Scotland's Economy

Brexit won’t stop TTIP but can a better deal be negotiated?

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Across Europe there have been demonstrations against TTIP

TTIP, the Transatlantic Trade and Investment Partnership, is a bilateral trade deal being negotiated between America and the EU. New trade deals are negotiated on our behalf by the EU on a regular basis with South Korea three years ago that has led to 36% increase in EU exports and one with Canada being signed soon. Usually few people know or care about them outside the negotiating teams. TTIP is the exception; across Europe there have been demonstrations and organisations are springing up as diverse as artists against TTIP in the UK and “SME against TTIP” in Germany and this has very defiantly caught the EU trade negotiators by surprise.

This is for three main reasons. Firstly, there are a few elements of TTIP that make it look like a dog of a deal, and people are worried that issues such as commercial arbitration tribunals undermining sovereign law, big companies suing governments for policies that impact on profits and that lowering food and environmental standards, will hurt UK businesses. Secondly, we actually know about it, we are told that it is all being negotiated in secret (most trade deals are), however, there is more information out there on TTIP than any other trade deal I have ever looked into not just from those attacking it but from the EU itself and that is part of the problem. Every trade deal I have ever looked at, every national exporting strategy, I have ever been involved with, helping to write it or providing evidence on behalf of business, has been a dog’s dinner in the first draft and TTIP was no exception. The reason TTIP hasn’t panicked me is I believe that as usual the daft stuff won’t make the final draft. Thirdly TTIP is making news due to the EU referendum; those that wish to leave the EU are using public awareness and rising public distrust with the deal to make it a political football in the referendum.

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A Brexit won’t save us from TTIP, with Cameron backing the trade agreement with the US

The claim that a Brexit would stop TTIP being applied in the UK is completely false. David Cameron claims that TTIP was actually his idea in the first place and that he “intends to put a rocket under the deal and get it signed”. If you believe that the UK won’t sign a trade deal with the USA following a Brexit you have to believe that Cameron, who has lobbied for the bad bits of TTIP (such as the ability to sue governments whose policies damage big corporations profits) to stay in, would somehow look to do a deal that didn’t include those elements. If we Brexit, then its more likely that the EU will drop the more contentious bits and do a better deal with the USA than Cameron or Johnson would. A Brexit won’t save you from the bad bits in TTIP, but it will put our SMEs, (the backbone of Scottish business), at a competitive disadvantage.

Trade deals are almost always hugely beneficial, companies and countries operate in a global economic system that demands interconnectivity and interdependence in ways that couldn’t have been imagined even at the outset of the EU project. Barriers to trade are counter productive to both the politics of the left and the right. Free trade, breaking down barriers and equalising workers and human rights creates a more level playing field and has lifted people out of poverty, created jobs and opened up markets for our products and allowed our economy to grow. Protectionism doesn’t work and leaves the businesses protected in the short term uncompetitive, resistant to innovation, poor at up-skilling workers and eventually obsolete and bankrupt in the long term. I don’t believe in allowing the market to fix wages because it will fix them at poverty rates, or that we should deregulate major industries because they will then take risks in the pursuit of profit creating bubbles that will burst, and it’s ordinary working people that bear the brunt of the fall out.

What I do believe is that global economic trade is an unstoppable wave; nations either need to learn to ride it or drown. Open global trade with equalised working and quality standards leads to developed nations having to create better quality, higher paying jobs in order to make better quality, higher priced goods to compete. The Scottish origin of goods in many sectors has a significant benefit in terms of quality perception and can command higher prices for innovative food and drink, bioscience, gaming, clothing and renewables products and more. Getting rid of trade barriers with a deal that includes specific measures to help SMEs navigate the barriers to entry in the American market, when our products in many of the fastest growth potential areas have a quality advantage, is a good thing.

Multinational corporations have the size, power and money to overcome trade barriers, it’s SMEs that are disproportionately damaged by barriers and SMEs make up 99.4% of Scotland’s businesses, employing 1.2million (55.6% of all private sector employment), 40% of private sector turnover and representing the single biggest opportunity for economic growth. SME exports from Scotland were worth £12.4bn to the Scottish economy in 2014, representing a 59% rise since 2006. As a percentage of total Scottish exports, SMEs share increased from 40.5% to 45% over the same time period. Overall, average USA trade tariffs are 4% but there are some interesting exemptions. Why should men’s cashmere coats produced by skilled workers and designers in the borders face a 16% trade tariff or a women’s blouse a 45% tariff before being sold in the United States?

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Essential public services should be protected as part of the deal

So now we know the good and the bad of the deal, how do we make it less ugly? Well for a start the protests are useful in giving the European negotiators ammunition to undermine some of the more extreme demands on the American wish list. All parties need to seek the achievable goal of keeping essential public services and quality standards out of the deal, but demanding an immediate stop to the deal is as effective as shouting at a hurricane.

TTIP is in trouble though, the clock is running out; they should be dotting the I’s and crossing the T’s by now, but less than half the deal has been agreed and the half that they are at loggerheads on includes all the contentious bits. They have until July to agree a final draft to be considered by the European Parliament and national governments, but that looks like a tall order without dropping the international public procurement and commercial dispute settlement suggestions that are causing such public worry. A TTIP-lite solution might arise and as long as sectors important to Scotland – food and engineering and biotechnology / life sciences – were not thought too complex to be included, then TTIP-lite might just get the deal done before Obama leaves office and the UK votes on its EU membership. Doing no deal at all reminds me of a story involving a baby and some bathwater and if the USA then turns its axis to Asia and looks to solve its economic problems though a stronger partnership with China, then the EU’s global economic position will be weakened and Scotland’s SMEs will see opportunities missed.

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About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

2 Comments

  • ‘If we Brexit, then its more likely that the EU will drop the more contentious bits and do a better deal with the USA than Cameron or Johnson would.’

    For this reason alone, vote leave. As you point out, pressure for this kind of deal favouring multinationals and not SME is coming from the Tories. They won’t be out of power til 2020, thanks to the imposition of 25% reduction in democracy -5 year Fixed Term- so the only way to protect SME Europe wide and the rights of democratic governments and their citizens is to vote leave and so give rest of EU countries the chance to negotiate a fairer version of this Trojan horse of a treaty. What you are saying amounts to cutting off your nose (Scottish SME vs TTIP) to spite your face (all EU SME vs TTIP).

    • If we Brexit all the powers of the EU transfer to Cameron in Downing Street and before the actual departure from the EU is completed the UK will have to sign a deal like TTIP with he USA. Given that Cameron is the champion of the bits that you don’t like then all a Brexit will do is mean that the UK gets TTIP turbo charged and the EU might have a lite version. If we stay in the EU then the moderating influence of the EU will stop TTIP from including drops in standards which are the very standards the UK out campaign want to stop the EU imposing on us. Strategically your suggestion doesn’t make any sense however is SME business organisations all over the EU call for a better trade agreement for SME then we might just get it.

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