Supporters and opponents of the two major trade deals America is negotiating–the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP)–had a pretty helter-skelter mid-May. The U.S. Senate first refused even to discuss a proposal (known as Trade Promotion Authority, or TPA, and explained fully here) to speed up their approval once agreed. Then, almost immediately, it changed its mind.
But only to decide it would debate a proposal to review any agreed deal from the U.S. and its negotiating partners.
That proposal may not be agreed–and even if it is, I suspect the TPP and TTIP will be a great deal tougher to turn into law than many trade-focused commentators think. The two have fundamental complications we’ve not encountered in such deals before.
Getting them into law will require two steps:
An agreed deal between all the negotiating nations. There are still a number of really serious areas where substantial negotiation is needed.
Each nation’s legislature must then formally ratify the agreed deal. Unlikely to be a problem in one-party states like Vietnam or absolute monarchies like Brunei. But, of the 40 countries involved with the TPP or TTIP (12 TPP negotiators and 28 EU members discussing TTIP with the U.S.), there’ll be an effortless ratification in only a handful.
Most have legislatures as crotchety as Congress–and just as likely to turn the deal down. Just one rejection can destroy, or seriously delay, all the previous years’ hard work for everyone else
Neither step can be taken for granted.
These deals are fundamentally different
Most free trade deals our industry is used to—like CAFTA-DR or AGOA—involve one rich importer (usually the U.S. or E.U.) agreeing to offer easier access into their territory for preferred, usually far poorer, countries.
The TPP and TTIP, though, share an unusual problem in almost all the democracies they affect.
Most businesses in the TPP and TTIP countries support the deals: most of their governments support them, too—just as the Obama Administration does in the U.S. But in the democracies, there’s huge opposition from a large proportion of legislators and from the voters those legislators depend on to stay in office. Meanwhile, none of the democracies’ voters are desperate to improve trade access to any of the others.
They involve a dialogue of the deaf—almost worldwide
Opposition to the TPP isn’t like most debate over trade deals—which is usually rational differences between similarly-minded interest groups.
For example, when Western countries agreed to drop quota restrictions in 2005 on poor-country apparel imports, they realized their garment makers would lose out—but thought they’d sell more planes and computers.
Now Gallup Research shows Americans are warming to the idea that foreign trade “creates an opportunity for economic growth through more exports.” But in 2014 research across 44 countries by the Pew organization showed 80 percent of Americans think foreign trade doesn’t actually create any jobs—and most other Westerners were just as hostile.
Opponents now mistrust all trade deals, because as trade’s been freed up over the past twenty years, unemployment’s grown throughout the west, and the gap between rich and poor has widened. It’s no answer to those concerns to say other things (like information technology) are partly responsible. Trade opponents are livid: they don’t just mistrust trade deals, but are especially hostile to what they’re convinced is excessive secrecy in the negotiations crafting these two particular deals.
The jeans delusion
In England, TTIP advocates give arguments most readers of this column probably agree with. Too often, they say, the E.U. and U.S. have different trade rules—on safety or determining origin for example—to achieve much the same ends. Most of us sell in, or make for, the U.S. or Europe: the TTIP would save us all a lot of wasted effort if the world’s two biggest traders harmonized—and preferably scrapped—all those rules that cost us all so much.
Ask TTIP advocates what’s in it for our fellow-citizens, though, and they scratch their heads. Two I got an answer from eventually gave the same answer. “Jeans” they said. “American jeans will be cheaper here.”
Who on earth in Britain buys American jeans? The entire E.U. last year bought 0.5% of their jeans from America: Americans buy twice as many jeans from the E.U. as Europeans buy from the U.S.
True: jeans were invented in America. But baseball was invented in Britain. Jane Austen describes a baseball game in England over half a century earlier than the first recorded game in North America. Hardly anyone plays the game in England any more though.
The world moves on for jeans and baseball alike–policy advocates’ grasp of world trade doesn’t seem to.
The same difficulty applies to both deals in all 40 countries involved in them. Businesses are clear what’s in the deals for them, but no-one has made a clear case about what’s in it for voters. There lies the rub.
Politicians seem closer to our customers than we are
When Congress—or the European Parliament—is unenthusiastic about trade deals, our industry’s reaction is to blame the politicians, accusing them of not understanding trade, or putting politics before our collective economic health. We call for politicians to show leadership.
But democracies don’t reward politicians for leadership. Politicians keep their jobs if they represent their constituents’ views: they lose their jobs—usually with no payoff—if they don’t.
When politicians show hesitation about trade deals, they’re not showing their weakness: they’re showing they understand their voters (who are the same people as our customers) better than we do.
The consumer really is king
Politicians aren’t there to tell their voters—our customers—to agree with us. It’s our job to persuade voters our ideas benefit them.
We’ve educated governments in how the TPP and TTIP are good for our businesses. But out of the hundreds of thousands of businesses in 40 countries likely to benefit from the two deals, just one—Nike—has shown any real leadership in trying to educate voters in the benefits they offer.
There’s opposition from far too many members of Congress and the national and European Parliaments—and from a disturbing proportion of our customers. Nike has promised that the TPP means more U.S. jobs: I can find no other business demonstrating more jobs—or lower prices, better ranges, faster service or lower prices. All voters hear are platitudes about “trade” from supporters—or plausible-sounding threats from opponents.
It’s not only in apparel retailing where the customer is king. And apparel retailers and brands really shouldn’t need politicians to tell them that customers won’t buy a product unless someone persuades them there’s something in it for them.
Mike Flanagan, CEO Clothesource. Clothesource offers consultancy on the world garment industry using the wide resources of The Clothesource Knowledge Base – the most comprehensive collection of information anywhere about sourcing for the apparel industry. He can be contacted at Flanagan@clothesource.net.