Ever since Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations free trade has generally been considered to be a good thing. Indeed, the idea of a barrier-free single market of member states lies at the heart of the development of the EU (at least in theory if not quite, yet, in practice). While one could argue that the single market is not quite the same as a truly free market, the single market does remain a major benefit of EU membership. This is why the current negotiations between the EU and the USA on the Transatlantic Trade and Investment Partnership are so important and represent such a great opportunity to secure future prosperity – if successful, TTIP would create the world’s largest single market or, as Adam Smith himself wrote: “The general advantages which Europe, considered as one great country, has derived from the discovery and colonisation of America, consist, first, in the increase of its enjoyments; and, secondly, in the augmentation of its industry.”
And so to the British Embassy to a joint seminar with Demos Europa entitled “Transatlantic Trade and Investment – a GREAT Opportunity” at which the key participants included representative from the Polish government, the US Embassy and the veteran Tory politician Kenneth Clarke, a senior cabinet minister and the Prime Minister’s trade representative. A man of forthright views, Kenneth Clarke had just that morning opened the new British Business Centre in Warsaw as part of the UKTI’s “GREAT Britain” initiative to provide, in cooperation with the BPCC, better support to British business entering the Polish market as part of the UK government’s initiative to improve the UK’s export performance. The UK and Poland have common interests in promoting trade and competitiveness with the rest of the world as well as on the energy front in areas such as shale gas exploitation and nuclear power. Although Kenneth Clarke did not actually so, both the UK and Poland face the prospect of severe energy shortfalls because political dithering has prevented new capacity being built in time to replace the aging plants that are being retired. The UK’s energy supply is largely now in the hands of non-British energy companies who while happily charging UK consumers 50 per cent more for energy that they do their own domestic consumers are, unsurprisingly, with less keen to invest in new generating plant without massive subsidy. Despite this problem having been known about for many years, lack of action means that the UK runs the risk of regular power cuts in the not too distant future, not dissimilar from the problems faced in West Africa which I have experienced at first hand – but I digress.
In Kenneth Clarke’s view there are real prospects for a deal over TTIP this time. The financial crisis has left governments struggling to find jobs and economic growth and the removal of trade barriers is one way of helping to achieve this. More encouragingly, the negotiations so far are focused on the outcome and a desire to move quickly acknowledging that paying too much attention to narrow lobbies can grind the process to a halt. Times are hard and politicians need to give way to achieve the larger gain or face years of economic malaise. Most member state governments have no idea what to do but the UK and Poland do believe in liberal, open and free markets. Of the main issues, tariff reduction is the easy part, regulatory standards will be more difficult although, if the focus is on the outcome – for example, a car which meets US safety standards should be as safe as a car which meets EU safety standards albeit that the standards may differ – then it should be possible, by recognizing each other’s regulatory standards, to overcome the bureaucratic impulse to have standards which focus not on the uniformity of outcome but on the uniformity of rules. The simple fact is that the world is ever more competitive and TTIP is needed if the EU is to be able to compete.
As ever, for Poland there is more to this than simply trade, as Adam Jasser, Secretary of State in the Polis Prime Minister’s office made clear. NATO and the US alliance is a main pillar of Poland’s security and the change in geo-political arrangements which affect the position of the West as whole means that sticking together for the purposes of security and trade makes more sense than ever. The EU and the USA have a community of values and the opportunities to export those values are becoming more limited. Critical mass is needed: democracies are based on freedom and free trade and TTIP represents an opportunity to halt the decline of the West. Whatever final arrangement is reached there will be winners and losers. The advent of a cheaper energy in the US will certainly affect heavy users of energy in the Europe such as the chemicals industry which will face competition burdened by the higher European energy costs to give one example. Nevertheless both sides are equally enthusiastic and JP Schutte from the US Embassy made the point that the decline of the West is a myth – US trade with the EU is three times larger than US trade with China.
Kenneth Clarke also sees TTIP as having a positive effect on the UK’s relationship with the EU since it will demonstrate that the EU is able to deliver a benefit which individual governments cannot. There is also the opportunity to set the standards for the rest of the world and the UK could only have an involvement in this as part of the EU. But, of course, it is not just in the UK that enthusiasm for the EU has declined. It is important therefore that the EU is seen to achieve something positive. The EU has to improve competitiveness – the single market is still not completed, especially in services, after forty years. The EU must demonstrate that it is as important to the US as is China and TTIP is a good way of deepening the relationship.
As an advocate of the UK’s adoption of the Euro, Kenneth Clarke made the point that a single market should have a single currency – currency exchange is but another barrier to trade. The current problems with Euro arise from the rules not having been followed and allowing countries whose economies were nit converging to join the Euro. Italy and other countries were allowed in in breach of the Maastricht criteria with obvious results. As a former Chancellor of the Exchequer, Kenneth Clark is also in favour of banking union as a natural corollary of currency union. Al this is eminently sensible but the democratic and accountability deficit with the EU needs to be addressed. The harmonization of standards is a big prize but it will be difficult; we should focus on outcomes and not on regulators protecting their jobs. To protect our citizens we need to be setting the standards and let others follow by example.
Will TTIP happen? The negotiators have only give themselves two years so let’s hope so. Adam Smith argued that free trade eventually makes us all better off and the continued wealth of these particular nations depends upon it.