Countless articles, emails and campaigns have expressed anger about TTIP. This is the Transatlantic Trade and Investment Partnership, which would cover over 800 million people in the EU and US, as well as helping determine the shape of future agreements the world over. There are numerous concerns – some entirely misguided, some merely exaggerated – and from reading the literature of campaign groups like 38 Degrees it might be hard to know whether there are any benefits at all from this trade deal. So supporters of free trade need to straightforwardly spell out some of TTIP’s advantages.
In particular, lost among the scaremongering and obscure debates has been the very foundation of TTIP: an abolition of almost all the remaining import and export tariffs between the US and EU. It’s true, as both supporters and opponents of TTIP say, that tariffs are only a part of the deal: harmonising regulations (without lowering standards) is now often more important. But when the entire process is under attack, the scrapping of tariffs should not be glossed over. I hope it’s not too insulting to suggest that many of those attacking TTIP or signing petitions (not to mention those who haven’t heard of TTIP) may have no idea that it includes the scrapping of import and export tariffs.
So take a look at the list of example tariffs below and put opponents of the negotiations on the back foot by asking why they want to retain a 10.5% tax on imported babies’ clothing, 12% tax on jeans, or a 4.7% tax on teddy bears. If the government were to propose taxes like these, many of the same people shouting about TTIP would scream blue murder about heartless politicians hammering the poorest – yet they’re the ones fighting to retain these tariffs.
Why should people support the TTIP trade deal? Here's one reason pic.twitter.com/XvBX9m5gff
— Adam Corlett (@adamcorlett) October 9, 2015
Cutting prices (and red tape) by scrapping tariffs is just one of TTIP’s benefits for Britain (and it works both ways – e.g. also ending the US’s 14% tax on British train carriages), but it’s a simple, meaningful change that’s hard to argue with. Even those who oppose specific potential aspects of TTIP must admit that ending tariffs would be welcome. So get the message out there!
* Adam Corlett is an economic analyst and Lib Dem member
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69 Comments
‘Even those who oppose specific potential aspects of TTIP must admit that ending tariffs would be welcome.’
Well actually Mr Corlett I’m not totally sure that is the case. The basic problem I have with TTIP (and I don’t claim to speak for anyone else) is that this looks like yet another open-ended supranational deal, binding forever on pain of penalties. Now, of course, some people may well be quite comfortable with this. That’s fair enough.
But these sort of tariffs surely are a matter for national judgment? If some countries wish to form their own value judgment on tariffs then to my mind they should be free to do so. Whether it’s a good idea or not should be a matter for political debate, not something signed and sealed in perpetuity under some treaty.
You see this as ending tariffs – true. I see this as present incumbent governments binding their successors and making promises into the future that quite simply are not theirs to make. You may regard this as something of constitutional nicety. But as Greece may yet show, the concerns about these open-ended, binding agreements are not merely philosophical whimsy.
Removing tariffs is not a good enough reason to just jump in on this at all.
Spot on. When will the opponents of TTIP actually attack what is proposed rather than what they think is in the proposals? When will they accept that state owned services are excluded (so no threat to NHS)? When will they recognise that the disputes procedure is in all of the 50 plus trade treaties already signed by the EU and that it’s not going to give US firms a special advantage? When will they accept that standards will be levelled up not down?
I’m not holding my breath. The opponents of TTIP don’t want to know the truth, they just want to have a go at the EU or capitalism in general.
Import and Export taxes and duties are just another transaction tax, just like VAT, only they apply to goods that cross borders; discuss.
Interestingly it seems to be making little impact on Modays general election in Canada, according to the polls. The exception is British Columbia where I suppose it has a more geographical impact. That election is still seemingly in flux. It has been a game of to and fro between the Cons , Liberals and NDP, with the latter soaring in May to July to a position where it seemed they could form a majority after their battering of the Liberals at the last election. However there seems to have been a swing back to the Liberals and at this time the NDP appear to have gone backwards, suprisingly even in Quebec, with the Cons and Libs beavering away for the most seats – it still looks like a minority government or coaliton, unless this issue plays well for the governing Cons nationally in the last few days.
Great article.
Jackie, I’m really not sure I understand your concern. A treaty like this is nothing more than a bi-lateral commitment to each other to follow a set of policies (in this case abolishing tariffs). As every A level student is taught, no parliament binds another, and if the UK govt at one point wanted to leave, it would – with a required restructuring of both domestic laws and trade.
Greece is an entirely different example of a govt needing to sign off sovereignty on issues because it needed funding from other groups who didn’t trust them to return it under their own economic governance. Greece is a cautionary tale about what happens if you spend beyond your means, and doesn’t relate to international law and agreements at all – something us Lib Dems are generally in favour of.
Not only will tariffs on imports be lifted …..
….. but more importantly tariffs will be lifted on UK exports to the USA, a massive market for us.
The UK trade balance is in a dire state. We desperately need to increase our exports and increase import substitution to pay our way in the world. TTIP is necessary (but not sufficient) to help our recovery.
