, which the Brexiteers need to take on board, is that acceptance of ISDS in a TTIP agreement could, for example, have led to the irreversible privatisation of large parts of the National Health Service.
So, the UK’s Brexiteers need to watch their backs if they expect to get any special deal with the Americans. Given their slavering enthusiasm for their long yearned for transatlantic nuptials, they are most likely to end up with an agreement which gives away much, but gains very little. Certainly, nothing to match the loss of free access to the level playing field of the EU single market.