Europe is right on the edge of another downward lurch into prolonged deflation. GDP growth is hovering right around zero. Germany, as an export powerhouse, continues to thrive, but at the expense of the rest of the continent -- victims of German-imposed budget austerity demands. The euro, which keeps sinking against the U.S. dollar, is now trading at just $1.20, its lowest level in four and a half years.
Unemployment outside prosperous Germany remains stuck at over 12 percent. All of this weakens the political center that supports the EU, and increases the appeal of far-right parties. (You wonder if Europe's leaders bother to read their own history. When there is protracted depression and desperate people, nasty things have been known to happen in this part of the world.)
The one institution that intermittently challenges Angela Merkel's government in Berlin, the European Central Bank, is mostly a paper tiger. ECB chief Mario Draghi talks a good game about doing whatever it takes to levitate Europe's moribund economy. But when push comes to shove, Draghi stops far short of the aggressive bond-buying program used by the American Federal Reserve, for fear of antagonizing the Germans who continue to think Europe can deflate its way to recovery.
So what does Europe have left? It is a mark of the delusion of Europe's leaders that the EU is putting its chips on a trade deal with the U.S. -- the so-called Transatlantic Trade and Investment Partnership. TTIP is not really a trade deal at all but a series of measures intended to promote further deregulation of economic, financial, health, labor, safety, privacy, and environmental protections on both sides of the Atlantic. TTIP was designed by corporations to weaken labor and government -- and would do just about nothing to get Europe out of its austerity trap.
Tariffs and other formal trade barriers between the U.S. and the EU are already vanishingly low. The story that differences in national regulatory policy somehow hamper trade (and hence growth) is bogus. Back when workers in both regions were paid decent wages and bankers did not play roulette with the economy, regulations were no obstacle to booming trade.
According to the official technical estimates on which the EU relies, the most optimistic projection of TTIP's impact would be a one-time increase of about half of one percent of GDP. And the assumptions on which that projection is based are highly dubious. It's more likely that TTIP, by increasing competitive pressure to cut wages, would actually shrink Europe's GDP.
TTIP, though a top policy goal of both Europe's leaders and the Obama administration, keeps getting delayed by rising opposition in both regions. In Europe, there is growing skepticism about a core provision of the deal, the Investor-State Dispute Settlement (ISDS) procedure, which allows corporations to sue governments in special, extra-judicial panels to challenge regulations that allegedly interfere with free commerce and property rights -- which is to say all meaningful social regulations. Under the North American Free Trade Agreement, NAFTA, on which TTIP is modeled, corporations based on the U.S., Canada and Mexico, have successfully sued all three governments to weaken regulations.
Opposition to ISDR in Europe is so fierce that there is serious talk of dropping the provision, even though many American corporate advocates of this gimmick would consider it a deal-breaker to lose it.
Meanwhile, in the U.S., President Obama hoped that Congress would approve trade negotiating authority either before the November election or before the lame-duck divided Congress went home. That didn't happen. It's anybody's guess whether the Republican-controlled Congress is more, or less, likely to give Obama the authority he needs to conclude the trade deal.
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On the one hand, corporate America, the prime mover behind TTIP, is eager to get the agreement concluded. Mitch McConnell, the new Majority Leader in the Republican Senate, spoke supportively of TTIP right after the November election. TTIP is the kind of pro-business "common ground" that Obama has been able to find with his Republican opponents.
On the other hand, Republican contempt for Obama has reached a fever pitch, following the president's use of his executive power to normalize the status of millions of immigrants and to pursue détente with Cuba. There are many in the Republican congressional delegation who would like to deny Obama the success of a major trade deal, as well as right-wing populists who don't like giving up U.S. sovereignty.
If TTIP is blocked, however, it looks more likely to be blocked on the European side, where the deal is seen as a stealth effort to impose weaker American controls over corporate excess on a European Union whose member nations are still far ahead of the U.S. when it comes to health, safety, environment and labor protections.
Given Europe's traditional broad support for a more managed form of capitalism, the question remains -- why do the EU's leaders support this deal and the philosophy it represents?
There seem to be two main reasons. First, the financial deregulation that caused the economic collapse, the austerity policies that needlessly prolong it, and the deregulation embodied by TTIP are all part of the same ideological package. The ideology is known as neo-liberalism.
The fact that neo-liberalism has dismally failed seems not to have fazed Europe's leaders. This struggle is about power, not about evidence or practical success. The corporations and bankers on both sides of the Atlantic make more money when they are subject to fewer social constraints, even when the economy is flat and tens of millions of people are jobless.
The second reason for the false allure of TTIP is that trade is a handy way of changing the subject. If austerity has failed, let's talk about something else. Let's look for salvation in a trade deal. But not even TTIP's most fervent defenders think that the proposed agreement would make more than a trivial difference for the better.
The next TTIP negotiating round -- the eighth -- is expected in February. We have to hope that TTIP will die of its own weight. Then, perhaps, leaders on both continents can focus on the true pressing economic issues of our era -- high unemployment, grotesque inequality of income and wealth, and the need to reconcile environmental sustainability with decent life prospects for regular people. Given these immense challenges, the focus of political elites on this trade deal is worse than farcical.