I am sorry Adam , but the message is getting out there.
Some of us are getting it from charities, work by the LSE and the subsequent Royal College of Physicians statement etc., indeed a multiplicity of sources. I am still opposed to it.
Excellent piece Adam. As the historic party of free trade we should be enthusiastic supporters of such agreements in principle, albeit scrutinising closely their content. This agreement has the potential at least to bring significant economic benefits.
Here we go again. TTIP has some good aspects, OK. Tariff dismantling is one of them. But it has a whole host of other aspects which are not about free trade but rather about corporate domination. I do not (yet) accept your blind faith that the NHS is protected. it is clearly not. Bits of the NHS that have not been privatised may – I emphasise the word “may” – be protected. But where anything has already been privatised, the thing that gets protected is corporate profit. ISDS will ensure that no government ever dare take back from the private sector anything that has already gone, regardless of the cost to the public purse or the merits of the case. the threat of the kind of compensation that private profiteers can wring out of governments via ISDS will kill that one dead. And, by the way, it is not a foregone conclusion that the NHS is protected. Much depends on what is actually in the deal which neither you or we know yet. There was a case recently in which a country (I think it was Slovakia) was successfully sued under ISDS because it had not privatised enough of its health insurance industry. If that kind of clause is in TTIP, we’re screwed.
I would not be at all surprised if such a clause were not buried somewhere in the still secret text. As you say, we are desperate to get into the American health market. Do you think for a moment that they are going to let that happen without a quid pro quo from our side? No, Adam, you’re going to have to do a lot better than this. If you’re advocating a tariff deal, then, fine, let’s have a tariff deal. We don’t have to accept the whole sorry mess that is TTIP.
Yes, Nick, I agree we should be supporting free trade. I do support free trade. But TTIP is not about free trade, it is about corporate feather bedding.
That’s really helpful, Adam.
However there’s one slight problem I can see. Applying the logic of the Corbyn “£93 billion of Corporate Welfare”, there are some who will claim that the cutting of import duties is yet another example of “Corporate Welfare”. Of course that’s not how you and I would see it.
Peter Bancroft –
‘ Greece is a cautionary tale about what happens if you spend beyond your means, and doesn’t relate to international law and agreements at all.’
Just so I’m clear, you think that the Euro and all the agreements around it could easily be unwound? Is that correct?
‘A treaty like this is nothing more than a bi-lateral commitment to each other to follow a set of policies (in this case abolishing tariffs).’
This is actually an EU deal so at best this is a somewhat eccentric definition of, ‘bi-lateral.’ If a future (say) Corbyn government wished to reverse TTIP do you think it would be readily able to do so?
‘As every A level student is taught, no parliament binds another’
And as every A-Level student should know there is a world of difference between theory and practice.
I support increasing tariffs on imports which is why I’m against it. The problem Britain faces is not poor export sales it’s an over reliance on imports. We don’t have the industrial base to deal with the flood of imports that will come in from America on top of those from China or elsewhere. We already export labour and sell our national infrastructure to say the French. What TTIP offers is false hope based on an equality of manufacturing that doesn’t exist. We’ve been told for years that low interest rates would help exports and it hasn’t. Now we are being told TTIP will boost exports and it won’t. The fundamental problem is faith in the free market as the pinnacle of capitalism, when it’s just as misguided as the belief that the failures of Communism were down to not pursuing Communism with more vigour. IMO Britain’s manufacturing failures are the result of closed circular thinking and ideologically driven wish fulfilment.
Meh… what’s even the point of this discussion? It doesn’t matter if people understand TTIP or have done their research, it matters if it passes or not. The battle lines have been drawn, if you’re against TTIP you’re against it for reasons that tariff reductions will never be able to overshadow.
Rob, the ISDS is no longer part of the proposal for the TTIP. There will (inevitably) be a way to address disputes, but that’s a good thing.
Jackie, I don’t think it’s really open to interpretation as to whether a deal between the EU and the US is bilateral or not.
On Greece, you seem to think that the issue is that they’re in the euro. That’s of course one interpretation, which I happen to think is actually impossible to justify. If you were referring to that though you’re talking about a scepticism of EU supranationalism (I.e. Democratic institutions above member state level) which has really little in common with a simple trade treaty. The liberal position is conventionally that supranationalism is the better of the two, though obviously that’s not on the table for our dealings with the US at the moment.
Adam, I have grave concerns about both sides of the argument. On one side there tends to rely on hyperbole and the other on very careful use of words. Your post is in the latter category. Just one example:
“There are numerous concerns – some entirely misguided, some merely exaggerated – and from reading the literature of campaign groups like 38 Degrees it might be hard to know whether there are any benefits at all from this trade deal.” Now the question is, are you implying there are no valid concerns, because you don’t refer to a third option – those that are not misguided or exaggerated? It is very difficult to balance things like the fundamental values of liberty, equality and community if they are ignored, but both sides still ignore them routinely.
