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Trade pacts

Interview: Michael Knigge
September 19, 2014

As Germany's Social Democrats meet to find a common line on TTIP, noted globalization scholar Saskia Sassen tells DW why we are witnessing a rise in trade agreements and who stands to benefit from them.

USA Soziologin Saskia Sassen
Image: MIGUEL RIOPA/AFP/Getty Images

Saskia Sassen @SaskiaSassen is professor of sociology and co-chairs The Committee on Global Thought at Columbia University in New York. She is a leading scholar on globalization and cities.

DW: It seems like we live in a period of major international trade pacts with the Transatlantic Trade and Investment Partnership (TTIP), the Comprehensive Economic Trade Agreement (CETA), the Trade In Services Agreement (TISA) and the Trans-Pacific Partnership (TPP) all being negotiated or finalized right now. What is behind this trend?

Saskia Sassen: I think they are crucial elements, starting with the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) rounds, for creating a global operational space that is an advantage for the multinationals. The truth of the matter is that when you look at the data the gains go to the firms operating globally. The notion of losing or gaining jobs like countries in Europe or the United States might try to look at, is just not an issue for them. So what they want is the capacity to access the particular labor supply or regulatory environment that works to their advantage. For the United States the data is quite clear: The United States has basically lost jobs. That affects workers, but it has nothing to do with big corporations. For them this is not important for their operation.

But the EU argues that TTIP would boost trade and the economy and an average European household could gain 545 euros every year. What's not to like about that?

This is the line that has been given for a long time. The United States has been at these trade deals for a long time, so we have a lot of data. And what that often means is the lowering of prices and the cost of goods via cheaper imports. So yes, the household in a very sort of narrow perspective gains because they pay less, the famous example of this is of course low-cost Chinese imports. But the large question is does the economy in which this households operates also gain so that you have a large shadow effect that is a benefit for a larger complex system rather than the pair of shoes that you buy for less money. And there the figures are negative. So the household may benefit, but it is a very particular and very short-term benefit. And in the long-run the effect can be to lessen the dynamism of an economy to keep it from adding new jobs.

The most widely discussed of these trade deals is probably the transatlantic pact between the world's two biggest economies, the EU and the US, which would cover almost 50 percent of global GDP and is supposed to boost bilateral trade between the two partners. What do you make of TTIP?

If you read the literature on what the government in the United States is saying is about the treaty is we gain, we gain, we gain. And in Europe they are saying the same thing. So they are giving us a miracle - everybody wins. You can probably isolate a couple of variables that allow you to say that everybody wins. But we know from prior treaties that over time what gains are the profits of the multinationals and who loses are the economies. So if I was in Europe I would question what are the goods and services that will become cheaper because we are importing them from lower cost production sites. Europe is a mixture in its economic space because in the East you have quite a bit of low wage countries. Look how Poland has thrived keeping its own currency, but exporting to the EU. It has been a boon for them. I can imagine those countries winning much more than Germany.

So do you reject bilateral trade deals like TTIP outright?

No. But I want to see treaties that are honest and where the logic organizing the benefits of the treaty is not only the logic of corporations. There must attention given to two other things: one, workers in the countries involved rather than just profits of corporations that are then used as an indication how much we gained. And that can be done. Germany does it a bit in its own economy, for instance. But most countries don't do that. Germany is quite exceptional there.

The other thing, much more difficult and requiring a complete rethinking of how our economies work, is to figure out how the whole economy can really gain over the long-term and not just in terms of cheaper consumer good prices.

I am not against international trade. We absolutely need it. I am not against the Ricardian model [whereby two countries produce two goods using one factor of production and are competitively equal - the ed.], producing different things in different countries, but we also have to factor in another increasingly important vector - the environment.

And a final issue I have with all these new generation treaties is that corporations gain rights. If you stand back and ask yourself who gains rights, it is not the citizens. Citizens in many of our countries have lost rights. Little rights that are sort of encased in technical aspects and most citizens don't even realize it until it happens to them. And with TTIP and TTP they gain even more rights and so a lot of critical analysts are stunned by these two treaties.