TTIP determines the future of trade

Critics complain that only large corporations will benefit from the TTIP. However, SME businessman Arndt G. Kirchhoff also sees opportunities for smaller companies and warns against allowing the agreement to fail due to minor points.

The TTIP has been highly controversial so far – you belong to the minority of its advocates. Have you ever had to justify yourself for this to family or friends?

Arndt G. Kirchhoff: No, because they all know the benefits of the social market economy and free trade and see opportunities for our highly innovative and successful export country. They particularly see the opportunity for common values which apply in America and Europe in relation to human rights, freedom of opinion and democratic rules also being implemented as standard in other parts of the world.

Why is the TIPP important for the European SME sector?

Up until now, parts of the SME sector have been unable to trade on the American market because they have been unable to afford the necessary expenses to do so. This does not only relate to customs duties – traders simply add this to their production costs and then see whether or not they are still competitive.

It relates to non-tariff barriers: differing standards which compel us as an automotive supplier to, for example, build and test all parts twice – once for the European market and once for the American market. They must then also be approved twice. Many companies cannot afford this.

The problems that you cite particularly affect the metallurgy and electrical industries. Do you think that even medium-sized service providers in this country will benefit from the TTIP?

Growth caused by harmonised standards will also benefit service providers – at least industrial service providers. Industry's contribution to Germany's GDP is approximately 25 percent; industrial service providers account for half as much again. That is those that are directly dependent on industry. They obviously benefit indirectly.

According to an Ifo study, every German household is set to have 545 euros more disposable income annually. Do you think that the money you are saving as a businessman is passed on to the consumer?

Lower costs thanks to not having to carry out all work on the product twice naturally results in a more competitive price.

Do you see any potential risks for you as an SME businessman as a result of the TTIP?

The criticism of the TTIP is not unjustified on all points. Our working and social standards, including free collective bargaining for example, have been successful in this country for decades – nobody wants to give this up. Things such as salary, reconciling work and family life or modern forms of work – all this will still be negotiated with the tariff partners. Bringing ourselves into line with the USA here would be a backwards step for us.

In what way?

In America there are no workers' representatives, no works councils. No union would allow that here – which is a good thing. The same applies to consumer protection and other standards that we as a society have jointly developed.

Indeed, the Americans also do not want our free collective bargaining or French blue cheese.

Not all areas of coexistence need to be standardised – such aspects should be excluded from the negotiations. The TTIP is about harmonising the areas in which current differing standards do not bring any benefit for consumers and manufacturers. After all, we allow for cultural differences within the EU.

You haven't mentioned one of the topics most frequently brought up by the critics – the investment protection clause. Even your colleague Martin Ohoven, the head of the German Association for Small and Medium-sized Businesses, has made negative comments about courts of arbitration. Do you share his opinion?

No. These arbitration clauses are included in all kinds of contracts – if companies have disagreements between themselves, this is resolved by arbitration.

What's wrong with the ordinary legal procedure?

The ordinary legal procedure is slow. All possible instances must be exhausted – it takes years to get legal certainty this way. In addition, costs are incurred which no SME can absorb.

Also, most companies with which SMEs trade are considerably bigger and are in a more advantageous position with large financial buffers. An SME would never enter into a legal dispute like this – particularly against an entire country that may even have a different legal position.

How do arbitration proceedings solve these problems?

The rules of arbitration are the basis for the regulations for all parties to the contract. The negotiations take place on neutral ground. Professionals from the field are involved who have more understanding of the issues than ordinary judges in the event of doubt and who deal with all areas of law. These professionals don't need to consult experts – this saves time and costs.

Arbitration is a freely agreed, neutral yet legally certain process that is both inexpensive and quick. Even if you lose – which is always a possibility – at least there is legal certainty. I don't see what the problem is.

Businesses like Philip Morris sue Australia because they don't like certain legal changes – critics complain that countries would become limited in their legislative freedom.

The cases they cite are the famous ones that are quoted again and again. However, these are absolutely exceptional cases and are neither representative nor relevant in terms of their numbers. Just ask entrepreneurs how often they trade with countries.

Now, Vattenfall is suing Germany for its nuclear phase-out – this has just as little to do with trading with a country as in the Philip Morris case. And both cases involve sums in the billions – this seems to me to be absolutely relevant.

Claims against public authorities or political decisions are the exception! But what else should energy companies do? They have invested billions on the basis of lifetime extensions promised by the state. The promise has not been kept – certain claims have therefore arisen.

However, the case is usually like this: two businesses agree to collaborate and if one fails to keep to the terms, the other invokes arbitration. But the newspapers don't report these cases.

A further point of criticism is that investors from abroad particularly benefit from investment protection and have an advantage over domestic companies – you would certainly be affected by this.

I don't have any worries about this. I am much more interested in having legal certainty if I am investing in an American state. If, for example, my production permit is revoked early, I want to have the opportunity to bring claims before an impartial, neutral court.

Foodwatch president Thilo Bode said recently in an interview with WirtschaftsWoche magazine: "In order to abolish customs tariffs, we do not need such a far-reaching agreement. The colours of car indicators could also be harmonised using inter-branch agreements." Is the TTIP too far-reaching?

Mr Bode takes a different view to that of German industry. He says the free trade agreement threatens to undermine our democracy. The members of the BDI, the VDA and I say the opposite is true! Such a trade agreement guarantees democracy for us in the end. After all, where are the most protected democratic states in the world? They are in Europe and America! Mr Bode is on a totally different path to us – what is it that undermines democracy?

Mr Bode says it is the nationalisation of business interests.

The fact is that we have the opportunity to set standards for the future – and not only technical ones. We can define how we deal with human rights, freedom of opinion, child labour and corruption. The European-American internal market could set good examples and establish standards for the world.

If we do not conclude the agreement and make a decision about the future of trade, controlled single party states such as Russia and China will do so. This could undermine democracy – even Mr Bode would have to see that. I get a bit heated about this sort of criticism!

Why is that?

Mr Bode twists the debate to the issue of systems – it is not about the TTIP any more. He does not distance himself from globalisation and capitalism opponents such as Attac which suggest that the capitalist system would be open for negotiation. But it is not about this – it is about agreements relating to trade, economy and industry.

In the meantime, the TTIP has gone through the ninth round of negotiations – and there is still hardly any accord. The agreement was supposed to be concluded by the end of 2014. Now, German Chancellor Angela Merkel is saying it will be 2015. Do you think this is realistic?

I definitely still see opportunities. Even if it takes longer to reach agreement, it won't be the end of the world. We must keep sight of the objective.

What would that be?

We must harmonise the two strongest economic areas of the world and – as with the EU – create an internal market. Only this time between America and Europe. This would be the greatest internal market in the world.

The longer the negotiations take, the more unlikely it becomes that this internal market will be created – especially as there will be a change of government in the USA soon and it is possible that negotiations could start again from the beginning.

We are aware in this country that when election campaigns start, the political discussions will become irrational again. I can only appeal to the politicians: don't try to put everything through at the same time. Firstly, do whatever is undisputed. The disputed points, particularly those concerning consumer protection, working standards and other "cultural differences" should then be renegotiated. The product identification requirement is a good example of transparency for the consumer.

There is nothing to say that in five years' time Americans will still not want blue cheese or the Germans will not want chlorinated chickens instead of chickens treated with antibiotics – the agreement should not fail on the basis of such trivial matters.

(Source: WirtschaftsWoche magazine)

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