It sounds like a topic that could cure insomnia, but the Transatlantic Trade and Investment Partnership is sparking a raging global debate.

David Cameron has stated it could be “the biggest bilateral trade deal in history, a deal that will have a greater impact than all the other trade deals on the table put together”. It’s been called everything from “a land of opportunity” to “an attack on jobs and the end of democracy”.

But what the hell does any of this actually mean?

What is the Transatlantic Trade and Investment Partnership?

To put it simply, TTIP (generally pronounced tea-tip) is a proposed deal between the European Union and the United States which aims to increase trade. It would do this by harmonising regulatory requirements between the EU and the US, ensuring that a product considered safe in the EU is also accepted in the US, and vice versa.

For example:

 ttip oyster1
Oyster producers can’t export to the States due to differences in EU and US requirements for bacteria testing.
 ttip oyster2 The US tests the water in which oysters are grown, while the EU requires testing of the oyster itself.
 ttip oyster3 Scientists have found they offered the same level of protection. Under TTIP both would be free to sell their wares across the Atlantic.

The deal would also reportedly cut down on customs ‘red tape’ when exporting goods. The Government states on its website that in order to put a shipment through customs a company has to provide on average ‘200 pieces of data, 30 of which are repeated at least 30 times’.

Reducing this, it claims, would ‘increase efficiency and decrease costs’. Makes sense – after all, who enjoys filling in forms?

Similarly, TTIP would remove most of the pricey trade tariffs between the EU and the US. For example, the rate of 20% on exports of some food and drink, or 25% on some ceramics, clothing and footwear would be removed or greatly reduced. This would free small businesses up to send their produce across the pond without worrying about having their profits eaten into.

The Federation of Small Businesses (the UK’s leading small business lobby group) has given a thumbs-up to the deal. “Currently, trading with the US can be a costly affair for small firms”, it states on its website:

“..anything that makes trading with the US easier would help small businesses in the transatlantic market. Therefore, the FSB welcomes TTIP. The FSB is actively working with the negotiators to ensure that global trade becomes mainstream for small firms with international ambitions.”

So far, so good right?

TROJAN

TTIP – A Trojan Horse?

Despite the FSB throwing their support behind the agreement, one of the organisation’s Parliamentary champions has vehemently stood up against it. Caroline Lucas, MP for Brighton Pavilion, warned in May:

“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.”

Yikes. Ominously, as Ms Lucas states, the main cause for concern amongst TTIP’s detractors is Investor State Dispute Settlements; one of the features of the deal designed to ‘reduce barriers to trade’.

ISDS (enough with the acronyms already!) allow a company to sue a government if their policies lead to a loss of ‘current or anticipated profits’.

You’d be forgiven for thinking ‘mad conspiracy theory’, but under similar stipulations, oil and gas company Lone Pine Resources are currently suing the Canadian Government for $250 million for temporarily halting fracking in Quebec.

Another high profile case involves the tobacco conglomerate Philip Morris, which is embroiled in a lengthy legal battle with Uruguay over lost profits as a result of plain packaging laws.

Critics say TTIP would increase the power of huge corporations and reduce governments’ ability to regulate markets for public benefit. The deal opposes ‘state monopolies’, so if for instance, the UK’s National Health Service is made subject to ISDS tribunals, it would in theory become impossible for any government to reverse privatisation of NHS services without compensating private health companies.

The prospect of such settlements would inevitably only titillate exceptionally large companies with enough capital to pay for the legal fees, which reportedly average $10 Million for each case, with private sector arbitrators (note: not public judges) being paid an alleged $600 – 700 an hour.

If super-rich companies are able to seize more power over even governments, it would conceivably give them a massive leg-up over small to medium enterprises.

How would SMEs be affected?

As attractive a prospect as increasing efficiency will be for SMEs, the reduction of so-called “barriers to trade” could potentially yield disastrous side-effects for them.

Thus far, there has been very little study into the effects of TTIP on SMEs, and it is unlikely there will be until the wording of the deal is finalised (MEPs who are involved in the discussions are reportedly tied by confidentiality agreements).

That being said, a study by Tufts University in the States has predicted TTIP would lead to 600,000 European job losses, a net fall in EU exports, declining GDPs for EU member states and a drop in Europeans’ personal income.

A similar 1994 trade deal between the US, Canada and Mexico (NAFTA) has also been accused of causing many of these problems despite being promoted as a massive coup for small businesses prior to its implementation. Public Citizen, a Washington based consumer rights group, said in a report that the deal’s “grand promises remain unfulfilled” twenty years later, and had resulted in the loss of one million U.S. jobs.

We do know that US companies’ standards and practices and workers’ rights regulations are generally a lot more lenient (and therefore cheaper to fulfil), and so would potentially be able to offer products at a lower price than European companies. Of course this relies on each product being given the green light for sale in the EU, but it is argued ISDS could corrupt the review process.

In this scenario, SMEs in the EU would have to make severe cuts to their prices or outgoings in order to compete with their American counterparts.

So, what’s the likelihood of this actually happening?

For the deal to go ahead, the final wording first has to be presented to the European Council and the European Parliament, both of which must agree the outcome before each of the national parliaments of all 28 EU member states give their approval.

If it makes it to a vote here in the UK, Plaid Cymru, the Green Party and UKIP are all opposed to TTIP outright. The Conservatives and the Liberal Democrats  have expressed support for the agreement, although many MPs have said they would not vote for it if the NHS was in any danger of being exploited. The SNP have also rejected the deal if ISDS is a factor and public services are not safeguarded, and new Labour leader Jeremy Corbyn is directly opposed to the deal outright, although time will tell whether the rest of the party will follow suit.

In the US, Congress must approve the deal, and there is still a chance of it being voted down.

The EU’s chief negotiator said last month that talks will have to continue into 2016, despite an initial deadline of the end of 2015.

euro

Deal or No Deal?

The European Commission claims that such a pact could boost overall trade between the EU and US by as much as 50%, and the UK government says TTIP could add £10 billion to the UK economy.

On the other hand, a record breaking ‘Stop TTIP’ petition online has gained 2 million signatures and is still growing, with its signatories terrified of the deal’s alleged side-effects.

Many critics have asked why, if we have acknowledged the potential damage such a deal could do to the NHS, we would be willing to risk compromising other public sector areas like schools, prisons and the emergency services.

As the debate rages on, small business owners are advised to keep their eye on this issue. As the formulation of the deal has largely taken place behind closed doors, it’s pretty difficult to debate the subject from either side without being accused of making rash assumptions. But as David Cameron has promised to put “rocket boosters” behind talks to secure the deal, by the time a final version is issued, it may be too late to figure out whether you’re for or against it.

What do you think? Is TTIP a good or a bad thing? Let us know in the comments below!

Trojan horse image by Mehr Demokratie

Get expert business advice delivered straight to your inbox.