” albeit scrutinising closely their content” – Looks like Nick has been paying attention to the anti-TTIP arguments and changed his position from one of unconditional out-right support for TTIP; who know’s in the coming year(s) he may perform a total change of heart once he gets to read and digest the content of TTIP 🙂
What I find interesting is to consider the impact TTIP (and it’s ISDS) would have had on events such as those that have engulfed VW (and are likely to engulf other vehicle manufacturers) and how people/societies gain recompense. In such deliberations we should firstly consider the reality of a VW based in Germany and then ask the question: if VW were a US company (for added complexity, also choose a state) how would TTIP help or hinder things…
As it is only through exploring real world examples do we learn, as has been the case with privacy and data protection, where the totally different views of the US and EU have been thrown into stark relief. Likewise, the US legal system is only beginning to grapple with the concept of ‘foreign’, something that is a fundamental part of the current Microsoft.v.DoJ case.
Peter Bancroft – ‘On Greece, you seem to think that the issue is that they’re in the euro. That’s of course one interpretation, which I happen to think is actually impossible to justify.’
That’s your value judgment. As it happens I think that the problem is not the euro per se, rather that the effect of being bound in the euro has had the effect of removing policy options. That’s the point. Whether those policy options are a good idea or not is another question. I actually don’t have a great deal of sympathy for Greece I should add.
‘The liberal position is conventionally that supranationalism is the better of the two’
Really?
Peter says “Rob, the ISDS is no longer part of the proposal for the TTIP. There will (inevitably) be a way to address disputes, but that’s a good thing.”
No, what they’ve done is made something different enough from ISDS to give it a different name. The basic structure is there of secret deals behind closed doors by corporate specialists. Why is that a good thing? We already have a system of commercial dispute settlement that works extremely well, is transparent and is carried out by independent and expert decision makers. It’s called the courts. There is no reason on earth why companies cannot have their business dealt with in court like everybody else.
Elimination of tariffs is free trade, although I do not see why the EU could not just do this unilaterally. If we support elimination of tariffs, there is no reason why we can’t just abolish them.
However, special rights for foreign investors (in the form of secret tribunals) are NOT free trade.
enshrining of highly restrictive intellectual property laws is NOT free trade. It is ironic that this “free trade” deal may enshrine in law restraints on international trade such as the legal protection of DVD region locks.
We rejected ACTA. If TTIp is being used to launder teh same kind of policies that ACTA was, then we should reject it. This blind faith that some in our party have in TTIP, and corresponding patronising dismissal of all opposition by association with the most extreme variety, is not worthy of a liberal party.
@ Rob Parsons,
The TUC has set out 10 reasons why we should be concerned with the new version of ISDS.
@Jackie
If you want each country to be able to autonomously decide what tariffs to charge then you must logically support leaving the EU.
Because part and parcel of being in the EU is a common customs system and therefore you don’t have national tariffs, you have EU wide tariffs. Otherwise it wouldn’t be a single market.
So either you’re an ardent anti- European, which is fair enough, or you massively misunderstand the core concept behind it and the way it works in the first place.
@Alex
The trouble is it isn’t free trade if you don’t have any tariffs on goods being imported from another country while that country whacks tariffs on what you export to that country.
And ACTA and TTIP are about completely different things. They have little more in common with each other than the Lisbon Treaty does with the Treaty of Versailles.
Excellent article
@ Mick Taylor “The opponents of TTIP don’t want to know the truth, they just want to have a go at the EU or capitalism in general”
Complelet agree, but I suspect it’s more the latter. There are some on the left who are so anti-US and so anti-free trade that any agreement being negotiated which combines the two has them shouting “Conspiracy!”
George Potter –
‘If you want each country to be able to autonomously decide what tariffs to charge then you must logically support leaving the EU.’
I think it is an argument to be weighted in debate.
‘Because part and parcel of being in the EU is a common customs system and therefore you don’t have national tariffs, you have EU wide tariffs. Otherwise it wouldn’t be a single market.’
Firstly, the absence of EU membership does not imply the absence of customs deals. Secondly the presence of a customs deal does not, to my mind, require everything else in the contemporary EU. Thirdly, and the basic point I’m getting at, is that customs deals do not need to be in the form of open-ended, permanent deals with supranational court systems and the like.
Don’t get me wrong here. It may very well be the case that a large-scale deal has advantages, I’m not questioning that. What I’m questioning is the quasi-permanent and effectively open-ended nature of all this.
@George: Concerns about ACTA are relevant to TTIP because TTIP contains an IP chapter, which according to the leaked draft as in many ways as bad as ACTA. Trade deals have been the go-to forum for western governments to launder extreme, corporatist IP law for at least two decades. It is no more acceptable to launder them through a standard free-trade deal than it is to do so through an agreement specifically concerning IP. Yet, given the head-in-sand attitude of many in this party (that we should support it regardless of what it actually says, which we don’t officially know yet because the text still has not been made public), it is clearly easier to do the former.
