ТТIP As A Power Political Tool

Research Paper 17th January, 2015
International Political Economy
IR/IO Skills 2
Sanne Kamerling







"The Transatlantic Trade And Investment Partnership (TTIP)
As A Power Political Tool"
Emre Şentürk
S2626268











Chapter 1: Introduction

In the course of Globalization the world and therefore politics became more complex. Actions in politics influence the society in more ways than they used to. This means that politicians and other decision-makers on the political stage have more options to achieve their political goals. One important tool is the economic treaty and in this case free trade zones.
Economic treaties have wide-ranging and deep-reaching impacts on all participants to the treaty. This raises the question whether the economic benefits are the only motivation that drives states to the increasing amount of multilateral treaties in the last century. In order to prove my hypothetical assumption that free-trade zones impact inter-coalition and moreover intra-coalition relations, I will use the Transatlantic Trade and Investment Partnership (hereafter TTIP) as an example to examine how and to what extent the United States of America`s (hereafter USA) relationship with the European Union (hereafter EU) is possibly going to impact their Power Political positions.
In order to do that it is important to understand what Power Politics are and therefore I will examine the concept of power under the light of David A. Baldwin´s work "Power Analysis and World Politics: New Trends versus Old Tendencies". In this work he defines political power and points out new tendencies. He divides power into five categories: potential and actual power, interdependence, military power, positive sanctions, the zero-sum model of politics, the distinction between deterrence and compellence. The most relevant factors will be further examined in order to build a basis for the work. My first sub-question therefore is:

"In which ways do economic treaties affect Power Politics in general?"

This information will be needed to see how far-reaching the impacts of economic treaties really are. As the influence, exerted by treaties on fields of policy, depends on the treaty, therefore I will only concentrate on fields relevant in the context of the TTIP, without using the TTIP as an example at this point.

After building the basis I will apply the theory to the TTIP.
"How could the TTIP impact intra-coalition Power Politics?"
In this part I will examine the effects of the TTIP, after giving a short overview over the treaty, applying several concepts and drawing a future scenario in which ways it may influence political relations between the USA and EU. Here I will use the previously outlined concepts and the provisional treaty provisions. There are many fields of economy which are included in the TTIP, but I will limit the extent to the key aspects. This helps to see in which ways the power could be exerted on each other.
As the main focus is impact on international relations, my third and last sub-question will be: "How could the TTIP impact inter-coalition Power Politics?"
This chapter´s structure is going to be very similar to the previously posed question. This time I will apply the theories to a possible development between the USA and an external party. These effects are also known as externalities and are products of a treaty. Answering this question will show the most important externalities which are in favor of the USA or maybe on the USA´s expense, leading to the conclusion.
Finally, my conclusion will close this future scenario. At this point one will be able to see what a possible outcome and long-term effects this treaty could have, if ratified by both parties.

Chapter 2: "In which ways do economic treaties affect power in politics?"

The concept of power in the political context is a highly debated one. Scholars put in much effort to define political power and among them Jeffrey Hart in his work "Three approaches to the measurement of power in international relations" pointed out the three concepts of power. The first one is the control over resources, the second one is the control over actors and related to both of them is the third concept of power as the control over events and outcomes. Economic treaties contribute to extend power in all three categories, even though its extent depends on the provisions in the treaty.
What power actually is and in which way it is measured depends heavily on the point of view. There are many ways to exert power, called tools. Different types of tools have different effects and levels of efficiency, but it depends on the view: For example, if the question would be raised who has the upper hand in a military conflict one would first look at the size of the armies involved, level of military technology, artillery, etc. One is not able to measure the actual power in a case without picking the right tool which has to be examined. In our example of a military conflict a look on exported goods will contribute very little to our understanding which actor has more actual power in this conflict.
Baldwin refers to this as failure of power prediction as follows: "[…] capabilities (or potential power) of an actor must be set in the context of a "policy-contingency framework" specifying who is trying (or might try) to get whom to do what."
In our contingency-framework, the economic treaty, interdependence plays an important role. "Not every international trading relationship involves dependency", but it has to be examined, case by case, what the alternatives for the party to the treaty, who power is exerted on, are, in order to check whether dependency is the outcome of the treaty. The link between power and dependency becomes visible, if we look at what party B and what it would give up without concluding a certain treaty, rather than what B has to give up when it ratifies a certain treaty. If the estimated future costs without the treaty are much higher dependency is created, as party B is dependent on party A´s offer.
But economic treaties do not always create dependency and its power political impact is not just limited to dependency. Imposing positive sanctions – non-power influences - are also a way to influence actors. Positive sanctions are often associated with monetary aid, but economic treaties can imply positive sanctions, too. In this case, non-power influences are perceived "as `beneficial´ to [party] B because it enriches his choices." Intentionally offering the other party more choices is a way to exert power in the approach (2): control over actors. In the light of the economic treaty this is mostly done by giving more than receiving, which is a psychological effect as party A might "remind the aid recipient that he owes him a favor".
Even the probability of war can be affected in either positive or negative way. It is less probable between the trade partners, but as the "absence of any supranational authority in the international system enables a state to resort to force at any time to achieve its goals. The probability that a state will do so depends in part upon its power, which, in turn, depends partly upon its real income," which can be increased with economic agreements. This creates positive security externalities against third parties, as the ally holds more power and can deter third parties. As these thoughts are very theoretical, it is now time to apply the theory to the TTIP.

