Trade policy is generally a dull area of international relations that only gets a limited number of policymakers, commercial diplomats, business groups and policy analysts excited. But the trade sphere has now become a political minefield.
There is waning support for trade in big Western democracies, and the Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated by Brussels and Washington DC could become a casualty of this process. And while until now public opinion in staunchly pro-American and pro-free market Central and Eastern European member states has been taken for granted by proponents of TTIP, they better take a closer look, as public support for the trade deal is now slipping in these parts of Europe too.
Horse-trading visa rights
Trade policy defines how traded goods are treated and taxed at customs, whether an investor can set up shop in a foreign country and under what conditions, or whether an industrial product complies with environmental or health regulations so that it can be cleared for release in a given market. There is a rising trend towards big bilateral trade deals between big trading blocs, such as TTIP, to tackle precisely such issues.
In the EU, trade policy is formally the exclusive remit of Brussels; the European Commission is in charge of negotiating trade agreements on behalf of the member states. Trade treaties, once concluded, are then ratified by the 28 member states in Brussels according to a ‘qualified’ majority vote, and by the EU Parliament.
In a rising number of cases trade agreements are also ratified by individual member state parliaments in national capitals. This is a new trend triggered by changes to EU fundamental law in the 2010 Lisbon Treaty. This means it is crucial to have all 28 EU member states on board a deal. The March non-binding referendum in the Netherlands on the EU’s Association Agreement with Ukraine, which was nixed by Dutch voters, raised the possibility that one day a single country could derail a text that had taken years of careful negotiations. Individual member states have started to discover that they have serious leverage: they can horse-trade something with the EU or its partners in return for support for an international trade deal.
In April, the Romanian government, after the European Commission failed to obtain from Canada the same tourist visa waiver policy as citizens from other member states, threatened to veto the recently concluded Comprehensive Economic and Trade Agreement (CETA) if it didn’t obtain satisfaction on this matter. CETA is a far-reaching trade deal between the EU and Canada that was signed in 2015, but is still awaiting ratification. Bucharest was emboldened by the example set by Prague, which threatened to veto CETA and obtained satisfaction on visas for Czech citizens in 2013.
Public opinion in former communist EU member states is on average much more supportive of TTIP than the rest of the EU. TTIP signals closer ties with the US – something that is key to national security on the eastern flanks of Europe. TTIP will likely lead to more imports of liquefied natural gas from the US, thus improving energy security in the region, and the deal also signals modernity and jobs. Economic studies back up popular opinion. A study by the World Trade Institute released in December 2015 estimates that Lithuania would be among the biggest winners of TTIP among EU member states, gaining 1.6% in economic output thanks to the deal. Slovakian exports could surge by 116%, so the study estimates.
The last bi-annual ‘standard’ Eurobarometer poll of November 2015 reveals that in Lithuania 78% of respondents said they were in favour of TTIP; in Romania support levels stood at 72%. By comparison, the EU average stood at just 53%, with a recent Bertelsmann Foundation poll putting German support for TTIP at a mere 15%. Slovenians have been the only EU people from the former communist sphere opposed to TTIP from the start, with support levels at only 41%.
And public support for TTIP across the EU is on a downward trend. In November 2014, average support for TTIP in the EU stood at 58%, 5 percentage points higher than in 2015. “In South and Central and Eastern Europe the trend follows the general trend across the EU of decreasing support for TTIP, but it decreases from a higher level,” Doru Frantescu, director of VoteWatch.eu, an organisation that analyses the votes of parliamentarians and member states in Brussels, explains to bne IntelliNews. In November 2014, Polish support for TTIP stood at 73%, only to drop to 66% a year later. In the Czech Republic support stood at 62% in favour of TTIP in November 2014, but had plunged to 49% a year later.
Not quite toeing the party line
The European Parliament adopted a resolution on TTIP in July 2015 that broadly endorsed the project. The resolution, legally a non-binding text, offers crucial guidance to the trade negotiators because it signals to them under what conditions the European Parliament would ultimately ratify or reject a trade deal.
However, more than 34% of Members of the European Parliament (MEP) rejected the controversial text. There were few outright rejections from CEE MEPs, who mostly followed the general line taken by the European political group that their party is affiliated with in the European Parliament. But this does not mean mainstream CEE MEPs toed sheepishly the EU ‘party line’. 15 out of the 32 MEPs that decided to abstain on the July 2015 TTIP resolution, many from the centre-right EPP, the centrist ALDE, and above all the centre-left S&D, were from the former Eastern Bloc states. “MEPs follow the group line, but this should not be taken for granted. This happens only as long as there are no big debates in their own member states and constituencies which can reshape their position,” Frantescu says.
So far, public debate on TTIP in the CEE region has been limited. The Czech Republic has seen a leftist backlash against TTIP, comparable to, though not on the same scale as, the one seen in Germany. It is led by civil society groups, digital rights organisations and leftist activists. The recent surge of the far right in elections in the region also plays a role. During a debate in the Hungarian parliament, Marton Gyongyosi from the ultranationalist Jobbik party, said TTIP would be “the last step” in Hungary’s process of “becoming a colony and losing its independence”.
The right of foreign investors to sue host governments in international arbitration tribunals if they consider they’ve been expropriated is also influencing public opinion. In the last two years, the region has seen a surge in new so-called investor-to-state dispute settlement (ISDS) cases brought by investors against governments in the Czech Republic, Poland and Hungary. Most of these cases were brought by European firms, referring to treaties signed by their governments with Western European member states in the early 1990s – not by US firms, who, in the unlikely event ISDS were to be included in TTIP, would benefit from the deal. Yet the cases have not helped swing the mood in favour of a TTIP whose most debated point so far has been about whether to allow such arbitration cases to happen.
Farmers and the chemicals industry in the region are fretting that the elimination of import tariffs and smoother approval processes for foods from the US, a possible outcome of the TTIP talks, could harm jobs. The moment TTIP will become tangible reality for these groups, one can expect the deal to become even more controversial in the region.