Wednesday 26 October 2016

Cross-Atlantic trade agreement will benefit Ireland - let's do the deal

Published 10/09/2015 | 02:30

Taoiseach Enda Kenny and Barack Obama during the US president’s 2011 visit to Ireland. Our history of lowering barriers and deepening ties with the USA strongly favours a proposed EU-America trade deal
Taoiseach Enda Kenny and Barack Obama during the US president’s 2011 visit to Ireland. Our history of lowering barriers and deepening ties with the USA strongly favours a proposed EU-America trade deal

Ireland was poorer than any of its near neighbours for most of the period after independence. There are many explanations and theories as to why that was the case, but there is near universal agreement that one factor was central: the decades spent pursuing a futile bid to grow stronger Irish industries by protecting them from foreign competition.

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The folly of protectionism became indisputable in the 1950s. As most of the rest of free Europe was entering its first ever era of mass prosperity, the Irish economy atrophied. According to census data, the collapse in the numbers at work was even bigger then than in the most recent crash, a fact that illustrates just how bad things were in those grim years.

The disaster of the 1950s led to the abandonment of the "ourselves alone" economic model. Things have not always been rosy since, but we are now broadly as prosperous as our nearest peers by most measures of wealth.

The lesson from the economic history of this State (and the rest of the planet, for that matter) is that opening up to cross-border commerce does not guarantee prosperity, but curbing it guarantees poverty.

The great success of Irish economic policy-making in the past half century has been to take the opportunities presented by opening up to the two giant economies to our east and west - the EU and US, which combined account for half of the entire world's economic activity.

Over the past 50 years, Ireland has, in effect, gone from being a peripheral satellite of Britain to a hub in the middle of the north Atlantic economy.

Given how our well-being is so deeply dependent on the links between Europe and America, deepening ties across the Atlantic would logically stand to benefit Ireland. That can happen if the remaining barriers to trade and investment between Europe and America are lowered or removed.

A man who has been as closely involved in EU-US economic relations as perhaps anyone else on this side of the Atlantic is Europe's ambassador to Washington, David O'Sullivan. The Irishman, who has held a string of tops jobs in the European Commission, including heading its trade directorate and its diplomatic service, passed through Dublin on Monday. He was here to back a deepening of Europe-America relations contained in a proposed deal known as the Transatlantic Trade and Investment Partnership (usually written as "TTIP", but pronounced "Tee-TIP")

Speaking at an event organised by the Institute of International and European Affairs (in the interests of full disclosure: I am that think tank's chief economist), he made an impassioned case for pushing ahead to complete the deal.

How, you might wonder, can anyone be in any way passionate about the mind-numbing detail of trade diplomacy?

The reason is simple -TTIP has generated an unexpected and surprisingly large amount of opposition, and there is a real possibility that the deal could fail to materialise as a result. Unless people like O'Sullivan get out to answer questions, allay fears and take on some of the crazier conspiracy charges against the deal, the political will to close the negotiations could evaporate.

While much of the opposition to TTIP is from the usual suspects who always oppose any opening up - the sort of folk who, for instance, are always on the No side in EU referendums or see conspiracies wherever they look - some smarter people also have concerns.

In Europe, much of the less fevered opposition to the deal is focused on a proposal to give companies who invest in a given country a means of challenging the actions of the host government in a specially set up arbitration forum, instead of taking their challenge through the courts. The mechanism, known as "investor-state dispute settlement", has been included in trade deals for decades, usually to reassure companies who invest in countries where the legal system can be biased against foreigners. These mechanisms have never traditionally been an issue for anyone. But a handful of cases have recently been seized upon by anti-TTIP campaigners.

Perhaps the most frequently cited example of how this arbitration system can be used by corporations in a worrying way is that of tobacco giant Philip Morris, which has taken a case against the Australian government in order to stop new laws designed to curb smoking in the interests of public health. The reason this is happening is because Australia and the US, where Philip Morris in headquartered, included an investor-state dispute settlement clause in their trade deal.

But quite apart from the fact that the issue hasn't been decided yet and could very well go against Philip Morris, O'Sullivan was adamant on Monday that such a case could never happen if TTIP is agreed because there are explicit guarantees excluding companies from taking cases against governments when public health issues are at stake. The already-in-force EU-Canada trade and investment deal includes just such a guarantee.

These points need to be made more frequently in Ireland to allay concerns. IDA Ireland, whose job it is to lure foreign companies here, recently found the time to campaign in favour of same-sex marriage. It could find some more time to inform the public on this issue, which is a lot more relevant to what it does than who marries who.

More generally, and looking at the bigger picture, O'Sullivan readily conceded on Monday that nobody can be sure exactly what changes a TTIP deal could bring about or precisely how much additional economic activity would be generated by a lowering of barriers to doing business. Nor did he deny that the lowering of barriers sometimes leads to winners and losers (even if there are net gains overall).

But trade deals, as with most of life's enterprises, come with upsides and downsides, risks and rewards. The unusually high level of consensus on the benefits of lowering barriers to commerce among economists (a group not known for agreeing on many issues) strongly favours TTIP. Ireland's history of lowering barriers and deepening ties with America does too.

TTIP will not transform Ireland, Europe or the US one way or the other. But it is highly likely to be beneficial. It is very unlikely to be damaging. The deal should be done.

Irish Independent

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