Streit Talk

by Mitch Yoshida and Alessia Rossi

After years of economic uncertainty and stalled multilateral trade negotiations under the WTO, U.S. and EU leaders have decided to negotiate a comprehensive trade and investment agreement – formally known as the Transatlantic Trade and Investment Partnership (TTIP) – by the end of 2014. By removing barriers between the world’s two largest and most intertwined economies, they aim to boost economic growth, spur job creation, and deepen and extend the reach of liberal international economic rules.

Policymakers, business leaders, and scholars have repeatedly called for the removal of barriers to transatlantic trade and investment during the past 20 years. In 1995, the New Transatlantic Agenda stated the intent to create a “New Transatlantic Marketplace” to “expand trade and investment opportunities and multiply jobs on both sides of the Atlantic” and “contribute to the dynamism of the global economy.” The next major step in this direction came in 2007, when the Transatlantic Economic Council was established to oversee and accelerate transatlantic economic integration. Despite progress in some sectors, liberalizing the broader transatlantic economy has proven easier said than done. Differences over agriculture, subsidies, regulations, and other issues were too difficult to overcome.

But the prospects for an agreement have improved markedly in recent years. Within the U.S. and the EU, persistently weak growth and high levels of unemployment and debt are driving senior policymakers to invest substantial political capital in concluding an agreement. After all, a freer transatlantic market would lead to more competition and larger economies of scale, spurring growth and job creation. Such an agreement would, in effect, provide a much-needed stimulus to both economies without the need for additional government spending. And interests that typically raise major objections to free trade agreements – labor and environmental groups, in particular – have relatively less to argue about since U.S. and EU labor and environmental standards are among the most stringent in the world.

While U.S. and EU tariffs are already low – around 3-4% on average – lowering them further would yield enormous benefits as they apply to a large volume of trade. Estimates vary, but according to Daniel Hamilton and Joseph Quinlan at the Center for Transatlantic Relations, a zero-tariff agreement on goods alone could boost annual U.S. and EU GDP by 1.48% and 0.48% respectively. When it comes to lowering non-tariff or “behind the border” barriers, the potential gains are much larger. According to the U.S. Chamber of Commerce, halving non-tariff barriers could provide a GDP boost of 3% to both sides of the Atlantic. A comprehensive agreement on both types of barriers could create 7 million new jobs. Although these estimates are on the higher side, they illustrate the benefits of concluding an agreement of the TTIP’s depth and breadth.

U.S. and European policymakers are also being driven toward an agreement by developments elsewhere. The WTO’s stalled Doha Round of multilateral trade negotiations is holding back global economic growth, and could in time undermine the liberal economic rules that have constituted an important pillar of the international order since the end of the Second World War. A freer transatlantic market would help push the Doha Round toward a conclusion by enabling the U.S. and the EU to deepen the liberal economic rules of the road, incentivize their broader adoption, and improve the competitiveness of their companies. It could also be leveraged to promote further reforms within and beyond the scope of the WTO, including those that strengthen market disciplines for state-owned enterprises, democratic governance, respect for human rights, and the rule of law.

Despite the strong incentives driving policymakers toward an agreement, hurdles remain. Agricultural interests are likely to pose a challenge despite budgetary pressures and high commodity prices; in fact, they have already adopted positions that will make for challenging negotiations. We can also expect disagreements over issues that are important to a broader range of interests, including divergent regulations and health, safety, and environmental standards. And therein could lie the biggest challenge facing U.S. and EU negotiators since they must, at least to some degree, forge consensus among national regulatory authorities if the final agreement is to have a significant impact. In this way, the TTIP requires a step beyond “negative integration” – that is, beyond the simple removal of barriers that are typical of free trade agreements – and toward the creation of common rules and standards that “positive integration” entails.  

This would be an ambitious step toward a more integrated transatlantic market – one that is necessary to revitalize the American and European economies and steer the future of the international order in a liberal direction. When it comes to market size, it has long been recognized that “bigger is better.” This still holds true today, and the stakes are too high not to act. 

