Why SMEs fear TTIP
Opinion Piece Author: Gottfried Härle runs the family brewing firm, Brauerei Clemens Härle KG in Leutkirch in Allgäu. He is one of the five co-founders of the www.kmu-gegen-ttip.de campaign (SMEs Against TTIP). The initiative, by SMEs, gives a platform to those small and medium-sized businesses that want to voice their criticisms of TTIP.
DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EurActiv
The idea that the Transatlantic free trade deal – TTIP – would be enthusiastically welcomed or is almost yearned for by business is completely inaccurate.
The TTIP agreement – which for years now has been under negotiation more or less behind closed doors – is just as controversial in the business sector as it is among government representatives. But negotiators on both the European and American sides are trying to dodge or ignore the critics. Even the speaker of the German Bundestag (German parliament) and CDU politician, Norbert Lammert, felt compelled to enter the debate, using undiplomatic language, saying that any treaty on which the representatives of the German people had not been permitted to negotiate and details of which they had not even been allowed to see could hardly expect to receive parliamentary approval.
It is now only the top political leaders and heads of trade associations who continue enthusiastically to describe TTIP as “urgently needed” and “a huge opportunity”. Support for the deal within the business sector now comes mainly from large corporations and from the trade associations and chambers that they dominate; indeed these associations and chambers are even funding costly advertising campaigns in favour of TTIP. According to PR magazine, the Bundesverband der Deutschen Industrie (BDI – Federation of German Industries) is spending a “low seven figure sum” on a “pro TTIP information and outreach campaign”, which includes huge posters on billboards in the centre of Berlin. And the Initiative Neue Soziale Marktwirtschaft, or INSM (New Market Economy Initiative group), commissioned an agency to create a giant, Chinese ‘lucky cat’ figure and sailed it on a boat up and down the River Spree. This is the level to which some Berlin economy officials want to lower the urgently needed debate about TTIP. They seem to be clutching at straws.
This sort of pro TTIP propaganda makes businesses like us feel like we are being taken for fools. And it’s why our campaign, “KMU gegen TTIP” (“SMEs Against TTIP”), is growing so fast and why 1,800 businesspeople have already voted on our website (www.kmu-gegen-ttip.de) in favour of a completely new start to the TTIP negotiations.
The free trade agreement could, afterall, determine the future of many businesses – but unfortunately mostly in a negative way. Businesses know this, and local firms – and even trade associations – have for a long time now not been supporting the pro TTIP stance of their officials in Brussels and Berlin. Indeed the situation in local IHKs (German Chambers of Commerce and Industry) is quite different, as shown in a review by the anti-TTIP “KMU gegen TTIP” campaign. The chambers in Kassel, Cottbus, Oldenburg and Stade, for example, are calling for more transparency and/or participation in the decision-making process. The IHK in Essen and Hamburg’s chamber of trade want considerably tougher rules for the proposed Investor-State Dispute Settlement (ISDS) mechanism. Essen says that “the existing legal system in the EU must not be undermined” and that “the highest degree of transparency in arbitration proceedings must be guaranteed”. The Essen chamber goes on to say that “given that a well functioning legal system already exists, the ISDS mechanism is not needed” and it therefore rejects it. Hamburg also points to the high costs related to the ISDS mechanism and therefore says that, if such a procedure really is unavoidable, it would have to be “simple and affordable” both for large corporates and for SMEs. At least 16 IHKs and three regional umbrella trade associations have formulated their own and often very different positions to TTIP. But the criticisms voiced in these positions fall on deaf ears in Berlin.
What do SMEs see as the main problems with TTIP?
Firstly: we are not opposed to free trade and common markets. Indeed some of the companies run by our campaigners are businesses that import and export within Europe and beyond. But we are calling for an open debate on TTIP so that criticisms can be aired; and we want a level playing field, rather than the lopsided situation that currently exists in favour of big business. We want to contribute to a critical analysis of the opportunities and risks associated with TTIP and to do away with this friend-or-foe fortress mentality that many economy officials have created.
• TTIP will not benefit SMEs: this is a view shared by many businesspeople both within and far beyond the “SMEs Against TTIP” campaign. The reason is that key elements of the planned deal – such as ISDS, the harmonisation of standards and norms, and the opening up of markets for public procurement contracts – will primarily be of benefit to multinationals. And it is precisely these companies, with their greater capital and staff resources, that are forcing SMEs out of the market. We have already seen in the past that agreements like TTIP tend to be a burden to SMEs. The North American Free Trade Agreement (NAFTA), signed between the USA and Mexico, is one such example. Here, American SMEs and Mexico’s small businesses had to give way: for Mexico, NAFTA led to the loss of 1.9 million jobs.
• There would be disadvantages as a result of increased imports from the USA, which in turn would lead to losses in regional markets across Europe (the trade distortion effect). The proposed regulations would put pay to any “buy local” policy and would prevent the setting of specific standards for public procurement contracts. This would lead to local SMEs losing contracts. TTIP not only threatens to lower existing standards; it would also mean that current inadequate standards would become set in stone.
• Negative List System: SMEs need reliable planning parameters, so the effects of a regulation based on the ‘Negative List’ system are hard to comprehend. Very little is said about this in the debate on TTIP. To date we have always come to agreements with our partners using the ‘Positive List’ system: in other words, no sector can be opened up unless it is specified on the list. In the case of TTIP (and CETA – the trade agreement with Canada) things are quite different. All sectors will be liberalised unless they are deemed to be particularly sensitive sectors and are excluded from the negotiations. According to the ‘list it or lose it’ principle, in future there will be pressure to privatise all those sectors which are not saved by the ‘Negative List’.
• Investor-State Dispute Settlement (ISDS) mechanism: it will be practically impossible for SMEs to have access to arbitration tribunals, given the high costs involved (US$8 million on average). And yet the ISDS mechanism is firmly anchored into CETA.In the case of TTIP, EU Trade Commissioner Malmström has renamed it the ICS (Investment Court System). But the key elements remain unchanged. It continues to represent the construction of a parallel legal system. The intention is that cases can only be brought by corporations – not by states, social organisations or companies that operate on the internal market only. We reject this.
• Regulatory Cooperation Council: SMEs which take a regional or sustainable approach will lose their competitiveness if, under TTIP, new pesticides like glyphosate are licensed, or if high social and environmental standards are reduced. Thus, regulatory cooperation as it exists in America, represents a danger for us. (In the American regulatory cooperation council senior government officials are joined in the main by corporate lobbyists.) The hurdles that medicines, chemicals, GMO plants etc. would have to cross would be lowered or simply removed. The planned Regulatory Cooperation Council would take away parliaments’ decision-making powers.
Therefore the TTIP negotiations have to be started again from scratch; and from the very start they need to be carried out openly. Lammert’s criticisms for the most part remain unheard. Thus far the EU Commission has only managed to negotiate with the American side that in future federal government officials and officials from other EU countries may only read summary versions of TTIP documents – and only in specially secured reading rooms. It is still not clear if members of parliament will be given similar access. Elected members of parliament of course find this unreasonable; and even the CSU politician, Peter Ramsauer, has spoken of “reading documents in prison-like conditions”.
What is also unreasonable is a sort of ‘black box’ free trade agreement, the incalculable contents of which could endanger the economic basis of many of Germany’s 2.2 million SMEs. It has to be pointed out that these companies provide 60 per cent of Germany’s jobs. Their criticisms must be listened to and taken seriously.