Grant Shapps’ TTIP delusions

The Conservative Party chairman has made his claims based on half truths and assumptions

 

My local MP, Conservative Party chairman Grant Shapps, has written an article in today’s City AM about the planned EU-US trade deal which includes so many rosy-tinted assumptions, so many exaggerated claims and so many half-truths that you might think he had something to hide about the deal.

He even refers to free trade as being “magic”, delivering such abundant benefits for everyone with no drawbacks at all that it would be madness to question the deal which is currently under negotiation. Mind you, from a politician whose very name is as malleable as Michael Green (sorry, Grant Shapps), this may not be his greatest flight of fantasy!

The TUC believes that more trade would be good for the economy, good for jobs and good for wages. But we aren’t gullible enough to believe that trade agreements are the same as increased trade, and we aren’t over-optimistic enough to ignore the disadvantages as well as the benefits that increased trade can bring, which need to be addressed.

Here are eight areas where Grant Shapps’ article falls foul of reality.

First, he is mostly selling the idea of a tariff-reduction trade deal, and most of the worst problems with the Trans-Atlantic Trade and Investment Partnership (TTIP) result from the elements that aren’t about tariffs at all. TTIP might well lower protections like health and safety rules, consumer and environmental standards. It would, as currently proposed, give US investors extra powers and new courts in which to sue our government for actions that might just possibly disadvantage those investors, far beyond the breaches of contracts that everyone accepts should be compensable.

Second, he’s right that reducing tariffs between two advanced economies like the EU and the USA would probably, on balance, be beneficial – and it would certainly be good for some specific sectors where tariffs remain high. But tariffs overall between the EU and USA are pretty small (customs duties on all US imported goods to the UK in 2013 amounted to about £30m.) So while tariff reductions would reduce prices for consumers and make our exported goods cheaper in the USA so they are more likely to sell better, consumers in the UK won’t be that much better off.

Indeed, the increase in VAT that Grant’s government imposed shortly after taking office raised prices for consumers by far more across the board than scrapping all tariffs on US goods would reduce them (total VAT and other duties on US imports in 2013 were about £14bn!)

And third, of course, dropping those tariffs wouldn’t be entirely cost free to the UK. That £30m lost in tariff revenue will mean £30m less money for government, which means £30m more cuts in services, public sector pay and so on.

So if US-UK import tariffs raise just £30m, where does Grant get his headline-grabbing predictions that TTIP would create up to 2m jobs, boost the economy by £10bn a year, and make the average British family £400 better off?

Fourth in my list is that the jobs he implies would be created in the UK are actually higher than the most optimistic assessment of job creation due to TTIP across the European Union as a whole (1.3m). But possibly, Grant is putting that figure (generally held to be absurdly optimistic) together with what the British government claims would be created in the US (740,000).

The figure for job creation in the UK would be much smaller. My fifth point is that there are similarly robust economic studies – or similarly weak, given the enormous assumptions involved in any economic modelling – that suggest there would be overall job losses as a result of TTIP! Grant Shapps doesn’t even acknowledge these, let alone address the concerns they raise.

Sixth: the study he is quoting to claim that the British economy would be boosted by £10bn a year actually says £4bn to £10bn, depending on how far the agreement goes. Only by scrapping up to 75 per cent of the actionable non-tariff barriers to trade (ie regulations) could you increase the UK economy by his claim, which amounts to 0.5 per cent GDP growth for our roughly £2 trillion economy.

Even a £4bn boost to the UK economy would be worthwhile (representing 0.2 per cent growth), but even that would require more than the increase in trade due to tariff reductions.

Seventh, the European Commission claim that the average European family would be €545 a year better off, or £400 a year at the current exchange rate, is based, again, on the widest possible trade deal which would have the greatest impact on regulatory standards (the £30m reduction in tariffs on US goods entering the UK would reduce the average UK family annual shopping bill by less than £2, or 4p a week.)

And these are averages, of course, although at the end of his article he implies every British family would be £400 a year better off. The last ten years shows that average improvements in living standards usually describe a situation where the richest get all the gains, leaving the average family no better or even worse off. Still, it’s nice to know your loss is someone richer’s gain, eh?

I will gloss over his bombastic assertion that it is “enterprise, capitalism and free trade” that has raised living standards globally to their current level since the Stone Age (yep, the NHS, state education, scientific discoveries have had no impact at all. All down to free enterprise. On this logic, slavery and war have had a major positive impact too!)

And my last concern, saving the worst for last, is his claim that “our NHS will be completely protected” from TTIP, basing his assertion on the pledges of the European Commission. Most recently, EU trade commissioner Malmstrom has written to UK trade minister Lord Livingston to assert that the Investor-State Dispute Settlement (ISDS) process that privileges foreign investors over democratically-elected governments will have no impact on the NHS (in which case, I’m not sure why politicians like Grant are so insistent on including ISDS in the deal.)

But this is just her prediction of how the courts (and the unaccountable, unchallengeable ISDS tribunals) will react to cases. It isn’t a guarantee. If she wanted to provide such certainty, she could simply exclude the NHS and public services generally from both the services and investment chapters of TTIP – and the UK government could demand that from the Commission, as the French government did over cultural industries. Why should we trust what Grant Shapps and Cecilia Malmstrom are only predicting when they are unwilling to take the step that would guarantee that end?

What Grant Shapps is doing is a dangerous game for a politician to play. He is knowingly over-promising the benefits that TTIP might deliver, ignoring completely the need to address the downsides that will result, and dismissing justified concerns about the impact of creating new rights for foreign investors with no counter-balancing protections for citizens, consumers or workers.

Owen Tudor is the head of European Union and International Relations at the TUC

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