Mitch Yoshida is a Mayme and Herb Frank Research Fellow at the Streit Council. Alessia Rossi is an Intern at the Streit Council. 

by Callie Le Renard

Shale Gas Well in Denton, Texas

Though only in the earliest stages of exploration and production in Europe, shale gas extraction via hydraulic fracturing is a very controversial topic.  For many Europeans, the fear of earthquakes, ground water contamination and environmental pollution outweigh the potential benefits that a domestic source of natural gas can provide.  The IEA weighed in on shale gas extraction just two weeks ago and brought yet another issue of concern that many Europeans will find troubling.  According to IEA chief economist Fatih Birol, “renewable energy may be the victim of cheap gas prices if governments do not stick to their renewable support schemes.”  In addition, while last year’s Commission Report on Unconventional Gas in Europe  expressed the view that existing regulation is sufficient given the current stage of development of the shale gas industry, some MEPs are beginning to weigh in on the matter, making the case for additional regulation.  With all this bad press in Europe, it’s not surprising that two countries, France and Bulgaria, have banned fracking outright.

Not all the news about shale gas is bad, however.  Early results from a study conducted by the Energy Institute at the University of Texas at Austin have indicated that “many of the problems appear to be related to other aspects of drilling operations, such as poor casing or cement jobs, rather than to hydraulic fracturing, per se.”  And although the IEA has expressed its concern about gas edging out the development of more expensive renewables, it has also provided a set of “Golden Rules” designed to address community and environmental concerns about fracking.  These include:

• Measuring water quality before and after fracking operations to determine whether there is any naturally occurring contamination
• Mandatory disclosure of the chemicals found in fracking fluid
• Robust geological surveys to ensure that the possibility of fracking-related earthquakes is limited
• Measures to reduce leaked emissions
• Consideration of depth limits to ensure public that fracking takes place far from the water tables
• Robust rules on well design and construction

Furthermore, a series of small earthquakes in Ohio, thought to be the result of hydraulic fracturing operations, were shown to be induced by another activity: the injection of wastewater into disposal wells.  Ohio has taken regulatory action to remedy this problem.  Even the EPA has questioned its own preliminary findings in a groundwater investigation in Pavilion WY, and is now working with the US Geological Survey to ensure that the science and sampling practices are sound before drawing conclusions about the impacts of fracking.

In the United States the industry is beginning to mature, and this is great news for everyone – energy companies and citizens alike – with a stake in the natural gas industry.  According to the Wall Street Journal, “Operators are professional and best practices are spreading. The industry understands that the environmentalists and political class don’t need much pretext to impose a moratorium” on fracking.  There are also efforts to educate the public about the realities of fracking, and organizations like the Environmental Defense Fund have been involved not only in educational efforts but EDF scientists have also been involved in other activities like a review of the Energy Institute study on fracking mentioned above.  So why is this great news for the EU?

The EU has an opportunity to benefit from American expertise in shale gas exploration and production before member states begin to develop their domestic shale gas industries in earnest.  This gives the EU and individual member states the opportunity to learn from American mistakes, initiate best practices and educate the public before the industry is fully developed.  Gostynska and Wisniewski at the Polish Institute for International Affairs, recommend inviting local lawmakers from areas in the US and Canada which have experienced shale gas drilling to discuss their experiences and lessons learned.  This could help to initiate a much needed frank discussion in Europe about the fact and fiction surrounding shale gas and hydraulic fracturing.  Furthermore, adopting the IEA’s “Golden Rules” will also show the citizens of European member states that both the EU and their national governments care about making sure that fracking is safe.

Finally, although the IEA has expressed concerns about cheap gas offsetting the use of renewable energy sources, this is unlikely to occur in Europe, the world leader in the development of renewable energy sources like wind power, solar power and biomass.  Europe has demonstrated time and time again that its commitment to renewable energy sources is strong enough to withstand the threat posed by cheap gas.  Natural gas need not offset measures to stop climate change.  To ensure this, however, the EU must continue its efforts and encourage other nations to maintain their support for the development of renewable energy sources, energy efficiency programs and other measures to fight climate change.

Callie Le Renard is a Research Fellow at the Streit Council; Photo Credit Rich Anderson (http://www.flickr.com/photos/memestate/4210057040/sizes/m/in/photostream/)

by Griffin W. Huschke

Government Illustration of bin Laden's Compound

Well, its over.  As you’ve heard by now, probably the largest and most expensive manhunt in U.S. history is at an end.  After a decade, the perpetrator of the terrorist attacks on September 11^th, Osama Bin Laden, is finally dead.

There isn’t a lot to be said about this man that isn’t already being spoken about elsewhere, and the details remain pretty sketchy. We’ll obviously be covering this for weeks to come, so let’s take a moment to think about the effects of bin Laden’s actions on the world community, and how the 17^th son of a Saudi construction magnate managed to have such an outsized effect on the way our world works.

