(Originally posted by Blasting News France)
Pierre Defraigne, an economist and European official from 1970 to 2005, was the Head of Cabinet to Pascal Lamy, the EU Trade Commissioner from 1999 to 2004. As an executive director of the Madariaga Foundation - College of Europe in Brussels he regularly organizes talks on the future of Europe, including the TTIP / TAFTA.What do you think of the potential benefits of the transatlantic partnership, including 119 billion euros per year for Europe, 95 billion euros per year for the US and European GDP growth of 0.5% and 1% ten years after the implementation of the agreement?
Pierre Defraigne. The growth argument is unconvincing. These numbers are relatively modest and say nothing about what it means in terms of employment. This growth would benefit some states such as Germany and the UK, rather than others… And that could increase the differences within the EU, especially as it cannot afford to precisely measure them. I would add that this marginal growth could be accompanied by job losses because the gains would mainly go to the shareholders rather than to the workers. When, through mergers and acquisitions, two companies get restructured there are productivity gains including economies of scale. Are lower costs going to mean lower prices which would then lead to rising demand production and employment?
Or will these gains simply benefit shareholders? This issue is not addressed in the London political research center (CEPR) study which was commissioned by the European Commission. It cannot be neglected. The restructuring of a large company always has strong regional consequences. I believe that in the sectors that want this agreement, there is the idea of productivity gains for large companies.
On American and European companies?
Pierre Defraigne. There is an asymmetry in favor of the US companies, which are already very present in Europe. In some sectors such as digital, Europe has almost no presence. With progress and competition in the US market it is absolutely not certain that Europe will get market share. Moreover, the European market is much more open than the US market. The US market for example keeps the Buy American Act, a federal law, which requires the acquisition of local products with established companies and organizations in the US.With TTIP / TAFTA, Europe is trying to remain one of the most important markets in the world by imposing standards on other markets...
Pierre Defraigne.
First of all, there is the problem of transatlantic standards between Europe and the United States and I doubt that the rest of the world will accept these standards. China, which is a large and expanding market, will try to protect itself by playing with industrial integration in order to impose other standards to its Asian neighbors, which it dominates already. If Europe and the US want to build their block, China can build up its own block as well. The transatlantic partnership, if approved, could fragment the global market and generate trading, monetary and maybe strategic blocs. TTIP / TAFTA seems to be a sorcerer's apprentice creation to me.
But this is the most important agreement negotiated by the European Union ...
This crucial stage of the negotiations relates to Commons Custom Tariff, public markets, services, standards...
Many civic organizations fear that the TTIP would bring down European standards.
Pierre Defraigne. Under the terms of the European Commission, each of the parties, European and American, plan to stay at the highest standards. However, I believe that something is neglected in the process - the matter of substance. When integrating two markets into a single transatlantic market, two different models of society are put together, including the social model which includes competition between social systems and wage levels. I think this will be the real challenge of the TTIP. I mentioned restructuring earlier. Well, companies choose to produce in one country rather than in another and play on it to get advantageous terms.
That means putting different social models in competition and this is usually done from the bottom: it destroys jobs and lowers wages. I believe that this last point is linked to a high level of unemployment in Europe. The high unemployment rate cannot be ignored. It is still very high in the US and is increasing in Europe.
Do you think that with the TTIP, US companies will take even more space than European companies?
Pierre Defraigne. I believe that compared to the US Europe is weak because the US partner has polished their governance, they have a very united domestic market in many sectors including Finance, digital, energy, weaponry and telecommunications. But Europe is not as united as the US in these sectors.
Europe and the US certainly have about the same economic weight but Europe is too disunited compared to the US. For example the United States - through the federal budget - has internal mechanisms to redistribute the gains and losses of liberalization. Those are mechanisms that Europe does not have, except from the European Globalisation Adjustment Fund (GEF) which is ridiculous and cannot be compared to American mechanisms. Moreover, the fact that in US trade, fiscal and research policy are dominated by lobbies cannot be ignored. US trade policy is really privatized, driven by interest groups which financed the president's election campaigns and those of most representatives in Congress. In comparison, Europe appears to be heterogeneous: some Member States have rivalry between them. And when it comes to attracting investment in Europe, Member States squabble for the best part of the cake.
