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Saving TTIP by Learning from NAFTA

Christopher Sands

The editorial team at recently published advice (Memo 48) gleaned from debates among the site’s participants on how political leaders could “save” the Transatlantic Trade and Investment Partnership (TTIP) talks from failure. Each suggestion is a concession to critics that may raise public support for an eventual agreement. I am not so sure this works. I suggest an alternative approach.

The premise of the’s advice seems wrong. Instead of a NAFTA-like TTIP treaty the Obama administration could seek an executive agreement with European leaders modeled from US negotiations with Canada and Mexico. Their advice seems to be based on the mistaken premise that TTIP will result in a traditional trade treaty to be ratified by the US Congress and European governments, for which voter support will be essential. Perhaps this will be the case, but another approach seems more likely when looking at the legacy of the North American Free Trade Agreement (NAFTA) and the battle to ratify it two decades ago.

For anti-globalization campaigners who lost the battle over NAFTA but won the war for public opinion over further liberalization of trade agreements, every new agreement is a possible NAFTA. For this reason US political elites begin every trade agreement with an effort to avoid another NAFTA fight.

A decade after NAFTA ratification, the George W. Bush administration returned to the task of fostering a single market for goods and services in North America through the Security and Prosperity Partnership for North America (SPP). The SPP was comprised of twenty working groups of officials from Canada, the United States and Mexico who worked to reconcile differences in regulation and inspection of cross-border commerce. These working groups were loosely overseen by a cabinet ministerial group that reported twice a year to the presidents and prime minister, who met annually to review progress.

The SPP design reflected the lessons of the NAFTA debate in two ways.

First, the SPP agenda included new issues. NAFTA had done its job of reducing tariff and investment barriers among the three countries so well that tariffs and traditional protectionist measures were no longer important obstacles for firms in most sectors. Supply chains for everything from agriculture to manufacturing, software, and services stretched across the continent so that large and small firms increasingly built things together, much as they were doing in Europe. This meant that the SPP would also have to ease the market access barriers established in the aftermath of the September 11, 2001 terrorist attacks. Regulatory differences and border security requirements were the new priorities for liberalization in North America, which had made progress toward economic integration but unlike the European Union, was not a single market.

Second, the SPP worked around Congress. The US Congress remained polarized on trade issues and hawkish on border security in 2005. As a result, the Bush administration designed the SPP to proceed using existing statutory authority – the authorization given by Congress to the executive branch to engage in rule-making and standards setting, as well as inspecting compliance with the laws. This meant that the SPP did not need congressional approval or ratification in the US and each government’s executive branch made a change to the rules in this way. These changes were subject to legislative oversight and legislators could still change the law to reverse an SPP-driven modification. In this way, the SPP respected every nation’s sovereignty while subjecting it to democratic due process. The SPP also denied opponents another NAFTA-type battle.

This is why a TTIP governance partnership by executive agreement, similar to the one set up in the SPP, could be more successful. Instead of a single undertaking in which nothing is decided until everything is decided, the SPP model establishes a new process by which future decisions can be taken cooperatively by governments, one by one. In North America, federalism means that some cooperation must involve national governments, while for some issues states and provinces are necessary partners. Likewise with TTIP, under the SPP model there would be areas of cooperation that fall under EU competence and others that require engagement of the EU member states. A TTIP regulatory cooperation commission and a customs facilitation working group (the transatlantic equivalent of a border cooperation dialogue) could be announced before 2017 and in the future the partnership process would address the substantive issues incrementally, and without a return to rancour of the 1990s.

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