Why Kansan Parsnips Might Soon Be Coming to Dutch Supermarkets

A handy guide to the Transatlantic Trade and Investment Partnership.
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T-TIP could significantly change world trade. (Dinuka Liyanawatte/Reuters)

Despite potentially awkward revelations that the U.S. has bugged parts of Europe, negotiations for a monumental free trade agreement between the new and old worlds are being carried out on schedule last week in DC.

The Transatlantic Trade and Investment Partnership (T-TIP), if agreed upon, will have a significant impact on world trade, as well as the everyday lives of Americans and Europeans alike.

Here's a handy explainer on the key issues related to T-TIP.

What is T-TIP and what does it aim to accomplish?

T-TIP, as its proponents will tell you, is designed to boost economies on both sides of the Atlantic. Estimates made with the support of the European Commission indicate that it would increase world GDP by around $400 billion.

The catch is that, while most free trade agreements are aimed at removing tariffs that discourage trade, this one is different. Tariffs between the U.S. and the E.U are already very low (on the order of 3-4 percent).

This agreement, instead, targets "non-tariff barriers."

What are "non-tariff barriers"?

The euphemism "non-tariff barriers" refers to regulations and standards put in place by democratic governments which "irritate" trade but usually do so out of concern for national, state, or local interests. These interests could include things like having secure financial institutions or preventing children from consuming products that are dangerous.

Basically, as under many other free trade agreements, the lowest standards and regulations will apply in cases of trade between the two sides. If Kansans are allowed to produce and trade genetically modified parsnips, the Dutch will be compelled to stock them in their supermarkets. European banks, which have expressed an interest in weakening American financial regulations, could get their way, as well, depending on the final wording of the agreement.

What does this mean for U.S. states?

One of the more controversial proposals expected to be part of T-TIP is the ability for foreign corporations to sue domestic governments, or vice versa, in what are known as "investor-state tribunals."

Delegates from both the U.S. and EU who are participating in the negotiations report that both sides favor an agreement that includes opening the way for these controversial dispute-resolution methods.

Basically, under a system that would allow for investor-state tribunals, if a European corporation wanted to sell to Oregon, but there were rules established by that state that were antagonistic to the corporation's product, the corporation could take the state to court. The tribunal would be presided over by three international judges. If the corporation won, it could be eligible to receive taxpayer money from the state as compensation for lost profits or even lost expected profits.

Opponents of the deal worry this would lead to a"chilling effect," meaning states would be less likely to pass regulations in the future out of fear that they would lead to a costly lawsuit.

The next round of negotiations will be in Brussels in October.


This post is part of a collaboration between The Atlantic and the Johns Hopkins School of Advanced International Studies.

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