west*wales*news*review

West Wales News Review — analysis with a sustainability slant

Shock Brexit Offers Chance to Rebuild — Better

So West Wales voted for EU exit. Carmarthenshire, 53.8% to 46.3%, Pembrokeshire 57.1% to 42.9%. Ceredigion electors thought differently, 54.6% wanting to remain. Well, Cardis have to live up to their reputation for fiscal caution!

Over Wales as a whole, the message that we need to remain in the EU, because we get more money out than we pay in, was not enough. In Wales only Ceredigion, Gwynedd, Monmouth and Vale of Glamorgan, and Cardiff, voted to stay in: two farming counties, two enclaves of relative affluence, and the capital.

In truth the ‘we get more out’ argument was too restricted, based on temporary financial advantage and not on deeper matters of political philosophy.

The main argument for me turned on whether the task of reforming the EU would be possible if we stayed in. The European Union expanded much too fast, in my view as a marginal bystander; the Euro is a straitjacket; and policy making in the EU is now excessively dominated by the big corporate battalions – which cannot be voted out, making reform colossally difficult to achieve.

The corporations are behind TTIP, the Transatlantic Trade and Investment Partnership, currently being negotiated behind firmly closed doors in Europe. TTIP is scary, as I wrote in Solving the Grim Equation (published by Cambria Books in 2015). Here is an extract, from pages 191-194:

“TTIP, a proposed ‘open market’ trade deal between the USA and the European Union, has near miraculous status in the minds of its proponents. Take this paean from an EU question-and-answer document:[i]

“European companies, workers and citizens would benefit enormously from a more open US market. The EU has many highly competitive firms producing top quality products and services, including many world leaders and top brands. In agriculture, for example, US plant health regulations ban European apples, while their food safety rules make it illegal to import many European cheeses. Getting rid of tariffs and other barriers to trade will enable European producers to sell more to the Americans: that is good for business and good for jobs. Removing EU barriers to US products and investment will mean more choice and lower prices for people here in Europe. What is clear is that both sides will gain from further opening up their markets to trade and investment. It will be a win-win situation.”

Win win for whom, the reader wonders. In 2013 the European Commission asked the Centre for Economic Policy Research (CEPR)[ii] to investigate the pros and cons of TTIP, and the CEPR’s figures indicated financial benefits. As far as the EU Commission was concerned, the CEPR was likely to be a safe pair of hands, and so it proved. The centre receives funding from a long list of banks, including central banks and commercial banks from around the world, and calls upon a network of academic economists to lead research projects.

Academic economists have long prioritised theory over the messy reality of the real world. Particularly, they are reluctant to worry about resource unavailability, on the basis that if one commodity is unattainable, clever humans will find another to substitute. The CEPR asked if TTIP would result in economic growth, and concluded that yes, it would, and is therefore highly desirable.

TTIP is about ‘harmonising’ regulations, which tend to slip towards a lowest common denominator, and also about protecting corporations from governments which change – strengthen – the regulatory environment. The protection will be in the Investor State Dispute Settlement (ISDS) system. This means that foreign companies, or multinationals whose operations in a territory are (even if nominally) controlled from outside the borders, are at liberty to sue governments who do anything likely to threaten the future flow of profits. ISDS cases in the TTIP would be heard in secret by a panel of specialist lawyers.

The negotiations for TTIP are proceeding in secret. The EU Commission justifies this as follows:

“For trade negotiations to work and succeed, you need a certain degree of confidentiality, otherwise it would be like showing the other players one’s cards in a card game.”[iii]

This is a weak argument. A trade agreement with the potential profoundly to change European societies – weaker environmental protection, lower wages resulting from more ferocious competition, the likely introduction of technologies such as seeds-and-chemicals packages, to which many people object – is rather more serious than a game of gin rummy or whist.

TTIP may be profitable for the world’s big corporations, their owners, lawyers and advisers, but the very concept of ISDS, privileging capital above all other considerations, is profoundly regressive. There are voices against TTIP, although they lack the clout of TTIP’s cheerleaders. The Austrian Foundation for Development Research, Vienna produced a report called ‘Assessing the Claimed Benefits of the Transatlantic Trade and Investment Partnership’,[iv] which is more balanced and draws out disadvantages, such as the compensation payments governments would have to make to corporations if they strengthened regulation, the loss of income to governments when tariffs are abolished, welfare costs if workers become unemployed, and lower tax revenues. The report concludes:

“Last but not least, an investor-to-state dispute settlement mechanism, if included in TTIP, could lead to compensation payments by governments and have a disciplining effect on future regulation in the public interest. A qualified public debate on the need for such an arbitration mechanism as currently proposed, and a discussion about alternative forms of international investment arbitration, which is both transparent and equilibrated in its treatment of investors’ rights and the prerogatives of public policy, is urgently needed.”[v]

The Centre for Economic Policy Research, happily assuming minimal drawbacks, reckoned that TTIP would bring €119 billion to the EU and €95 billion to the USA, which would equate to €545 for a family of four in Europe and €655 for a family in the USA. Equivalence is not actual income, though, and it is possible that families would not see any of the claimed benefits. The aim is not to make all families more prosperous, but to open doors for business. Even before TTIP, tariffs between the EU and the USA average less than 3% — and even more to the point, at least a third of transatlantic trade is intra-company, i.e. companies sending their own goods from one side of the Atlantic to the other, for whom the removal of tariffs has immediate cash flow benefits.

The North American Free Trade Agreement (NAFTA) has lessons for TTIP. NAFTA, a deal between the USA, Canada and Mexico introduced in 1994, has increased the power of major corporations, free to move capital and production wherever they want, a freedom which intensifies job insecurity and damages conditions for workers. Free markets, however, are still in vogue among the upper echelons of governments around the world.”  (end of extract)

 

Free markets have benefited big business owners, executives and bankers but the ‘trickle down’ of wealth to the majority of people is largely absent. And the power of corporations is too often misused, to gobble up finite resources, trash the environment, buy up politicians and ride roughshod over workers’ human rights.

The European Union changed from a small group of countries deciding on mutual economic assistance to a political behemoth deaf to the plight of people in poorer member states, especially de facto bankrupt Greece.

Future co-operation between European states is vital, of course, but voluntary collaboration between nations as diverse as they want to be, a political permaculture of ecological niches responsive to local conditions and not a monoculture mandated from a far-away head office.

Isn’t that why the Soviet economic system failed? Management and control by remote diktat?

The challenge of domination by corporations has not gone away, far from it, but we have a chance now to create political structures which are more flexible, adaptive — and democratic.

PDR

 

 

[i]  European Commission, http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and-answers/

[ii] ‘Estimating the Economic Impact on the UK of a Transatlantic Trade and Investment Partnership (TTIP) Agreement between the European Union and the United States’. Final project report by the Centre for Economic Policy Research, March 2013.

[iii] European Commission, as above.

[iv] ‘Assessing the claimed benefits of the Transatlantic Trade and Investment Partnership’ by Werner Raza and Bernhard Tröster, Austrian Foundation for Development Research, Vienna, 2014, http://www.guengl.eu/uploads/plenary-focus-pdf/ASSESS_TTIP.pdf

[v] Part V, Conclusions and policy recommendations, www2.euromemorandum.eu/uploads/raza_assessing_the_claimed_benefits_of_the_transatlantic_ttip.pdf

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