Chapter 3: "How could the TTIP impact intra-coalition Power Politics?"
The TTIP is a currently negotiated free-trade zone between the EU and USA. It comprises 24 chapters in overall 3 parts, which are market access, regulatory cooperation and rules. Its aim is to promote mutual economic growth through removing trade barriers in many sectors of each´s economy. Some sectors have more power political impact than others.
In our policy-contingency framework the potential power of both parties is likely to increase. Potential power implies that a party has the means to achieve a certain goal, if used correctly. Despite the pure monetary gain, which increases the budget of each party and can be invested in power policies, other factors, which are not in the hands of the policy-makers, may influence power independently.
Now looking at the relation between the USA and the EU the preliminary treaty provision, article 4 of Chapter II, which addresses market access, it states that neither party shall adopt measures which limit: (a) the number of enterprises, (b) the total value of transactions, (c) the participation of foreign capital in terms of maximum percentage limit in the respective territory. And article 5 protects the investors as it says that: "[…] each Party shall accord […] treatment no less favorable than that accorded to its own like investors." Additionally, article 12 is fully committed to the protection of investors, which leads to equality of EU and US-investors, who operate either on US territory, or EU territory. Coming back to potential power, this means that both the USA and the EU have increased their potential power, because they would be able to directly influence each other´s market by encouraging investors at home to expand their businesses abroad. The USA have the advantage of being only one state with a Gross Domestic Product close to the European one (16,76 trillion in 2013; EU 17,96 trillion in 2013) and therefore can coordinate their investors better than the EU.
If this tactic is used, potential power would change into actual power, as companies from the USA in the EU, and vice versa, would be able to dictate trends in the market. This can result in dependency, if the domestic market is flooded by foreign investments. Referring to Hart´s concepts of power, a development like this comprises all three of them: (1) control over resources (raw materials, monetary resources), (2) control over actors (increased involvement in foreign market) and (3) control over events and outcomes (import/export and recession policies). In short, if developments like these take place, a party could adjust the foreign market to the needs of its own and even have influence on its counterpart´s policies, as the high level of involvement in the market has to be regarded.
As it can be seen, the intra-coalition effects are dependent on investment trends, policy-makers´ decision and of course on the willingness of investors to invest abroad. However, effects of a free-trade zone between the two largest economies, which "account for nearly half of world GDP and 30 percent of world trade," are unlikely to stay within the borders, outlined by the TTIP.

Chapter 4: "How could the TTIP impact inter-coalition Power Politics?"
As mentioned in chapter 2, positive sanctions can play a role in power relations. In this case the "TTIP would bring overall annual GDP gains of 0.5% for the EU (€119 billion) and 0.4% (€95 billion) for the US, once fully implemented (2027). That is, an extra €545/EU household/year." The USA would gain less than the EU, but can make use of a psychological effect and remind the EU "that he owes him a favor", when its help is needed.
Just as in the previous chapter an increase of potential power is going to be an outcome of the TTIP. In the inter-coalition context - the relation between the TTIP parties and third parties – the potential power is going to be much higher than in the intra-coalition context. For example, the increased income of any actor gives him the chance to invest in its military in order to lead operations or for the purpose of deterrence, but this has no effect on the relationship between the USA and the EU, as they mutually benefit from the TTIP. This is therefore no increase in power at all, even if the military capability increased. However, third parties would be affected by this move, because they are more likely to engage in an armed conflict with the USA or with a member state of the EU than those two between them. But even if a state does not actively pursue a better power political position, externalities will occur that might change how a state is perceived.
One of them, and arguably the most important one, is the security externality. It is effect on collective security within the international, sovereign-state system. If the effect is positive the probability of war or conflict and tensions in general decreases. Joanne Gowa and Edward D. Mansfield point out: "In the case of allies, the security externality that trade produces is positive", which also applies to the TTIP and the example.
The TTIP would change the relatively independent relationship between the EU and USA into an interdependent one, because of its sheer size and the multiple levels on which their respective economies would be connected. Resulting from this interdependence the USA and the EU would move even closer together politically. There are at this point several externalities in this case: (1) EU-US economy builds economic hegemon and set global economic course, (2) EU-US is perceived as strong block; other strong economies seek to do the same and (3) other states seek to join the treaty. I base on the estimations that "the TTIP would regulate an estimated 72.5 percent of all global trade and investment, potentially overpowering the World Trade Organization (WTO) as the main organ of global trade governance." This would leave all other states far behind and leaving a state just these previously mentioned three options to react to the TTIP. In the scenarios (1) and (3) the security externality is positive, as these developments are power-increasing ones. However, such a strong block can be perceived as dangerous by other states and therefore scenario (2) has a negative security externality and thus increases the probability of conflict.