Julian Tisi – So you think that anyone dubious about TTIP is some hard-leftist anti-US partisan to be dismissed out of hand as somehow irredeemably malign?
Something that is made a LOT easier by the secretive nature of the negotiations, the lack of an official draft text and the refusal of many people who one would expect to look at it critically to do so, instead favouring blind support just because it calls itself a “free trade” agreement.
It’s a shame that an article which complains about people only putting one side of an argument… only puts one side of an argument.
The tariffs on trade are a problem. I’d argue they aren’t as big a problem as the tariffs we put on trade from the Global South, but whatever. By all means get rid of tariffs to encourage more trade.
But don’t characterise the opponents of TTIP as being in favour of a tax on toothbrushes. That isn’t why we oppose TTIP. I oppose ISDS (by any name). I oppose importing tar sand oil and fracked oil to the EU, because it will insentivise more fossil fuel extraction and increase carbon emissions. I oppose importing GMOs to the EU. I oppose “market harmonisation” if it means reducing regulations designed to protect human health and the environment to the lowest common denominator.
Now, maybe not all of those things are going to be in TTIP (though influential people in the EU and US are pushing for them to be included). Maybe my fears are unfounded. But how can I know that’s the case when the entire thing is being negotiated in secret? How can I trust people who refuse to tell me what they are doing?
Mick Taylor: ” The opponents of TTIP don’t want to know the truth, they just want to have a go at the EU or capitalism in general.”
Absolutely not. In my view it is TTIP that is anticapitalist. Capitalism assumes markets in which companies take risks – they assess risks and don’t do stupid things if the risks are too high. TTIP is designed to reduce risks for corporations, with the price for the decisions they then make being paid for by taxpayers. No, no, and absolutely no.
I genuinely don’t think people who want free trade agreements between two countries/ entities but who then disagree with having a system to address disputes have thought it through. How would national courts handle disputes between some mix of foreign and domestic countries and foreign and domestic governments?
The issue is about disputes between investors and countries, in which case they should go through the courts. Supporters of ISDS talk as if the countries are a bunch of banana republics whose judicial systems cannot be trusted to judge such disputes fairly. This is bunk, and even if an individual EU country does act in this way, there is the ECJ.
The evidence from NAFTA suggests the US system can’t be trusted to judge disputes fairly – there are quite a few examples of NAFTA dispute Mgt having to go all the way through the process.
Do we think the US has suddenly changed, or would behave in a different way to the EU?
An alternative explanation is that the ISDS system in NAFTA is institutionally biased in favour of investors.
That’s not a very credible explanation though. I am mainly familiar with the cases where the US system was biased (due to watching Canadian news), but the NAFTA dispute resolution has clearly been used in several high profile examples to ensure fair treatment of (often rather small) foreign companies. I presume Canada is as bad, but I wouldn’t have seen press coverage on these.
Free trade agreements are in no way new, and it’s surely uncontroversial that the dispute settlement each contains wasn’t there as an optional extra.
Peter Bancroft – OK, if these courts are so vital to the investment process, how about we open them up and let overseas investors be pursued in them?
Generally, investment is a risk. Always has been. These corporates should be privately ensuring their own business risk rather than looking to the state and supranational courts to strip it out. If some countries wish to be a higher risk then so be it.
Perhaps it is worth looking at the libertarian right argument against ISDS. This article from the Cato Institute is a good read.
http://www.cato.org/publications/free-trade-bulletin/compromise-advance-trade-agenda-purge-negotiations-investor-state
Personally I think having any system which can only be used by foreign multinationals to challenge government is completely out of order. If you are going to go down the realm of supranational “justice”, then everyone be they citizens, foreign governments, environmental groups, trade unions and indeed business both small and big, home and abroad should have the same legal right and equality to challenge governments.
I’d be grateful if Mr Corlett, who I believe worked at one time for the Centre Forum, can tell me which of the following statements about TTIP are untrue :
“TTIP transfers power from people to corporations. It vastly reduces the accountability of big businesses, but places our public services – and whole Governments – at their mercy. It could allow them to sue governments, in secret tribunals, for passing laws or regulations in the public interest, if that might dent their profits. Among other things, it could impact the NHS, education policy, workers’ rights, food safety standards, animal welfare and environmental protection.
The Government assures us our NHS is immune. The British Medical Association disagrees – and continues to lobby for health to be exempted in its entirety, a mark of the dangers posed by TTIP”.
The USa is looking for Pacific trade through a deal with 10 countries including Canada, Japan and Vietnam (!!!) but not including China. This is called TTP, so we must be careful with your typos.
President Obama wants to do TTP first, but it needs to go through ten legislatures, including the USA, which may take a while.
