Why TTIP Failure Would Be Damaging for Barack Obama

Barack Obama
U.S. President Barack Obama n the Oval Office at the White House, Washington, July 7. Reuters

U.S. Trade Representative Michael Froman will meet key EU officials in Brussels on Thursday, including Trade Commissioner Cecila Malmström. The talks are aimed at rejuvenating the controversial, stalling Transatlantic Trade and Investment Partnership (TTIP) between the United States and the 28-member EU, but a decisive breakthrough looks unlikely before the end of the Obama presidency.

In recent weeks, French President Francois Hollande and German Economy Minister Sigmar Gabriel have indicated the talks are on the verge of failure. Reflecting this dynamic, former French President Nicolas Sarkozy—who is challenging Hollande next year—has suggested pushing back the negotiations a year till after the French and the German national elections, when a new U.S. president will also be in the White House.

Should the TTIP talks collapse, it would be a major setback for Washington, which has enjoyed significant success in a long-term, bipartisan goal of encouraging growth of free trade across the world in the post-war period. TTIP failure for the Obama team would be compounded if it is also unable to persuade Congress to pass the Trans-Pacific Partnership (TPP) before the president leaves the White House in January.

Inspired by predecessors in the post-1945 period, the administrations of Barack Obama, and also Bill Clinton and George H.W. Bush have sought to respond to the collapse of Communism in the last 25 years by encouraging expansion or creation of a range of economic and security institutions including TTIP, TPP, the North American Free Trade Agreement (NAFTA), Asia Pacific Economic Cooperation (APEC), World Trade Organisation (WTO), and the North Atlantic Treaty Organisation (NATO).

The highly controversial TTIP between the United States and the EU would create a combined economic bloc accounting for around 50 percent of global GDP that would represent the largest regional free trade and investment agreement in history. Meanwhile, TPP would see a deal with around a dozen countries in the Americas and Asia-Pacific that collectively account for about 40 percent of world GDP.

As with previous presidential incumbents post the collapse of the Berlin Wall, a key ambition for Obama is embedding regional and global institutional frameworks to extend and enhance U.S. influence. This parallels the post-Second World War creation and nurturing of key international bodies from the UN, to the IMF and World Bank.

On the economic front, the creation of NAFTA, APEC and the WTO have binded in emerging markets and/or newly democratic governments toward pro-market economic reform from Asia-Pacific to the Americas. For instance, NAFTA has consolidated Mexico's embrace of free market, international orientated policies.

Moreover, the creation of the WTO has been a step towards facilitation of free trade on a global basis. The body has reinforced multilateral trade laws and embedded 160 states, including China, into a system that, for instance, helps ensure agreed rules are correctly applied and enforced.

While the United States has benefited from creation of these institutions, other states have also gained by tying in what is still the world's most powerful country into bodies that make its policies more predictable. For instance, Washington is subject to the WTO's multilateral dispute settlement mechanisms, whilst enabling potentially enhanced access to the U.S. marketplace.

On the security front, NATO has been expanded in three main waves since 1989 in an attempt to lock much of Central and Eastern Europe (mostly formerly Warsaw Pact countries) into the Western security system. Today, the organization's membership stands at 28 with 12 additions since the fall of Soviet Communism.

To be sure, these institutions have not been without significant criticism and opposition, as reflected in this year's U.S. presidential campaign. NAFTA, for instance, has been condemned, just like the proposed TPP, by free trade critics, including U.S. Republican presidential nominee Donald Trump. Even U.S. Democratic presidential nominee, Hillary Clinton, whose husband Bill was a key architect of NAFTA, has called for it to be reviewed almost 25 years after first coming into existence, and she has also come out against TPP.

The expansion of NATO has also prompted significant controversy. The alliance's enlargement eastwards has been an especially difficult pill for Russia to swallow, while Trump has described the body as "obsolete" and cast doubt over whether, if he is elected president, Washington would necessarily come to the aid of NATO allies under attack.

As well as proving sometimes controversial, these security and economic institutions have experienced mixed fortunes in recent years. NATO, for instance, is in the midst of a major period of change that will set a revised strategic direction for the next five to ten years.

The WTO has also experienced a difficult period that has seen the Doha round of multilateral talks collapse. Reform measures, including ending the need for unanimity on future world trade deals, are thus now being debated.

Moreover, even some of the keenest supporters of NAFTA have acknowledged that the impetus toward freer trade within North America has ebbed in recent years. And there appears no major enthusiasm for a significantly 'deeper' trilateral U.S., Mexican and Canadian agreement.

Meanwhile, the future for APEC is also uncertain, with China pushing for creation of a free trade area by 2025. However, other APEC member countries want to achieve a similar ambition through the U.S.-driven TPP of which China is not currently a part.

Nevertheless, all these bodies have proved of enduring significance, despite the multiple challenges they continue to face. This is demonstrated by, for instance, the pipeline of countries still wanting to join NATO, and the U.S.-led proposal to build upon NAFTA and APEC with TPP.

Taken overall, this historical context underlines why failure of TTIP and/ or TPP would be a setback not just for the Obama administration. It would also undermine the decades-long U.S. ambition of building regional and global institutions to extend its influence internationally.

Andrew Hammond is an Associate at LSE IDEAS (the Centre for International Affairs, Diplomacy and Strategy) at the London School of Economics.