Salter Lecture 2015 – Trade Deals: realistic concerns or rabble-rousing?

Jude Kirton Darling MEP

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Thank you very much for inviting me to give this year’s Salter Lecture. It is an unbelievable privilege to be here, having been an active listener for many years. It is has been an honour to represent the people of the North East of England in the European Parliament for the last 11 months.

The EU can feel very remote from people’s daily lives. As a newly elected MEP – and a Labour member of the International Trade committee – I spend my time trying to bridge the gap: showing why being an active member of the EU is crucial for peace and justice here and abroad. I should state from the outset that I am a convinced internationalist.

I’ve spent my working life (after a first job at the Quaker Council for European Affairs as a Programme Assistant) building up cooperation between working people across Europe and globally within the trade union movement. I am a convinced European and keen to see the EU better promote social and economic justice between and within the member states.

But the EU is far from perfect by any stretch of the imagination, our trade and investment policy, driven essentially by the logic of competitiveness, exacerbates inequality and  exploitation and deprives countries and communities of the opportunity to realise social, cultural and political human rights. It prevents them from regulating their economies in the interest of development, the environment and social justice.

One primary reason for this is that European trade and investment policy has become dominated by a narrow set of interests. In 2012, BYM minuted that “We agree to work together with others of goodwill to achieve a better economic system. However, we know that this will be a long journey with an, as yet, unknown outcome. We stand in this light and wait to discern what the new system could be. It is an enormously hard and transformative thing to pray for the emergence of a good economy – isn’t this the Kingdom of God which we pray for?”

I am working with ‘others of goodwill’ to press for the changes necessary in our trade relations in the European Parliament to ensure that our trade relations promote sustainable development – it is as rewarding as it is frustrating.

Look right at the centre of the struggle for social and economic justice at the moment and you’ll find the debate around the controversial Transatlantic Trade and Investment Partnership (or TTIP). TTIP has become emblematic of much broader concerns about how our world is regulated, by whom and in whose interests.

To start at the very beginning – what is TTIP? Eighteen months ago, the EU (with the agreement of all 28 trade ministers) and the USA launched negotiations for a colossal trade and investment agreement, which if finalised would cover 50% of global production & wealth and nearly a third of global trade.

Any resulting deal will effectively set global standards for trade, especially if the World Trade Organisation’s multilateral trade talks remain blocked. The talks are far from concluded and so public debate about the contents of any future agreement is really important because you can still influence it. I like to think of the negotiations like a primary school disco with the girls on one side of the hall and the boys on the others you can decide which are the Europeans and which are the Americans – there are 24 chapters in the TTIP negotiations and each one is like a couple on the dancefloor. Each are at different stages – some are still talking to each other on the edges, others are mirror dancing and the most advanced are already in the middle of the floor dancing together… it was hoped that the negotiations would be over by Christmas 2015 but everyone involved has accepted that this won’t be the case.

Once into 2016, we enter the US Presidential cycle and anyone who enjoys House of Cards will know that this doesn’t bode well for considered negotiations.

So it remains to be seen if a deal will appear, and while much attention is on these negotiations, there are others going on in radio silence which raise similar questions in substance as TTIP – e.g. the recently concluded agreements with Canada and Singapore, or the negotiations with Japan. These agreements are part of the EU’s Global Europe strategy launched in 2006 – which was a response to the collapse in WTO Doha Round. The EU, US & many others have embarked on an international arms race of bilateral trade agreements creating a web of different trade relations globally.

Since the last EU treaty reform came into effect in 2007, when a trade agreement is concluded, the European Parliament now has the right to accept it or reject it – we can’t amend it & so it is a blunt power – but in recent years public debate has created leverage for MEPs to influence trade negotiations in a way we have not seen before within the EU. We are gradually seeing the democratisation of trade policy – which is coming as a rude shock to some special interests who have developed too close relations with trade policymakers in the Commission and national governments.

I think that democracy is like a fragile flower, and public debate and interest is the water to keep it alive. I don’t want to enter a ‘post-democratic society’ as some academics have suggested we are starting in which technocracy takes over.

That’s why I have worked with activist organisations to stimulate public debate about our trade relations. It was in Hexham in Northumberland last autumn that I realised that something very special was happening.

I have never thought of Hexham as a protest town. And yet on a cold Saturday morning in Hexham a few months back, dozens came to campaign in the marketplace against the TTIP negotiations. Talking to many of the people that were there on that day, it was clear that people were drawn from lots of different backgrounds but equally concerned about the negotiations.