Even if the TTIP does not lead to widespread privatisation or whatever else is feared, the TISA deal is also being negotiated as the third part of the TPP / TTIP / TISA triangle. From what I can see, the purpose of TISA is to treat services, including public services as globally tradable goods, which is almost certainly a mandate for further privatisation and liberalisation. I am sure the usual detrius like G4S and A4e can’t wait to get their hands into everything globally…
“The USa is looking for Pacific trade through a deal with 10 countries including Canada, Japan and Vietnam (!!!) but not including China. ” (Richard Underhill 14th Oct ’15 – 7:00pm)
Yes, this aspect of the various ‘trade’ agreements (all outside of existing bodies such as the WTO) the US is in a hurry to get signed, is the obviously intended exclusion of specific countries, doesn’t get much of a mention… Additionally, the other aspect is the cumulative effect of all these trade agreements and how they can be used/misused by various vested interests.
Richard:
“Personally I think having any system which can only be used by foreign multinationals to challenge government is completely out of order.” Foreign multinationals can sue governments under national law where they are breaking national law! This is not an issue related to TTIP or even free trade treaties in general.
Jackie:
Dispute resolution courts are about checking that free trade agreements are upheld. Companies have no powers when it comes to enforcing free trade agreements, therefore there’s nothing that these courts could hold companies to account for.
Come on guys, these comments make no sense. I’m not going to even comment on the “…But it will actually affect the NHS despite it being declared 100 times that it won’t” argument.
Peter: Yes companies or anyone else can sue governments in national courts and rightly so. This is a completely different position to supranational offshore arbitration, which is a one way process which allows only foreign corporations to sue, with the merits decided by corporate lawyers, rather than a judge taking into account public and national interest.
The justification for ISDS was that many “Banana Republics” had a poor or non existence legal system, and military uprisings would steal factories or whatnot belonging to foreign companies. That is a complete different set up from mature democracies with a fully fledged court system. If we take the controversial Philip Morris case in Australia, they lost in in the national courts, over a democratically elected piece of legislation. That should be the end of it. There should be no opportunity for them to sue via a shady secretive ISDS panel. Australia is a modern democracy entitled to pass laws as it sees fit. Perhaps Philip Morris should consider investor insurance instead. Should I be allowed to sue the British government in an offshore tribunal because my house has been robbed and the police have failed to protect my property effectively? Or should I have had contents insurance perhaps?
David Raw,
Not just the BMA but also the Royal College of Physicians.
Hardly the left wing anti-capitalists portrayed by the TTIP extremists!
This is a strange and rather worrying post. It says the concerns of groups like 38 Degrees (and also, it doesn’t mention, for example Friends of the Earth) are “some entirely misguided, some merely exaggerated”. So I looked for a rebuttal of those concerns. What I found instead was that they were completely ignored in favour of listing the benefits and then pretending those who had concerns were campaigning against cheaper teddy bears.
I don’t doubt there are benefits. What about fears that governments with concerns about environmental damage, governments perhaps that have been elected on the back of public opposition to their predecessors’ policies, will be prevented from taking action or hit with huge damages? I understand the demands of contract law (and believe governments should not enter into highly controversial contracts shortly before elections when the opposition to such contracts may win), but companies that spend highly on activities that may soon be restricted by democratic decisions should regard this simply as a business risk.
Peter Bancroft: “Foreign multinationals can sue governments under national law where they are breaking national law”
Precisely. So why is that not enough. Why do we need a system that allows foreign corporations an extra, secret bite at the cherry? Only one reason I can think of….
The official party line on TTIP, of support it whatever the terms because, um, “free trade” is, based on articles from its proponents such as this one, founded in conservative thought. Not just in pandering to large business, but in its elitist “trust the politicians” attitude, and high-handed dismissal of any objections based on what the text might say. The fact is that this treaty has strings attached, and it simply will not doto dismiss calls to critically analyse it as extremism or conspiracy theorising, especially when the text itself is not even public. Would you uncritically accept secret government legislation? I imagine any self-respecting Lib Dem would be up in arms about the government putting legislation before Parliament without revealing its text, and expecting parliamentarians and the public to trust that it would work as intended. Well it’s the same situation here.
Also worth noting in the Philip Morris case is that it is the tobacco giant’s Asian subsidiary bringing the case against the Australian government, under the Australia–Hong Kong FTA. The reason for this is simply that Australia’s FTA with the US does not have ISDS, but the one with Hong Kong does. The opportunities for forum shopping afforded to multinationals (or any other company with enough resources to create a foreign subsidiary for the purpose of exploiting a specific FTA) are worrying.
Australia’s previous Labor government refused to include ISDS in any FTAs, principally because of its effect on flexibility in making domestic laws. This policy seems to have been reversed under the country’s current “Liberal” (=Conservative) administration.
Alex, just as legislation going before Westminster parliament is public so is legislation going to the European Parliament (incl. TTIP). The amount of untruths being thrown around about TTIP is just inconceivable.
But the text of the agreement is NOT public, and that is what most needs to be public.
Oh dear! It’s really desperate to pretend that it’s all about tariffs on white chocolate and the like.
