Critical look at FTAs

Trade deals in a global race: America, Asia, and Europe

While Europeans worried about TTIP negotiations, American and Asian nations finalized TPP. Is Europe being left behind in the race of global economies?

Some time ago, I read a commentary by Eric T. Hansen. He’s an American who came to Germany at age 21, then stayed, and now uses quite a unique and humorous writing style to hold up a mirror to us Germans. Great, I thought. A change of perspective. What’s America’s view on us? And with an example of one of my favorite topics: free trade agreements.

Now in early 2016, the EU is intensifying the TTIP struggle. And also CETA – the agreement with Canada that has been under negotiations for years – suddenly receives increased attention from a number of parties. Bernd Lange, Euro-MP of the German party SPD, reported in an interview with TAZ that parts of the CETA agreement are already being implemented – even without a vote from all 28 EU parliaments. And that this may be possible in a similar way for TTIP.

But, how is this suddenly possible? So far, politicians consistently called on everyone in the EU to “chill out” because trade agreements cannot take effect without consent by all national parliaments. But this turns out to be only partially correct because some elements of these agreements do not involve national state authorities. This may even apply to the controversial investment protection aspect. Consequently, it would be possible for the European Parliament to take agreements into effect on a preliminary basis.

Too slow to lead the economic race?

How do many Europeans react to such a message? With outrage, of course. How is this possible? Are we being betrayed by politics? Were corporate lobbyists successful yet again in taking advantage of loopholes to protect their interests? What a disgrace!

And what does the same message mean to an American, who has lived in Germany for over two decades? It makes him wonder and rub his eyes! Didn’t the US just recently sign a trans-pacific partnership with 11 other states?

To make it short: while we in Europe were fully focused on TTIP, one third of the world’s economy came together to form a free trade zone under TPP. Besides the US, this includes Canada, Chile, Mexico, Peru, New Zealand, Australia, Japan, Malaysia, Brunei, Singapore, and Vietnam.

The two most dynamic and promising regions in the world will grow together. It’s assumed that China will eventually join, too. Underlying preconditions are largely based on US-driven negotiations, and the US also leads the way in terms of innovation. Asia brings dynamism to the table, and a population hungry for progress. My colleague Frans Kok also reported on TPP from an Asia-Pacific perspective in January.

So, what exactly will be left for Europe? Well, sure, we’ll be able to claim that we were clearly ahead of the game in the 18th, 19th, and 20th centuries. We’ll have a history that we are proud of. But it will be others that are looking ahead to a proud future. No wonder we’re picking up pace with TTIP and CETA…

Comfortable and conservative perfectionists?

In Eric T. Hansen’s words, Germany is perfecting kitchen appliances while the rest of the world is occupying the internet, teaching humanoid robots to walk, and sneaking developments of artificial intelligence into everyday life.

Personally, this statement hits me quite hard. I admit to be one of the millions of Thermomix fans. Back in the day I was a more or less creative amateur cook, and today I am a creatively rather limited cooking machine user. A device so intuitively perfected – actually, it should bear a half-eaten apple as logo ;). From my perspective, since the invention of navigation systems and smart phones, this cooking appliance most significantly simplifies daily life. I fear, however, that future generations of these appliances including individually tailored recipes and integrated ingredient delivery service will no longer originate in Europe. Instead, we will focus on perfecting WIFI access of the device to truly ensure 99.9% access throughout all production phases (even though the display is no longer readable once the machine hits 100 blade rotations)…

Taking a step back and using Hansen’s words: “Europeans can certainly compete with Asia – and America – if they want to. But they don’t want to. They are neither as hungry as the Asians, nor do they have a mind set to break molds.”

An outrage! Or a grain of truth?

Is that how we are seen? Are we really that conservative and backwards? It sparks my outrage and I can feel myself rallying up for defense. Employees in Europe are more fairly treated than anywhere else in the world. We’re still working on political integration and at the same time face unique challenges that the refugee crisis currently presents. And for decades we’ve brought peace to a continent that used to be almost constantly at war.

Admittedly, I am also getting the feeling that we are mainly busy with ourselves. And the list of challenges remains extensive: a crumbling currency union, a fall-out with the partner Russia, the old and the new Europe divided, European values of openness and solidarity stretched to the breaking point, separation tendencies on various sides, and a central reserve bank with focus on helicopter money,…

OK, let’s stop the list here, it’s getting frustrating. I guess we urgently need to practice some of the American principle of optimism.

Social responsibility and sustainability

Let’s quickly put the rose-colored glasses back on: us Europeans might be global conservatives but once we’re done wallowing in pessimism, we usually start looking forward realistically. And I am asking myself:

  • Can economies that are built on the basis of constant growth to such an extent – as currently demonstrated by the US and Asia – truly make their success last forever?
  • Isn’t the gap between the richest and the poorest in those regions – America and Asia – becoming ever greater at a rather risky pace? What’s the social risk involved?
  • Aren’t European corporations and hidden champions also already stateless entities that are assigned to countries by mere coincidence?

Sophisticated concerns about TPP are also voiced in the US. Hillary Clinton, for example, is questioning whether pharma corporations nowadays view patients increasingly as profit generators. Another example can be found at the climate front: will those countries that see unlimited growth as the one and only model for the future also feel the consequences of global warming, which is in part also driven by economic growth?

Europe, the sinking ship? Not so fast…

I conclude today with the strange feeling that I am sitting in a sinking ship – when just considering the short term facts. And yet I am completely relaxed because if there’s one thing life teaches us, it’s that it never follows its predicted path. Changes of course always come unexpectedly – and usually from a direction that no one anticipated.

In the meantime, I take comfort in a quintessential American investment strategy: always proceed in a non-cyclical manner. The opera in Europe ain’t over yet – … or is that the fat lady, who’s singing already? Well, either way, let’s stay positive ;). What are your thoughts on this?