I realised on that day the true scale of the public’s concerns over TTIP. It has become ever more obvious in my inbox as we’ve received thousands of emails about these negotiations from every corner of the North East.

In a country that has always been one the most pro-trade in Europe, in a region that is the single largest beneficiary of international trade in this country, and only UK region with a trade surplus, and in a town that has traditionally been more conservative than the rest of this region, you would simply not expect anything else than cheerful support for TTIP, or to the very least benevolent indifference.

So what’s the reason that so many have decided to take action against TTIP? Why is it that anti-trade sentiments have moved from the margins of British politics right to its core? And crucially, what can we do to address people’s concerns over TTIP?

Understanding the true nature of these concerns is absolutely crucial, because it’s the only way we can really do something useful about it.

As an MEP, I hear a great deal of concerns about the NHS and public services, Investor-State Dispute Settlement and food standards. I’ll come to each of these in a minute.

But as I have alluded we need to realise that something much more profound is at stake. TTIP is about how the economy impacts society; it’s about globalisation and what it is doing to our communities.

It’s about offshoring and unemployment, in-work poverty and human dignity. It’s about being let in or left outside, it’s about trust and lack of trust, confidence and lack of confidence.

International trade has been economically beneficial to the UK, and particularly in my native North East, whether it came from Europe or from further away. Foreign-owned companies like Nissan or Hitachi have invested in the UK creating thousands of local jobs.

If making trade and foreign investment easier translates into creating further jobs in our poorer regions, then surely we should support it.

But we also know that free trade has not delivered gains for everyone. Trickle-down economics have been shown to fail across Western economies.

In parts of the North East, you can see clearly what trade economists and lawyers dispassionately call “distributional effects”. Trade may increase the size of the pie, but some peoples’ slices get smaller.

There are people who gain from globalisation and people who lose from it. But while some decision-makers take this fact into account, others choose not to. And it’s the latter who are currently running the country.

When they say: “let’s put rocket boosters under TTIP”, they are simply missing the point that the public is making. It’s a very simple point: we’ll trade, but we won’t trade our jobs and rights for corporate profits.

I spoke about trust just now, and what the TTIP debate demonstrates is that the British public has by in large lost trust in politics. It does not matter how many times the Ministers responsible or even the Prime Minister says the NHS is safe from further privatisation through TTIP, people simply do not believe it, because we don’t believe them. And it’s not just the other Parties’ problem. First because whether we like it or not we are being perceived by many as all the same in Westminster and Brussels, and I fight everyday against this perception.

Interestingly, according to surveys on trust, I’ve gone from being one of the most trusted categories in society – a trade unionist – to one of the least trusted, even below an estate agent and on par with a banker… this is a strange sort of career progression but it is an important life lesson!

As Labour MEPs we have a special responsibility in this respect, because we want to do politics differently. So what we are doing about TTIP has to be about regaining the trust of the British public. In my view transparency and democratic scrutiny are crucial to rebuilding trust.

Therefore it doesn’t help that such an important deal has been prepared largely behind closed doors. If TTIP fulfils the ambition that was originally placed in it by the EU Commission, it would essential amount to a new transatlantic single market between the EU and the US.

It took over 30 years, 5 EU treaties and 6 European elections to build the EU single market that we know have, and it’s not even complete yet. And yet, our governments and the Commission wanted to create a fanciful transatlantic market in just a couple of years with little public debate, expecting it would go through unchallenged and unimpeded.

This is a huge political project, and it’s simply not one you can do in haste and without full transparency, because without transparency, without letting people in, the advocates of TTIP could never secure the involvement and backing of citizens needed to see it through.

It hasn’t been easy but through public debate we have gained far greater transparency now than only a year ago. We are collectively prising open the ‘blackbox’ of our trade negotiations.

Thanks to an unprecedented civil society mobilisation, we got the disclosure of extremely important documents, such as the negotiating mandate of the Commission and some of the offers from the EU to the US.

We are still a long way from full transparency, but it should be noted that TTIP is now much more transparent than previous trade deals.

The next step is to convince the Commission and the EU member states, especially our own, that TTIP deserves the same level of scrutiny as the WTO.

At the WTO, absolutely every document is publicly available. We should settle for nothing less in TTIP.