What the EC actually said in March 2013:
“The European Union and the United States will have their eyes on more than just removing tariffs. Tariffs between them are already low (on average only 4%) so the main hurdles to trade lie ‘behind the border’ in regulations, non-tariff barriers and red tape. Estimates show that 80% of the overall potential wealth gains of a trade deal will come from cutting costs imposed by bureaucracy and regulations, as well as from liberalising trade in services and public procurement.”
http://europa.eu/rapid/press-release_IP-13-224_en.htm
Note the last line and remember that the “estimates” concerned are from the EC’s favourite
poodlethink tank and are based on multiple unrealistic assumptions and models. Better models and actual experience project negative outcomes.Then there was an attempt to pretend it was about helping SMEs and little if anything to do with public services conveniently ignoring that an average ISDS case costs close to $10m:
TTIP is mainly about helping SMEs; large corporations can easily get around the red tape that exists in transatlantic trade … [added emphasis]
https://www.libdemvoice.org/opinion-threat-to-europe-countering-the-ttip-scaremongering-45354.html
As for whose agenda the EC follows, read:
http://corporateeurope.org/international-trade/2015/10/public-services-under-attack-through-ttip-and-ceta
See also CEO’s most recent post on VW.
And that white chocolate? In my local supermarket dark, milk and white are all the same price although I’m sure they don’t cost the same. The reality is that almost all prices are managed. If the cost of importing white chocolate goes down here or in the US will the benefit go to customers or supermarkets? Answers on a postcard … And what of those who lose their jobs. It really won’t do to pretend that there aren’t swings and balances.
Incidentally, I have been arguing for years that supermarkets were overcharging by about 30% on average. Prices at Aldi and Lidl show I was about right. Sorting out that oligopoly would have led to savings for ordinary consumers many, many times TTIP’s even on the basis of the EC’s rosy estimates. It’s strange how the economic liberals never appeared to see a problem.
@Gordon
“Incidentally, I have been arguing for years that supermarkets were overcharging by about 30% on average. Prices at Aldi and Lidl show I was about right.”Really? 30% on average? I’d love to know how you arrive at that.
I’ve no idea what you mean by “overcharge” (and I assume you don’t either), but one obvious possibility is that you think that the net profit that supermarkets make is excessive. Using Sainsburys as one example http://www.j-sainsbury.co.uk/investor-centre/financial-performance/retail-statistics/ you will note that their net profit margin is around 3% to 3.5%.
So what are you suggesting? That supermarkets should cuts their prices by 30% and achieve a net profit margin of minus 20% or so? i.e. that they should run at a massive loss?
” Sorting out that oligopoly would have led to savings for ordinary consumers many, many times TTIP’s even on the basis of the EC’s rosy estimates.”
Do you actually know what an oligopoly is? What exactly do you want “sorting out” that isn’t being delivered by market economics already? i.e. that lots of people who are content with a “less frills” service and a more restricted choice switch at least some of their shopping to Lidl and Aldi.
As you clearly don’t understand basic economics, why should we think your views on TTIP are any more correct?
Nick Thornsby comments (14th @ 11:15 am)
“As the historic party of free trade we should be enthusiastic supporters of such agreements in principle … “
Well, yes – and no! The Liberals were indeed the historic party of free trade but that doesn’t necessarily mean we should still be; other factors come into play.
The Liberal Party arose from an initially loose coalition of Whigs and others in the middle of the 19th century with ‘free trade’ front and centre of their platform. But the Whigs, who had dominated much of the 18th century when the foundations of the industrial revolution were laid, had always been fiercely protectionist. Why the change?
Quite simply because the economic balance of power changed.
In the late 18th century and through the early decades of he 19th Britain’s key textile industries simply weren’t competitive with much cheaper and better quality Indian textiles. So the UK establishment protected its developing industry with what would today be called an ‘infant industry’ strategy. Tariffs reached astonishing levels – 85% on Indian cottons in 1813. The import of some goods was banned altogether.
The British industry became gradually more competitive as technology improved but it was only with the widespread adoption of steam-powered looms that it could compete with Indian producers; by 1835 steam power powered 75% of the UK cotton industry and it became the world’s low-cost producer at the expense in terms of market share of Indian, particularly Bengali, producers.
The change was reflected almost immediately in UK politics which now decided that ‘free trade’ was just the thing and used military power to enforce that POV. Bengal, soon incorporated into the British Empire could not impose its own tariffs so its previously prosperous industry was ruined and towns impoverished. At much the same time Britain fought the two disgraceful Opium Wars to impose its ideas of ‘free trade’ on China and much of the later history of Victorian Empire was really about ‘opening’ markets for manufactures or as sources of raw materials.
http://socialdemocracy21stcentury.blogspot.co.uk/2010/06/early-british-industrial-revolution-and.html
It follows from the history of free trade that one interpretation of it is as an imperial project. It’s not that free trade creates economic prosperity so much as that political muscle is used to create trade on one’s own terms which is termed ‘free’, meaning free of pesky rules to protect others that might impinge on profit.