Chapter 5: Conclusion
My main motivation roots in my former assumption that the GDP and therefore money directly translate into power, but I knew that it cannot be that easy. Therefore I was motivated to find out more about the link between economy and power. Picking an economic treaty, especially the TTIP, was in my opinion a good choice, because its size makes the link more visible. Furthermore I think that future scenarios are important for decision-making and opinion-building, as they look beyond the officially laid down terms and pose several possibilities for the future.
The first sub-question points out the three concepts of power in international relations, the policy-contingency framework, the relationship between interdependence created through trade and positive sanctions in international trade. Followed by the second sub-question examines the treaty provisions in regard to possibly resulting interdependence and potential-power structures. And finally, the third sub-question gives a future outlook on the reactions of third parties and positive sanctions as a means of pressure of exert power in the context of the three concepts by Hart.
This leads to my conclusion as from this work it follows that the actual power does not increase disproportionately, whereas the potential power increase drastically in a number of ways. The probability of exerting power within the ally is relatively low, even though not unlikely. But the externalities have the potential of influencing international relations in a big way. Partly, because one development is inevitable: the economic growth and linked to that the wealth generated by the TTIP, if concluded.
This future scenario showed just limited ways of how the TTIP might change power political relations, but that change will occur is already sure.
Whether and how this potential power is going to be used in the future will be seen.




Bibliography

Jeffrey Hart. "Three approaches to the measurement of power in international relations. " International Organization 30, No. 2 (1976): 289-305. http://www.jstor.org/stable/2706260.
David A. Baldwin. "Power Analysis and World Politics: New Trends versus Old Tendencies." World Politics 31, No. 2 (1979): 161-194. http://www.jstor.org/stable/2009941.
Gowa Joanne and Edward D. Mansfield. "Power Politics and International Trade." The American Political Science Review 87, No. 2 (1993): 408-420.
European Commission. About TTIP. Last modified January, 2015 http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/contents/.
IBDE. The First Transatlantic Trade & Investment Partnership Forum. December 12, 2013. http://www.ibde.org/component/content/article/222-ttip-overview.html.
World Ecology. Economy & Development, TTIP Draft European Commission. http://www2.weed-online.org/uploads/ttip_draft_european_commission.pdf.
The World Bank. Data: GDP. http://data.worldbank.org/indicator/NY.GDP.MKTP.CD.
EPRSAUTHOR. "Towards an US-EU trade and investment deal." European Parliamentary Research Service. July 11, 2014. http://epthinktank.eu/2014/07/11/towards-an-eu-us-trade-and-investment-deal-2/.
Alvaro Guzman Bastida. "Explainer: TTIP aims to boost US-EU economic ties." Aljazeera America. September 29, 2014. http://america.aljazeera.com/articles/2014/9/29/explainer-ttip-aimstoboostuseueconomicties.html.



Jeffrey Hart, "Three approaches to the measurement of power in international relations," International Organization 30, No. 2 (1976): 289.
David A. Baldwin, "Power Analysis and World Politics: New Trends versus Old Tendencies," World Politics 31, No. 2 (1979): 164.
Ibid., 176.
Ibid.
Ibid., 184.
Ibid., 185.
Joanne Gowa and Edward D. Mansfield, "Power Politics and International Trade," American Political Science Review 87, No. 2 (1993): 408.
Ibid., 411.
European Commission, About TTIP, http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/contents/.
IBDE, The First Transatlantic Trade & Investment Partnership Forum, http://www.ibde.org/component/content/article/222-ttip-overview.html (accessed December 12, 2013).
World Ecology, Economy & Development, TTIP Draft European Commission, http://www2.weed-online.org/uploads/ttip_draft_european_commission.pdf.
Ibid.
The World Bank, Data: GDP, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD.
Jeffrey Hart, "Three approaches to the measurement of power in international relations," International Organization 30, No. 2 (1976): 289.
IBDE, The First Transatlantic Trade & Investment Partnership Forum, http://www.ibde.org/component/content/article/222-ttip-overview.html (accessed December 12, 2013).
EPRSAUTHOR, "Towards an US-EU trade and investment deal," European Parliamentary Research Service, July 11, 2014, http://epthinktank.eu/2014/07/11/towards-an-eu-us-trade-and-investment-deal-2/ (accessed July 11, 2014).
David A. Baldwin, "Power Analysis and World Politics: New Trends versus Old Tendencies," World Politics 31, No. 2 (1979): 185.
Joanne Gowa and Edward D. Mansfield, "Power Politics and International Trade," American Political Science Review 87, No. 2 (1993): 411.
Alvaro Guzman Bastida, "Explainer: TTIP aims to boost US-EU economic ties," Aljazeera America, September 29, 2014, http://america.aljazeera.com/articles/2014/9/29/explainer-ttip-aimstoboostuseueconomicties.html (accessed September 29, 2014).
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