TTIP also affects developing countries

Employment & Income,Inclusive Economy22 Sep 2014Owen Tudor

The implications of TTIP for employment are uncertain for the EU and US, but also for developing countries.

The EU-US trade deal currently under negotiation – known as the Transatlantic Trade and Investment Partnership (TTIP) – is being promoted as the answer to sluggish growth and mass unemployment on both sides of the Atlantic.

International trade can of course boost jobs, although for developed economies like the EU and the US, it is not going to have the impact that it did on a formerly closed, developing economy like China. It is important to note that trade agreements are not the same as trade. The track record of some – like the North American Free Trade Agreement (NAFTA) – has been poor on job creation, whereas the EU – itself one big free trade area – has been generally been considered to be positive. The difference between NAFTA and the EU is at least partly because the EU has a social dimension to accompany the single market, with governments committed to full employment, state intervention and social protection. TTIP would see the end of tariffs between the EU and the US, which should increase trade volumes across the Atlantic.

But there are worrying implications from the inclusion in the negotiations of regulatory convergence which many (not just in Europe) worry will reduce protections for workers, consumers and the environment. In particular, the EU’s control of chemicals at work under the REACH directive could be watered down if chemicals manufactured under the much weaker US system can be imported.

In addition, special protections for private investors (e.g. Investor-State Dispute Settlement procedures) could give them the upper hand over governments attempting to regulate or renationalize health, rail and other public services.

The implications for employment growth are far less clear. Studies which have been conducted so far have presented a mixed picture of some job gains, some losses. Economic models (such as computable general equilibrium models which assume that job losses and gains automatically balance out) do not give much certainty about predicted job gains. Such models are reduced to assuming that job gains will not be produced from anything specific to TTIP, but as a side-effect of the growth that is predicted to result.

The story of the last couple of decades, in both the EU and the US, has been that the benefits of such growth have not been shared around equally, but have been entering the pockets of the 1%. Therefore claims that TTIP-inspired growth will see reductions in unemployment are unconvincing.

Our contemporaries in Africa, Asia and Latin America are wary that job gains in their economies due to increased growth in the EU and US demanding more imports could be offset, if tariff reductions lead to the prices of EU and US goods dropping compared to imports from developing countries. Simply put, will dropping tariff barriers in the mid-Atlantic raise the drawbridge to goods entering the EU-US market from outside at the same time?

What trade unions are looking for in further research on TTIP and growth is a greater sector focus on where jobs might be created – which could be at the level of individual firms. We want to know what sort of jobs will be created: the low quality, low pay, low rights jobs that the UK seems to specialise in, or highly skilled, well paid, quality work? Expecting the former, the TUC Congress in September adopted a policy of opposition to TTIP.

This expert opinion is one of a series of articles on trade agreements. The series was published shortly before the start of the 7th round of negotiations on TTIP on 29 September and the expiry of the deadline for signing the EPAs that the EU has set at 1 October. Please find the other articles in this series here.