In his own unfortunate way, bin Laden drastically changed the way security organizations, especially NATO, thought about possible threats.  Al Qaeda brought to light the threat of radical Islamic terrorism, and engendered massive shifts in force structure, command and control, and information sharing across the world as countries aligned to combat this “new” threat.   Al Qaeda also gave the Atlantic Alliance a new way to focus its resources on smaller scale units, like the Special Operations forces that ended up capturing bin Laden and development projects in areas hardest hit by the seemingly endless war in Afghanistan. NATO has grown into this role in fits and starts, and there’s plenty more work to be done, but Europe and the U.S. remain to be each other’s strongest strategic allies, and the Alliance continues to adapt.

Al Qaeda also changed the way NATO thought about itself.  9/11 solidified the notion that NATO would no be used to defend Western Europe in a pitched tank battle in the Fulda Gap, but would need to respond to new threats as infrastructure became more vulnerable and the world became increasingly globalized.  NATO’s new focus on a range of threats, including cyber attacks and WMD, are a total result of this post-9/11 soul-searching, as are NATO’s continued search for out-of-area “partners” like Japan and Australia.  The Alliance realized that global threats, like terrorism and cyber attacks, require global allies in all theaters.

We obviously all wish that NATO never had to make these changes in thinking; that bin Laden had renounced violence that would claim so many lives.  But now that we have had to live through a painful decade of war and recession, let’s hope those tasked with protecting us are more able than they were a decade ago.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo credit: TalkMediaNews (http://www.flickr.com/photos/talkradionews/5680432685/sizes/z/in/photostream/)

by Griffin W. Huschke

An MQ-1 Predator Drone

There’s a lot of news worth covering lately (Wikileaks is the gift that keeps on giving for the blogophere), but a popular article in the Washington Post today raised some especially salient points for transatlantic watchers and more general international relations scholars. A recently released study by the British Defence Ministry pondered if technological advances in unmanned aerial vehicles, like the Predator drones that are now buzzing over the skies in Libya, will allow future policy makers to “resort to war as a policy option far sooner than previously.”

Whether they knew it or not, our ponderously-spelling allies in the British Defence Ministry have wandered into the crossfire of an international relations debate that has been going on for years.  Several years ago Steven Van Evra published a work hypothesizing that if countries thought offensive weaponry were more effective, they would be more likely to go to war (while if defensive weaponry were perceived to be more effective, states would be more hesitant to engage in conflict).  For example, in the early 20^th century, European countries believed they could gain a strong military advantage if they were the aggressor in war, which helped create the hostile “powder-keg” political conditions in the run-up to World War I.  This theory, which uses the “offense-defense balance” to explain why countries go to war, continues to be influential to this day, and is clearly echoed in the Defence Ministry’s assertion above.

But like anything worth saying in academia, the offense-defense balance has engendered a lot of passionate arguments among the large-brained.  Scholars argue that there isn’t really such a thing as a strictly “offensive” or “defensive” weapon (is a tank an offensive or defensive weapon?  What about heavy artillery?), and military experts almost always say the defense has the advantage no matter how evolved the weaponry.  Some also concede that the offense-defense balance is a factor that leads states to go to war, but isn’t as big of a factor as, say, shifts in international power or regime type.  Indeed, in the last several years, fewer and fewer scholarly debates seem to be referencing the offense-defense balance as a legitimate explanation for inter-state warfare.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo credit: Beth and Christian (http://www.flickr.com/photos/six27/4698436162/sizes/z/in/photostream/)

by Griffin W. Huschke

NATO Headquarters

So now we’re in-fighting in NATO over the whole Libya thing.  Thirteen days into the NATO-led bombing campaign against loyalist forces in Libya, and the alliance is already showing signs of strain.  The Hawks, led by France and the UK, have expressed their displeasure over the small impact the bombing missions have made thus far (the sorties have yet to stop the shelling of tenuously-held Misurata ), and are pushing to send arms to the poorly-equipped rebels.   The Doves, led by Belgium and the empty seat Germany used to sit in, are questioning the legality of arming rebels under a UN mandate that only calls for “protecting civilians.”

While the latest spat within the Atlantic Alliance isn’t that surprising (we’re still fighting about deployments to Afghanistan) there might be some extenuating circumstances that are exacerbating tensions present in any NATO-led mission.  A general lack of political will and low levels of European defense spending are obviously contributing to the recent fracas, but operational factors may also be putting an undue strain on the alliance.  NATO commanders have all but admitted that constraints put on people and machinery by their home countries, such as limiting aircraft to a support role, is restricting the efficacy of the bombing campaign.  It may be these tactical and operational failings that are causing rifts at much higher levels.

