A few, or rather two, trade and economic alliances may rule our brave new world

Jean-Claude Juncker, President of the European Commission (first from left) and Donald Tusk, President of the European Council, bending his head a bit more than what the protocol demands (in the middle) participated in the at the 23rd EU-Japan Summit, which took place in Tokyo. In this instance they meet with the Japanese prime minister Shinzo Abe. (European Commission Audiovisual Services, 29/05/2015, Tokyo).

Jean-Claude Juncker, President of the European Commission (first from left) and Donald Tusk, President of the European Council, bending his head a bit more than what the protocol demands (in the middle) participated in the at the 23rd EU-Japan Summit, which took place in Tokyo. In this instance they meet with the Japanese prime minister Shinzo Abe. (European Commission Audiovisual Services, 29/05/2015, Tokyo).

Jean-Claude Juncker, the EU Commission President together with the Japanese Prime Minister Shinzo Abe gave a Press conference following the 23rd EU-Japan Summit which took place in Tokyo on 29 May. The focal point of the meeting was supposed to be the free trade agreement (FTA) between the two sides. However the EU dignitary spoke mostly about internal EU affairs like the Greek question and Europe’s growth problem rather than the subject matter of his trip to the other side of the globe. Should the Japanese authorities take it as a sign that the EU doesn’t think much about this topic?

Even the timetable that Juncker proposed for the conclusion of this key agreement was elusive. On top of that, he related the signing of the EU-Japan FTA with the TTIP (Transatlantic Trade and Investment Partnership) the free trade agreement that the EU and the US are negotiating for two years now. In reality he made the former conditional on the conclusion of the latter. In a very clear manner he also left it to be understood that the EU-Japan FTA has to be as extensive and comprehensive as TTIP.

Goodbye Tokyo

In reference to both agreements he said “We want to be ambitious: eliminating tariffs and relevant non-tariff measures; opening up services, investment and public procurement; fully protecting geographical indications”. The truth is, however, that while the TTIP is progressing in all those fronts albeit slowly and laboriously, the EU-Japan one is far away from any of its crucial chapters like the burning file of the automotive sector. As for the EU-Japan joint statement which was issued after the conference, it was devoted to security issues rather than to trade. This joint statement issued by Shinzo Abe, Donald Tusk, President of the European Council and Juncker was almost exclusively devoted to East Asian security issues. It was more than evident that the EU-Japan free trade agreement was not the hot issue of the Summit; at least as far as the EU side was concerned.

Hello Washington

On another occasion pertaining also to the EU’s foreign trade, the EU Commission Vice-President Andrus Ansip (in charge of the Digital Single Market) on 28 May delivered a speech, at the Brookings Institute in Washington D.C. under the title: “Building digital bridges: Transatlantic cooperation in ICT”. He opened his speech by stressing that “data flows between the United States and Europe are the highest in the world—50 percent more than those between the U.S. and Asia. Almost double the flows between the U.S. and Latin America”.

An obvious comment on this statement is that it’s clearly a positive and supportive remark favouring the swift conclusion of the strongly disputed TTIP at this side of the Atlantic. In reality this Ansip remark, actually a tautology, focuses on a more or less expected fact about the large size of the volume of data flows between Europe and the US. Nevertheless he needlessly elevated it into a strong argument, directly supporting his view why Brussels must agree with Washington over crucial trade issues and more. Comparing these two Commission considerations about the two prospective FTAs with the US and Japan, the EU is obviously biased in favour of the former.

Not without good reason

Of course there are innumerable other indications and reasons why Europe is immensely more interested in concluding the FTA with the US. At the same time Brussels doesn’t seem to bother much about the Japanese one. All that give us a taste about how our brave new world functions after the global authority on international trade, the World Trade Oraganisation ceased to play its time cherished role. WTO made sure that all trade disputes were resolved on the same principles no matter who the conflicting parties were. Not anymore. Now the big economic and political powers are trying to resolve their differences on a bilateral base. The smaller players are squeezed out of the picture. But the WTO is not the only international dispute solving forum that doesn’t anymore play its pacifying role. Let’s reflect on it a bit.

During the past twenty years the principles of international law have gradually succumbed. No political principles apply anymore in international relations, at least in Africa, the Middle East and even in some parts of Europe and Asia. Ukraine, Crimea, the Balkans, and South China Sea all stand witnesses to this. Entire countries are being destroyed and disappear from the map while ‘states’ like ISIS and the Boko Haram are a reality. The antagonism amongst the heavyweights like the US, EU, China and Russia takes at times dangerous forms the world hadn’t seen after the WWII.

New regroupings

Very possibly because of that though, there seem to appear some gigantic groupings like the Atlantic economic volume (US, EU and Canada) and the BRICs. In some ways within those groupings the participants are suppressing their own differences in order to create a huge and self sustainable alliance, able to dictate its own terms, primarily in the economic field or at least adequately protect their interests. The security gist comes next. The EU and the US constitute the pillars of Western alliance, which has a special feature. It is much more advanced in the military chapter with NATO, while their economies albeit parallel still retain their largely differing characters.

TTIP is meant to change that and create a homogenous economic space/market with an annual GDP of around $25 trillion. In order for this prospect to have a meaning in the arena of global competition, the major differences between the US and the EU have to disappear. The target is to create a common economic volume for the free circulation of capital and goods. Presumably however, this homogeneity is to be attained by exorcising some European peculiarities like the tough labour legislation and the social protection systems.

The big getting bigger

In such a huge borderless free competition Atlantic universe the small and the medium sized enterprises will be in a disadvantaged position and Europe is full of them. On top of that, the costly European social model will become a growing disadvantage for many EU countries (France for example). Because of this reality the social and the political structures in many countries will come under pressure. Greece is an early bird of that. Only Britain and to some extend Germany and very few more smaller EU countries have introduced ground braking changes in their labour market and social protection structures, making them ready to participate in this new Atlantic economic space to be created by TTIP. For all those reasons great frictions are expected in Europe over the next few years.

It’s very characteristic that the European Economic and Social Committee (EESC), expressing authentically the interests of the very small businesses and the working classes seems to have felt that danger. That’s why the EESC last week opposed the inclusion of Investor-State Dispute Settlement (ISDS) provisions in the Transatlantic Trade and Investment Partnership (TTIP) or in the Comprehensive Economic Trade Agreement (CETA), presently negotiated with the US and Canada respectively. It must be noted though that the Employers group within the EESC didn’t oppose the inclusion of the ISDS in TTIP. On the contrary, in the EESC plenary they fought for its inclusion.

Protecting the strongest?

Understandably, if the ISDS is incorporated in those two free trade agreements, it will support not only the American multinationals but also the European ones to gain a structural advantage vis-à-vis the European small businesses and the working classes. To be noted, that the ISDS will guarantee to employers that from the moment they complete an investment there shouldn’t be any changes in the labour legislation and the social protection rules. To secure this the ISDS will give the employers the right to sue for indemnities, if their profits are to be harmed in any way by a government decision.

There is no doubt that over the next few years Europe and the world are to see unprecedented changes. In the economic field the incomes inequality will continue to grow. In the political level the international groupings like the Western alliance and the BRICs will gain momentum. The early signs of all that are the destruction of Afghanistan, Iraq, Libya, Syria and Ukraine along with what Beijing does in the South China Sea and how Crimea was incorporated into Russia.

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