I also mentioned confidence earlier, and I think it’s another very important factor in this debate.

Many of the people that I talk to and who are concerned about TTIP, whether it’s because of the NHS or private arbitration tribunals, are hoping to hear me say that Labour will commit to vote against it no matter what. Equally, most companies and industry associations are passionate advocates for us to back the deal without criticism.

There’s 2 reasons why I believe it would not be wrong for MEPs at this stage to take either position.

The first reason is tactical. In any negotiation you need to keep some cards close to your chest. Stating your final voting intention while negotiations are ongoing guarantees only one thing, that you lose leverage to influence the negotiations. It can be more comfortable to shout from the sidelines than negotiate the details, but far less effective. Negotiators do not need to consult those who have already announced their final decision: they have no need to court them or to make concessions to try to win their support, either because they already have it or because they know it’s completely out of reach.

The second reason is about confidence. It’s about being able to perceive TTIP not just as a sum of problems, but also as a sum of opportunities. I genuinely believe that if we find solutions to the key concerns – and we are making progress in this respect that I’ll explain in a minute – and if we seize these opportunities, then TTIP could be beneficial to Britain: business and people alike.

So let me turn to the three key dangers of TTIP before presenting what I see as the opportunities.

1. The first concern for many, the one that I think got many people out in Hexham on that Saturday morning, is the NHS and public services in general.

The privatisation of the NHS has been described as a creeping privatisation. It is an accurate image, and works not just for the NHS but for many other services.

These things are done cleverly, bit by bit with the goalposts constantly moving through national, EU and international rules.

Let’s take transport as an example: At EU level, there’s been 4 sets of directives on railways liberalisation over the last 15 years, each one going slightly further than the previous one – they are still behind our national privatisation of the railways but use the UK model as a model for the rest of the EU, contrary to the evidence that public provision of transport services is more cost-effective.

The key shift in TTIP, and the Canada deal that has just concluded, is that for the first time the EU has adopted a ‘negative or hybrid list’ approach – meaning that anything not explicitly excluded is implicitly included in the scope. Again the goalposts have changed and introduced legal uncertainty for public service providers.

Trade deals are not used to privatise sectors. That is a myth, but they can lock in the economy at a certain degree of liberalisation, thus preventing renationalisation through socalled ‘ratchet’ mechanisms. This is why people’s concern over the NHS in TTIP is justified, and we are pushing for a full exemption for all public services from the deal regardless of how they are organised, financed or provided.

However, that’s not enough – an exemption would only removing legal ratchets we also need to address ‘effective ratchets’ in the negotiations. Measures which make it difficult for public authorities at central or local level to organise public services as the public wishes.

2. Here much focus has fallen rightly on Investor-State Dispute Settlement.

‘ISDS’ has attracted the largest opposition. Invented in the 1950s within the framework of the World Bank, bilateral investment agreements started including a dispute settlement clause which allows foreign investors to sue governments for expropriation of property, unfair treatment or a denial of justice.

For decades few cases were brought and the mechanism acted largely as an insurance system to support investment in developing countries. However in the last 2 decades, the number of cases has rocketed as ISDS has been abused as a tool of political pressure on sovereign governments.

Tribunals operate in secret, arbitrators come from a small pool of commercial lawyers who often work on multinationals’ accounts and have been found to have grave conflicts of interest (1/3 of ISDS arbitrators globally come from one City law firm), there is a no appeal mechanism, expropriation has been used to reclaim ‘future profits’, etc.

In response to unprecedented public concern about ISDS, the Commission launched a public consultation last year. There were 150,000 responses of which 97% were totally opposed to ISDS in TTIP and CETA. The Commission has relctantly acknowledged there are problems but ISDS advocated argue that it is best to reform it in parallel to the TTIP negotiations than discard it.
I disagree. The system is fatally flawed.

It’s not just me saying that, there is growing global dissatisfaction with the costs of ISDS. A UK government commissioned report from the LSE concluded that the potential costs to the UK of ISDS cases far outweigh any advantages to including it in TTIP. Even the ultra-liberal US Cato Institute has argued that ISDS is a ‘corporate powergrab’. Our current government is leading the charge to include this fatally flawed mechanism in the TTIP agreement. The LSE report has been buried. India and South Africa recently announced broad reviews of their clauses. Thus, it is unlikely such clauses will continue if the U.S. and EU decide to not subject themselves to such extraterritorial juridical measures. A lasting legacy of a U.S.-EU agreement, then, could be the dismantling of foreign investor-led suits against states. TTIP could tilt global investment rules in the right direction.