There’s also the red-white-and-blue elephant in the room that no one seems to be mentioning much.  The U.S. pulled out of bombing missions when NATO took over, leaving French, British and other member- countries to fill the hole in manpower and equipment left by Uncle Sugar’s withdrawal.  But it’s tough for Europe to fill that gap on its own—the U.S. spends twice as much on defense as all other NATO countries combined, and NATO is designed to rely on U.S. defense capabilities.  Consider this quote from the Council on Foreign Relations in 2006:

Imagine a NATO operation with Norwegian special forces being dropped off and picked up by a Polish airlift team, protected by US satellites, an aircraft carrier and its warplanes. What makes NATO effective is its integrated military structure and its mutual defense pledge.

The author is speaking somewhat hypothetically here, but it’s a good illustration of how people have been thinking about NATO’s force structure.  The United States provides a firm base for operations, and if you take that essential piece away, it’s going to make things a lot harder for the alliance.

Going forward, moving away from consensus decision-making at the committee level would make the Alliance more nimble, and revamping some common funding elements would better distribute the financial and military costs among all members.   This would ensure the Alliance’s effectiveness even if individual member states objected to an operation, and would allow for both financial and military contributions.  The 21^st century is going to require a stronger alliance to combat a host of new threats, and better integration is the only way NATO can adapt.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo Credit: European Parliament (http://www.flickr.com/photos/european_parliament/4128509538/sizes/z/in/photostream/)

by Griffin W. Huschke

HMCS IROQUOIS, part of the NATO maritime mission in the Mediterranean, on patrol

International Relations theory is weird.   In most cases, policy is constructed in dichotomies of “realism versus idealism” or “liberal versus conservative”.  Never one to follow the pack, international relations theory is full of philosophies that aren’t traditionally juxtaposed in political discourse: in the US , the competing schools in IR theory are realism, liberalism and constructivism, with a smattering of feminists, critical theorists , cultural scholars, Marxists and other smaller disciplines making noise now and again.

While there’s a pretty big disconnect with elegant international relations theory and messy, messy foreign policy, the Bush Administration is largely regarded as following pretty realist paradigm (although realists will never admit it).  Condoleezza Rice’s pre-9/11 article in Foreign Affairs is a pretty good representation of realism’s core beliefs: the U.S. should use its power to pursue its own national interests without much regard for the will of international organizations like the UN.   The Greek historian Thucydides was credited with the first realist take on international organizations, and alliances as a whole—when you face a common threat, alliances are great. Every other time though, watch your back, because you never know who is going to turn on you.

Conversely, liberal scholars, who take their founding conceptual framework from German political theorist Immanuel Kant, think that alliances are great ways to strengthen a  country, and that international organizations are pretty swell, too.  Liberals argue that international organizations, like the UN and G8, allow for countries to air their grievances without going to war, and strengthen trade agreements that make everyone money.  International organizations also allow states to interact with each other enough that you can expect a certain behavior from different countries (we call that shortening the “shadow of the future” in The Biz). Overall, liberals argue that multilateral organizations have host of positive effect on the international community that allows participating countries reap more benefits than they could hope to get on their own.

Although there’ve been a few of nattering nabobs of negativism on Obama’s commitment to the international community, the ongoing civil war in Libya has demonstrated the President’s full-on liberal colors.  In the last couple of weeks, the Obama administration has reached out to all of the relevant international organizations, including the UN, NATO, the Arab League the African Union, and the G8, in weighing the options for a no-fly zone over Libya.  Warships sent to monitor the fighting in Libya flew the NATO naval ensign, and were ordered to act only in response to a UN Security Council resolution.  It’s enough to make a grown liberal scholar all verklempt.

On the transatlantic level, the EU and US have been issuing similar measured responses since the situation began.  Defense officials on both sides of the Atlantic have issued calls for support from the Arab world, and the proposed no-fly zone would be a wholly NATO job.  Indeed, Secretary Clinton’s trip to Libya to meet with the Rebel Alliance, er, the Libyan National Council, came on the heels of a meeting between French Prime Minister Nicholas Sarkozy, Mon Mithma, and Crix Madine Mahmoud Jibril, and Ali Al-Esawi, two important members of the Rebel Council.  Even humanitarian aid is being discussed in a transatlantic manner.  Its going to be tricky for the transatlantic community to pull together something quick and legitimate, but its going to get done soon.  And for those fighting and dying in the lawless lands of Libya right now, that probably sounds pretty good.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo Credit: Iafrancevi (http://www.flickr.com/photos/85013738@N00/277696987/sizes/z/in/photostream/)