A hard sell.

Photographer: Mehmet Kaman/Anadolu Agency/Getty Images

German Scorn Could Kill the Transatlantic Trade Deal

Therese Raphael writes editorials on European politics and economics for Bloomberg View. She was editorial page editor of the Wall Street Journal Europe.
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In Hannover on Sunday, Barack Obama sought to convince a hostile German public of the merits of a transatlantic free-trade deal. Pitching European Union membership in Britain was a walk in the park by comparison.

It’s hard to overstate the level of opposition to the new deal in Germany. The Transatlantic Trade and Investment Partnership, or TTIP, is more unpopular in Germany these days than President Obama in a room full of Tory euroskeptics. Ask an American what they think about investor-state dispute settlement provisions and you are likely to get a blank face. Ask a German, and there’s a good chance you’ll get an earful.

That wasn’t always the case. Two years ago, when negotiations for a new transatlantic trade deal were announced (it was Germany that pushed for an agreement then, by the way), more than half of Germans favored the deal. A survey released last week showed only one in five Germans want it now. To Germans, TTIP reflects a capitalism that is too finance-driven, dominated by large multinationals, cavalier about privacy and not as serious about product standards.

A new round of negotiations -- the 13th, for anyone keeping track -- started in New York Monday for a pact that would liberalize trade affecting 40 percent of the global economy. The key to a deal, as Obama’s Hannover visit suggested, rests with Germany. That a global exporting powerhouse and Europe’s biggest economy has become such a reluctant partner ought to be at least as worrying as the prospect of losing Britain’s voice in the EU.

It’s unusual even in these highly charged times for a trade agreement to receive the kind of attention that TTIP has in parts of Europe. But TTIP isn’t a typical free-trade agreement. For one thing, it’s much bigger than anything attempted before. It would create the world’s largest free market of some 800 million people. According to U.S. chamber of commerce estimates, it would add 119 billion euros (nearly $134 billion) to Europe’s economy and 95 billion euros to the U.S. economy, creating thousands of jobs in the process. 

But the real difference is qualitative. While tariffs are already low between the two economies (they would be reduced further under TTIP), the main thrust of the agreement is the removal of non-tariff barriers in agriculture, services, procurement and other areas. It is this large-scale regulatory liberalization that many Europeans, and principally Germans, find dangerous.

Americans, too, are losing their appetite for free trade agreements, but their reasons are rather more prosaic. Among Americans opposed to the deal, half say they are worried about job losses and lower wages. Only 17 percent of Germans had those concerns. Germans, instead, are focused on what they see as inferior American standards (something that will strike many Americans as ironic after the Volkswagen emission scandal), concerns about privacy and also lack of transparency in the negotiations.

These sentiments took American negotiators by surprise. America is the destination of over 8 percent of German exports; some 600,000 German jobs directly or indirectly depend on that trade, according to a 2013 study by the Cologne Institute for Economic Research. German trust for America’s business standards has been low for a while -- there was near hysteria over chlorine-washed U.S. chickens, even though a German body declared them perfectly safe -- but many figured France would present bigger obstacles to clinching an agreement.

They hadn’t reckoned on the Snowden effect. TTIP was announced only weeks after revelations in 2013 by U.S. intelligence contractor Edward Snowden of government surveillance programs that enraged privacy-oriented Germans. With German opinion becoming more skeptical, politicians who supported a transatlantic deal grew quiet. Meanwhile anti-TTIP organizations and unions (with support in the European Parliament) whipped up resistance, which has included mass petitions and protests.

All of that fed a growing sense after the financial crisis that something was awry in American capitalism. “Germany is a country that is very proud it’s not as finance-driven as the Anglo-Saxon economic model,” says Peter Sparding, a fellow at the German Marshall Fund, noting that German politicians have referred to hedge funds as ‘locusts.’ “It’s not just about TTIP; it’s about the image of America as standing for a kind of capitalism that is finance-driven and has lower standards in general.”

In the post-Snowden, post financial-crisis world, there is little tolerance for the kind of secrecy that is typical of trade negotiations. Responding to criticism from Germany and other countries about lack of transparency in January 2015, the EU’s ombudsman rejected a complaint that the European Commission had overstepped itself. But she made 10 suggestions for greater openness and noted there were “significant delays” by the Commission in granting public access to some TTIP documents.

Disclosing negotiating documents would undermine the Commission’s position and its relations with the U.S., said the ombudsman. She also referred to a European Court of Justice ruling that while transparency isn’t irrelevant in international negotiations, institutions decide whether disclosure of documents would work against the public interest.

The Commission argues it has gone beyond the usual practice and published negotiation position papers, conducted stakeholder meetings and launched a public consultation process over investor-state dispute settlement. That’s a losing argument; the transparency debate is a proxy for the underlying mistrust in both EU processes and American standards on everything from hormone-treated beef to labor-market regulations. The EU will have to do more to overcome those objections or risk further losing public trust. The German Marshall Fund’s Sparding suggests the unconventional approach of releasing intermediate negotiating results. 

As he said in Hannover, Obama would dearly like to see agreement on the trade deal before he checks out of the White House. Obama and other proponents see TTIP as more than a stand-alone trade deal; it's a way to reinvigorate the transatlantic partnership and set new global standards for trade. But time is running out, as is German Chancellor Angela Merkel’s political capital with an electorate already deeply tested over immigration and other issues. America’s presidential contenders don’t see much percentage in touting free trade either; quite the opposite. The new U.S. president, even if he or she has a change of heart, will be busy filling positions in their administration. With major elections in France and Germany in 2017, the political timetable is working against an agreement.

Perhaps if the idea for TTIP had never been broached, nobody would miss it. But having gone this far, failure would be costly, and not just in terms of lost economic opportunities. It would stand as a sorry symbol of allies and close trading partners who couldn’t overcome their difference over chlorine-washed chicken.

(Corrects name in ninth paragraph to Edward Snowden.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Therese Raphael at traphael4@bloomberg.net

To contact the editor responsible for this story:
Susan Warren at susanwarren@bloomberg.net