3. A third set of frequently expressed concerns has to do with standards.

Since we have relatively low trade tariffs, much of the focus in these negotiations is on ‘Non-Tariff Barriers’ – regulation and standards to you and me. The trade rules and mechanisms foreseen in TTIP would apply to food safety and animal welfare but also car regulation or even possibly chemicals.

TTIP’s main innovation is that it is intended to be a ‘living agreement’ with the creation of a Transatlantic Regulatory Council – a potentially explosive mechanism for ongoing regulatory cooperation, that would kick in only after the agreement’s ratification.
The logic of this approach is to generate efficiency gains by aligning rules and procedures on both side of the Atlantic.

Rather than a UK car company having to run costly safety tests twice, first in Europe and then in the US, TTIP would provide mutual recognition of such safety tests.

This is fairly straightforward in areas where standards are different yet have similar outcomes. It’s far trickier when risks are not assessed the same way, for instance when it comes to food safety or chemicals. In the EU, we judge risk through the precautionary principle where the burden of proof is on the producer to show that a substance/good is safe, in the US the burden of proof is on the regulator to show there is a problem. This is a key difference.

Our line must be simple and unequivocal: where joint rules can be agreed that is great but we won’t accept any weakening of consumer, public health, environmental or worker protection.

Any harmonisation should be upward, or there should not be harmonisation. Only truly similar procedures should be subject to mutual recognition.

Many other concerns have been voiced about TTIP, and there will be time later to talk about them if there is any particular issue you would like to raise.

For now, and before concluding, I would like to turn to what I referred to as opportunities earlier, and which constitute our positive agenda, for TTIP in particular, and the EU trade policy in general.

One of the main reasons why international trade has not worked for everyone in the past is because it’s been solely used as a tool for multinationals to reduce all costs in order to maximise their profits. But some of these ‘costs’ have wider social value and benefits, notably, our labour rights and environmental standards.

If free trade is used as a tool to bypass national or EU social and environmental legislation the same way that free movement of capital is being abused to dodge taxes, then clearly it’s not acceptable. By the same token, trade liberalisation has made offshoring economically possible, and this in turns has led to huge social dumping resulting in joblessness and wage stagnation in the UK.

Global competition on that basis has diffused the idea that our social model and our labour rights were remnants of the past, and that we could not afford to keep them anymore if we want to keep up. Social competition has promoted a low road to economic development. Half of the US States don’t recognise international labour rights, and wages discrepancies are massive between the EU and the US. Meanwhile, the US demands binding labour standards from its developing world partners – it’s time that this hypocrisy is called out.

This has been going on for decades, and TTIP has nothing to do with it. And even without TTIP, it will continue in the future. Of course, there’s a risk because TTIP could reinforce this trend and make the situation worse if it were to contain no safeguards.

But it does not have to be like that – an alternative trade policy is possible and we have to roll up our sleeves and mobilise to achieve it.

Globalisation is already happening, and it’s highly unfair.
So we need to create rules in order to make it fairer – to reregulate global markets. Any trade agreement therefore represents an opportunity because a trade deal is nothing more or less than a set of rules for the game.
To reap the benefit of these opportunities simply requires us to get the rules right.

Trade agreements could be used as tools to reinforce our social and environmental objectives, through the adoption of joint rules and conditional mechanisms linking compliance with trade benefits – the carrot – and avoidance with trade sanctions – the stick.

If TTIP contains strong labour and environmental protection clauses, this would undoubtedly set a gold standard: it would be the first step towards establishing a new global order based on justice. The litmus tests will be on public services, ISDS and labour standards – this is where the negotiators stand a chance of regaining public faith and trust in trade to benefit ordinary people.

Today, we do not know whether TTIP will be a force for raising living standards or for forcing down wages and weakening democratic rights. But we do know that if we signal to the trade negotiators that progressives will accept any agreement, we will get an agreement that is designed to weaken civil society and democratic institutions. We must engage in this negotiation with a clear sense of what we want, and a clear willingness to oppose the TTIP if we do not get it. Or we will get nothing.

So we’re engaging with the Commission, and making sure that those currently on the dance floor of the negotiations are respecting each other, our communities and that fragile flower of democracy.

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