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If proof was needed that the European Union’s bureaucracy was headed by ideological extremists, it can be found in the approach being taken to trade negotiations with the US.
Barack Obama has rightly encountered much criticism for allowing those Wall Street insiders – whose reckless behaviour led to the financial crisis – continue to dictate American economic policy. Yet in some respects he may have resisted the hypnotic power of top bankers more than policy-makers this side of the Atlantic.
Whereas the US wishes to remove financial services from the scope of talks aimed at reaching a trade agreement with the EU, Brussels officials are pushing for their inclusion. This means that the EU representatives are more in tune with the Republican James Baker than with those urbane Democrats they claim to identify with (in private conversations, at least). Baker, who was secretary of state when the US first attacked Iraq in the early 1990s, told the American Chamber of Commerce that nothing should be taboo in the negotiations.
Why is the EU being so gung-ho? The short answer is that banks have asked it to be.
Not long ago, the British press carried stories about how the City of London was furious with the Brussels institutions over attempts to cap bankers’ bonuses. No such fury can be detected in the City’s approach to trans-Atlantic trade. City lobbyist John Cooke has argued that “the gains of a truly comprehensive
agreement could be lost if either side draws too many red lines too soon, cutting out subjects of potential sensitivity.”
It is remarkable that film is the only sector that EU governments appear to regard as “sensitive”. France – to the chagrin of European Commission chief José Manuel Barroso – has rightly argued that it must be able to protect its movie industry from Hollywood’s predators. No similar passions have been aroused among EU governments when it comes to restraining banks.
Traditionally, trade agreements have been concentrated on reducing or withdrawing taxes levied on manufactured goods. The push to have them broadened to cover services intensified in the first decade of this century. In 2006, the European Services Forum – which represents Deutsche Bank, Standard Chartered Bank and Zurich Financial Services – urged EU officials to seek the removal of capital requirements for banks throughout the world.
The financial crisis which erupted five years ago highlighted the folly of taking such a lax approach to regulation. And yet the EU’s trade department is still following a script that was drawn up before that catastrophe.
My friends in the organisation Corporate Europe Observatory have obtained a list of 130 meetings that EU officials held with “stakeholders” as they prepared for the trade talks with America. A full 119 of these discussions – or 93 percent – involved lobbyists from big business.
The document confirms that financial services was one of the topics addressed. Kreab Gavin Anderson, a “public relations” firm that boasts Goldman Sachs, MasterCard and Bank of America Merill Lynch as clients, took part in these secret encounters. So did the Business Coalition for Transatlantic Trade (banks on its board: Citi and JP Morgan Chase). That coalition has been set up especially to push for a far-reaching trade and investment pact; it plans to send a delegation of American high-flyers to Brussels ahead of the round of EU-US talks scheduled for October.
The European Banking Federation, meanwhile, has advocated that any trans-Atlantic deal should be at least as ambitious as the one the EU clinched with South Korea in 2009. That agreement contained the principle that any new “products” dreamed up by Europe’s financial whizz-kids should automatically be allowed in Korea, unless they had previously been restricted.
There are good reasons to be wary of “innovation” in the financial sector: the proliferation of exotic products called derivatives not only helped trigger the financial crisis, they continue to encourage speculation on food prices, thereby pushing up the grocery bills of the poor.
Earlier this month, I was reminded that the EU has already entered a trans-Atlantic trade pact.
A free trade agreement between the Union and Mexico entered into force in 2000. According to the spin, the accord has been an enormous success, leading to a doubling in commerce between the two sides.
A very different perspective was offered by Norma Castaneda from ALOP, an alliance of Latin American anti-poverty groups. She told me that the benefits of the deal have accrued to just a handful of major corporations. “Mexico hasn’t profited,” she said. “There has been no increase in investment from Mexico into the EU.”
When Karel de Gucht, the EU’s trade commissioner, visited Mexico City last year, he argued that the “legal relationship” between the EU and Mexico “now risks falling behind,” he said. That was because the EU was eyeing more “comprehensive” trade deals with Canada and the US. It would be logical, he suggested, to “upgrade” the agreement with Mexico so that it provided more openings for investments.
What he really meant is that he wished to have clauses from the North America Free Trade Agreement (NAFTA) copied and pasted into the EU’s deal with Mexico. Known as “chapter 11,” these clauses allow corporations to sue governments every time they encounter obstacles to making profits.
Elsewhere in Latin America, de Gucht is encountering stiff resistance to his agenda. Small farmers in Colombia have risen up against the ruinous effects of trade deals the Bogota government has signed with America and the EU; they have inspired solidarity strikes from numerous other workers.
These protests should inspire everyone concerned about the unending quest by big business to control almost every aspect of our lives. We need to act fast if we are to rekindle the dying embers of democracy.
David Cronin is the author of the new book Corporate Europe: How Big Business Sets Policies on Food, Climate and War published by Pluto Press.
A version of this article was first published by EUobserver.