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September 24, 2013

Gussying Up Old Assumptions: Today’s TAFTA-Touting Report Is a Re-Run

If you say something enough times, does it become true?  That seems to be the calculation of some proponents of the Trans-Atlantic Free Trade Agreement (TAFTA), a sweeping deal that would require the U.S. and EU to conform domestic safeguards to deregulatory rules currently being negotiated under corporate supervision.  Pro-TAFTA think tanks have been rehashing the same set of starry-eyed prognostications of TAFTA economic benefits at a frequency (and concern for accuracy) that rivals iterations of the “Fast and the Furious” movie series. 

But repetition does not truth make.  As we’ve pointed out time and again, these reports keep using sweeping assumptions to project that TAFTA would bring a surprisingly miniscule economic blip.  And to get that blip, they assume that we’ll be willing to watch corporate-advised TAFTA negotiators dismantle a swath of health, environmental, financial, and other safeguards.  Click here for our retort to this parade of studies. 

Another TAFTA-touting report came out today, commissioned by the British Embassy in Washington, the Bertelsmann Foundation, and the Atlantic Council (whose advisors include executives from J.P. Morgan and Big Pharma). 

The report offers 71 glossy pages of rewarmed speculations.  Here are the five main takeaways:

1. The “new” study is not really new.  It is largely a recycled version of another recycled version of a study that appeared in 2009.  Today’s report hypothesizes what TAFTA could mean for each U.S. state, assuming economic gains primarily from the weakening of financial regulations, climate policies, food and product safety standards, data privacy protections and other “trade irritants.” Those “gains” were tabulated about four years ago, dusted off in a study disseminated in March, and sliced up by state in today’s report.

2. The study confirms again that TAFTA is not about trade.  Since tariffs (an actual trade issue) are “already quite low” between the EU and U.S., pro-TAFTA government officials have readily stated that TAFTA’s primary goal is not tariff reduction, but the “elimination, reduction, or prevention of unnecessary ‘behind the border’” policies, ranging from Wall Street reforms to milk safety standards to GMO food labels. 

That’s why attempts to measure the economic impact of TAFTA-prompted tariff reductions have produced embarrassingly meager results.  A frequently cited pro-TAFTA study estimates that even in the unlikely scenario of 100% tariff elimination, TAFTA will deliver economic benefits equivalent to three extra cents per person per day.  To project a higher benefit, the study released today had to not just repeat this unrealistic assumption of 100% tariff reduction, but also assume that TAFTA would reduce health, financial and environmental regulations that have been euphemistically renamed “non-tariff barriers.” 

3. The study assumes zero downside of eliminating consumer and environmental safeguards. Today’s study assumes that TAFTA would eliminate one out of every four “non-tariff barriers” – from the Volcker Rule at the center of Wall Street reform to safety standards for children’s toys to the ban on beef linked to mad-cow disease – at no cost to consumers.  In addition to an obvious social and environmental toll, such a degradation of safeguards would also result in quantifiable monetary costs for U.S. consumers and the broader economy.

For example, the 2009 study on which today’s report relies counts “Grade A dairy safety…rules and inspection requirements” for milk and “a US ban on the import of uncooked meat products” in the case of “a health risk” as “non-tariff barriers” that could be slated for dismantling under TAFTA. The elimination of such consumer protections would likely result in greater incidence of food-borne illness in the United States, which would not only increase the medical costs of affected consumers, but would reduce their productivity levels and number of days at work, spelling a negative impact on aggregate economic output.

In financial services, the study names the Sarbanes-Oxley Act of 2002 as a “non-tariff barrier” on the target list of EU businesses and officials. The Act created enhanced accounting and anti-fraud standards to prevent a recurrence of the Enron, WorldCom, and other corporate accounting scandals that destroyed billions of dollars of U.S. investments. Undermining such critical financial reregulation via TAFTA would risk a return to such costly scandals. Today’s study ignored such costs.

4. The study uses contested models with assumptions that can turn economic losses into gains.  While ignoring costs, today's study strives to capture all theoreticaly plausible benefits by relying on assumptions-laden methods, such as using a computable general equilibrium (CGE) model to assess removal of “non-tariff barriers” (NTBs).  A U.N. study has questioned the reliability of this inchoate approach. It argues, “ongoing liberalization policy efforts to eliminate the restrictive effects of NTBs are proceeding with little economic analysis…the modeling of NTBs using general equilibrium modeling techniques is still in its early stages.” The U.N. study tested the usage of differing assumptions in a CGE model to estimate the economic effects of NTB removal and found that a change in the assumptions meant that the net economic effect of NTB removal actually switched from positive to negative for some countries (even before taking into account the above costs).  If today’s study performed any such testing of assumptions, it did not reveal the results. 

5. The study assumes a massive rollback of Buy American and Buy Local policies.  Another assumption of today’s study is that TAFTA would eliminate one half of all “procurement barriers,” a euphemism for popular policies like Buy American and Buy Local to ensure that U.S. government projects, funded by U.S. taxpayers, are used to create U.S. jobs.  It is rather fanciful to think that the U.S. Congress, state legislatures, or the U.S. public would accept such a clear-cutting of policies that enjoy 90% support.  Indeed, today’s study assumes an even greater undercutting of Buy American and Buy Local than the EU negotiators themselves are hoping for. In a leaked EU position paper on government procurement, the EU explicitly names 13 U.S. states and 23 U.S. cities it is targeting for rollback of Buy Local policies.  Today’s study assumes that the U.S. will offer to eliminate Buy Local in about twice as many states as the EU itself requested.

For more information on the lineage of TAFTA-touting studies from which today’s rosy report descended, click here to see our factsheet.  

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