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U.S.-EU Free Trade Agreement (TTIP)

In his 2013 State of the Union Address, President Obama announced the U.S. would soon begin talks on a Trans-Atlantic Trade and Investment Partnership (TTIP). In other words, the U.S. will begin negotiating a “free trade agreement” (FTA) with the European Union (EU).

The AFL-CIO believes that increasing trade ties with the EU could be beneficial for both American and European workers but as with all trade agreements, the rules matter. Generally speaking, both regions have advanced economies, high national incomes and well-developed legal and regulatory regimes designed to protect the environment and defend workers’ rights. And in many respects, the European nations’ social programs to protect families and the environment exceed those of U.S. laws and regulations—and any U.S.-EU agreement must not be used as a tool to deregulate or drive down these higher standards. If that is the goal, working families of both regions will pay the price.

However, it is important for there to be a new approach to this agreement: the status quo approach to trade has resulted in increasing income inequality, stagnating or declining wages and unacceptably high trade deficits that are sapping economic growth.     

Moreover, it is important to note that the EU now includes Romania, Bulgaria, Cyprus and Slovakia—countries whose economies, incomes and worker protections lag behind most of their EU counterparts. In addition, Poland has been engaging in so-called “labor market flexibilities” for a generation and Hungary’s current government has likewise been intent on destroying many worker protections. American workers should be aware that some multinational corporations could be intending to use a U.S.-EU trade agreement to move jobs from the U.S. to these countries whose wages and worker protections do not reach the level of the rest of the EU.

In 2012, the U.S. had a $107 billion deficit in trade in goods with the EU. If negotiated with the goal of increasing employment and well-being for working families, the TTIP could positively affect that trade imbalance and create jobs in the U.S. by increasing net exports.  Unfortunately, experience has shown that despite rosy predictions by the U.S. International Trade Commission (ITC) and various free trade advocates about export and job growth, promised gains from NAFTA-style trade agreements generally fail to pan out. The 2011 debate over a trade agreement with South Korea echoed past debates about NAFTA and permanent normal trade relations with China. In each case the estimates of job creation by the ITC, experts and Democratic and Republican Administrations were wildly inaccurate. America’s workers lost out on jobs—they didn’t gain them. As a result, the AFL-CIO will be closely monitoring developments in the TTIP discussions. The Administration must abandon the corporate-driven, NAFTA-style model and adopt an entirely new approach, hewing more closely to the Michaud-Brown TRADE Act.

U.S.-EU Discussions Should Focus on Jobs and Demand-Led Growth

Trade negotiators must distinguish between activities that will benefit the U.S. economy by supporting U.S. jobs, domestic growth and economic equity and those activities that only benefit shareholder value for certain corporations. 

Actual U.S. job and wage growth that will spur demand and lead the U.S. out of its economic troubles must be the priority of the TTIP discussions. In the past few years, millions of U.S. jobs in manufacturing and other sectors have been lost. If the U.S.-EU discussions are to have a net positive impact on U.S. workers, discussions must remain focused on specific efforts to spur the creation and maintenance of good jobs. Negotiators should be discouraged from discussing policies that could make it easier for U.S. corporations to shift sourcing, production and technology abroad. They should also avoid efforts to undermine existing job creation policies like Buy America and the Jones Act.  

Like U.S. workers, European workers—even in Europe’s richest or most “liberal” countries—have been experiencing high levels of unemployment and threats to their social safety nets. In particular, workers in Greece, Spain and Portugal are in crisis. Their governments have been under heavy pressure from the IMF and EU Central Bank to destroy worker protections and cut back on public services and investment. The result has been a spiral of austerity-led economic contraction, which leads to more cuts and job losses and ultimately even more contraction. The U.S.-EU trade agreement must not be a disguised vehicle for more austerity, but a real effort to elevate working people both here and in Europe. 

Labor Rights

Unlike trade with many other regions, increased trade with the EU offers the opportunity to trade with nations that, for the most part, have active labor market policies and strong social safety nets. In many EU countries, the commitment to worker-employer dialogue is so strong that the laws even require worker representation on corporate boards

Given the generally high level of worker protections in the EU, a U.S.-EU trade agreement must expand on the typical labor rights approach in other U.S. FTAs by improving upon the basic commitment to adopt, enforce and maintain core labor rights as laid out in the ILO Declaration on Fundamental Principles and Rights at Work (e.g., by referencing ILO Conventions and their jurisprudence). Beyond that important step, the U.S. and EU could explore adopting mechanisms to provide for consultation and information disclosure between workers and trans-national corporations (as outlined in this EU directive); stronger protections for workplace safety and health; or even requirements to ensure “temp” workers (such as those employed by third-party staffing companies) receive equal treatment with regard to pay, overtime, breaks, rest periods, night work, holidays and the like, as provided for in the EU directive on temporary agency work.  A trade agreement with Europe presents an opportunity for the U.S. government to go beyond the “lowest common denominator” approach to labor rights and create truly people-centered trade rules.  

Other Considerations: Investment, Finance, Regulations that Protect Working Families

A key component of the TTIP should be the exclusion of the Investor-State Dispute Settlement (ISDS) mechanism. Given the advanced judicial systems of both the U.S. and EU, ISDS is an unwarranted risk to domestic policy-making at the local, state and federal levels.

In light of the global financial crisis and recession, negotiators should also abandon the traditional de-regulatory agenda toward financial services that would promote mergers and acquisitions, creating new global conglomerates that would be “too big to fail.” Instead, negotiators should concentrate on creating opportunities for institutional cooperation as American and European regulators work to stabilize the global financial system and rein in Wall Street excesses.

And, even though some big businesses have tried to make “regulation” a dirty word in recent years, the AFL-CIO and other working family organizations are challenging their exaggerated statistics and bogus arguments, which are merely a smokescreen for an anti-family agenda—one that puts profits ahead of on-the-job safety, clean air and water, and even healthy food. Any U.S.-EU trade deal should not be a thinly disguised attempt to make it easier to poison workers, pollute our environment or hide information from consumers. Americans live longer today than we did a century ago, and part of the reason is that our food supply is less toxic and our workplaces are (for the most part) no longer death traps. Working families should not be forced to give up the gains made in the 20th century in the name of “free trade.”

Trade Agreements Must Work for Working Families

As the voice of America’s workers on trade matters, the AFL-CIO will be following developments in the U.S.-EU discussions closely. We will be unable to support any trade agreement unless it is well-balanced, stimulates the creation of good jobs, protects the rights and interests of working people and promotes a healthy environment. To work properly, trade agreements must be enforced fairly, quickly and consistently. As America’s workers have learned the hard way, trade agreements without complementary policies such as infrastructure investment, export promotion strategies and active labor market policies will not produce shared prosperity, but only help concentrate wealth in the hands of the 1%.

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