Fast forward to today and that understanding fits TTIP, TPP and TISA perfectly. Obama has said in terms that it’s about creating trade rules on US terms before any challenge emerges to US hegemony – which explains why China is specifically excluded. It is the economic counterpart of the neo-cons’ Wolfowitz Doctrine.
https://en.wikipedia.org/wiki/Wolfowitz_Doctrine
Then, because the US is now a very imperfect democracy and more of an oligarchy run by Wall St and other corporate interests, understand that it is their interests that are to the fore and not those of the people.
Simon Shaw – Can I assume that, because you only attacked a peripheral point of my comment, you agree with its substance?
For the rest your observations on net profit are a complete strawman. Net profit, as I’m sure you know, is a very, very bad measure of performance, subject to all sorts of accounting chicanery and the tendency of costs to bloat to eat up the available margin etc.
Gross profit is much better since it measures the margin a retailer adds as goods pass through his business from supplier to customer. If it is exceptionally high it might be because he is an outstanding retailer, able to charge more by virtue of exceptional service or because he manages to keep spoilage to very low levels or some such. Alternatively, it may be (and more usually is) because he is in a sector that’s not nearly as competitive as it’s pretends to be, for instance because it comprises a small number of players with very similar operations and a common interest in high mark-ups. To put that the other way round, a really efficient retailer can survive on a low gross margin although he hopes not to be forced by competition into the position of having to.
In practice, multiple retailers, including supermarkets, are booking gross margins way in excess of traditional levels (that was what I noticed around 25 years ago). So, by this very relevant measure, they are LESS efficient than their traditional predecessors despite the vast improvements in computerised stock control etc. they enjoy. If successive governments had ensured the market was properly competitive, these gains would have been passed onto consumers as lower prices.
As it is the gains have been pocketed for decades. Meanwhile, Germany has, by and large, maintained a more competitive market and the firms that have been ‘bred’ in their hothouse of competition have now arrived armed with business models our domestic players are struggling to respond to.
You might argue that their success is proof of the market working. Well, yes, but very belatedly and not because of any domestic competitive vigour. Would anyone care to estimate the loss to consumers of an average of retail prices that have been on average, say, 15% higher-than-necessary over 40 years?
@Gordon
“Simon Shaw – Can I assume that, because you only attacked a peripheral point of my comment, you agree with its substance?”
No. Because I know very little and care relatively little about TTIP I make the sensible assessment of whether what you say has any validity by considering what you say about something that I do understand.
Based on that I don’t believe what you say about TTIP any more than I believe what the majority of opponents say about it.
“For the rest your observations on net profit are a complete strawman. Net profit, as I’m sure you know, is a very, very bad measure of performance, subject to all sorts of accounting chicanery and the tendency of costs to bloat to eat up the available margin etc.”
Trying not to be rude, do you have the slightest idea what you are talking about? If fact what you say is the exact reverse of the true position. One of the best measures of performance for companies such as Sainsbury is Return on Capital Employed. Net Profit is a important part of that.
“As it is the gains have been pocketed for decades.”
That’s a good example of your lack of understanding. When you refer to these “gains which have been pocketed” you are talking about the difference between gross margin and net margin. Have you ever thought who “pockets” that difference? It’s pocketed by the people who work for Sainsburys, Tesco or Asda. It’s pocketed by the companies who supply utilities and provide and repair chillers, freezers and shelving to those supermarket chains. It’s pocketed by the landlords, builders and shopfitters who provide store space to those supermarket chains. It’s pocketed by the delivery companies who deliver to those supermarket chains.
All that’s happened is that, thanks in large part to the financial downturn of recent years, many customers have decided (with their feet) that they would prefer lower prices rather than “posh” surroundings and higher levels of sales assistants.
Did I misunderstand you, or were you suggesting that “the state” should have forced through that shift rather than letting market economics do it? Bearing in mind that part of the Lidl/Aldi business model would involve sacking large numbers of staff, that’s certainly a most interesting suggestion!
Simon Shaw – ROCE is a measure of financial performance; I was talking about gross profit which is a measure of operational performance.
As for all the other costs you list, Aldi and Lidl have to pay for equivalent supplies and services which they seem to manage. I don’t have any data (perhaps you do) on staffing intensity at the discounters. If they have found a way to run their shops using less staff then that would be a continuation of the trend established when supermarkets replaced corner shops.
@Gordon
“As for all the other costs you list, Aldi and Lidl have to pay for equivalent supplies and services which they seem to manage. I don’t have any data (perhaps you do) on staffing intensity at the discounters. If they have found a way to run their shops using less staff then that would be a continuation of the trend established when supermarkets replaced corner shops.”
My views on staffing intensity are based simply on my own observations as someone who shops at Sainsburys, Morrisons and Lidl.
When you say that “if they have found a way to run their shops using less staff …” I take that to mean that, when you said above “Sorting out that oligopoly would have led to savings for ordinary consumers” you really did mean what I suspected. Namely that you think that “the state” should have stepped in and forced supermarket chains to sack large numbers of staff and cut prices.
Tell me, is that because you think such a central control approach worked so well in Soviet Russia?
“Simon Shaw – ROCE is a measure of financial performance; I was talking about gross profit which is a measure of operational performance.”
Gordon, with all due respect, that makes no sense. ROCE is about the relationship between the balance sheet and the P&L, whereas gross profit is only the P&L, but they are clearly not operational vs. financial. For example, I could incur massive capital expenses which have nothing to do with my operational performance, but which will still appear in the P&L (all expenses have to). For supermarkets specifically, the operational numbers you want to be looking at are like for like sales and sales per square foot.
Simon was being slightly mean but entirely on the ball when he pointed out your central assertion that supermarkets making a small margin should be charging 30% less meant that most of what you were talking about was likely to be nonsense.
Simon Shaw – I am mystified why you might think that “sorting out that oligopoly” would have anything to do with the state taking a direct hand in management. However, it is an established principle that the state should ensure that markets remain properly competitive which is why we have competition laws. I believe the UK government should have taken a more assertive stance at some point. Regrettably, they haven’t, leading to a long period when prices were higher than they needed to be. Now the discounters are belatedly disrupting the market in a good way which I welcome.
Peter Bancroft – Gross profit is indeed an element of the P&L. However, it is separately an operational measure and one that I can assure you will be very closely watched by any competent retailer. Conversely P&L includes lots of other ingredients that are not under the control of the buyers and others working at the gross margin coal-face . For instance by a year ago Tesco had accumulated a fleet of five (!!!) private jets, the latest costing £30 million, all of which are now to be sold. Their operating costs and depreciation will be in the P&L and will reduce net profit which is why that is such a poor measure of underlying performance. Incidentally, the capital cost of the jets as such does NOT appear in the P&L.
As for most of what I was talking about being nonsense please note that my 30% overpriced figure was a guesstimate I made some years before I had come across the discounters. They have rather powerfully demonstrated I was about right. Of course, it’s true that Tesco et al can’t just cut prices (and change nothing else) to compete; they must cut the bloat, the private jets and whatever else it takes. Even after that it’s possible they still can’t compete, that their business model is fatally flawed. However, I doubt that’s the case – I suspect it’s more a bad case of cost-bloat and over-extension.
A lot of the things being called for in the comments above regarding investor disputes seem to be addressed in the Commission’s proposal for the establishment of a tribunal system with permanent judges, which I wrote about here https://www.libdemvoice.org/ttip-update-a-liberal-in-charge-and-a-new-investor-dispute-proposal-47700.html
The Commission is proposing this instead of the usual ISDS provisions, and this would be used in future trade and investment agreements.
One thing they don’t tell you about TTIP is whether the enthusiastic support of it by the right of the party is gaining, or losing the party votes. I suspect that there are no votes to be gathered up in terms of enthusiastic TTIP supporters already uncommitted politically – it’s a policy geek’s dream; I suspect that there are votes to be lost in large numbers. In that, it’s a continuation of Cleggism.
Nick Thornsby: The Commission had to be dragged kicking and screaming towards addressing the very valid concerns that people have about ISDS. Without the campaigning from people you call scaremongers, the Commission would have just put in place a standard ISDS mechanism because it would have been able to get away with it. Even now the proposed system is still not acceptable, as it still has the fundamental problem of being a special tribunal accessible only to a certain group, namely foreign investors (or those who pretend to be such). I also have yet to see any of the concerns about laundered IP maximalism and environmental deregulation in TTIP.
Profit above humanity is being enshrined in Law now and the consequences will cost all future generations to come dearly, as TTIP is irrevocable and forever when signed with no real conscience for the wellbeing of the people, only profit of the few.
‘The TTIP (Transatlantic Trade and Investment Partnership) will be an Absolute Disaster for the People of the EU (European Union) and the People of America (USA) in the long-term – We simply have to Vote AGAINST this behind closed doors Transatlantic Trade deal before it is signed up and too late for the People to do anything about it’ – http://worldinnovationfoundation.blogspot.co.uk/2014/08/the-ttip-transatlantic-trade-and.html
Those in control have learnt nothing as an intelligent species in reality and where 90% of the people in the EU will suffer greatly from this corporate takeover of Democracy itself.
Good article. Thank you Adam. I’m in favour of TTIP and of free trade in general.
Ian MacFayden: But “free trade” at any price? Public concerns about TTIP are not about free trade, but policy laundering and putting corporations above the law. This is actually antithetical to free trade, as it protects foreign investors from the consequences of their business decisions.
Ongoing tariffs are a small price to pay for ensuring that our laws, healthcare, education, environmental and agricultural security and food safety are not dictated by US corporate agenda. Price of Hershey’s “chocolate” vs democracy, hmm…
Sorry, but yes, it is insulting to suggest people don’t understand that – and it’s damaging for Lib Dems to support TTIP.