Freer trade is worth having, but giving big business more power is too high a price for it

Free trade requires rules. When modern nations exchange goods and services for mutual benefit they generally also seek to establish some commonly agreed rules of commerce.

These rules relate primarily to environmental and safety standards, and also state subsidies and protection for foreign investors. Think about it: why should I allow you to sell your widgets freely into my market when your widgets are not produced to the same exacting standards as mine must be under my national law? That would be unfair competition. Similarly, why should you allow my subsidised products into your market when your wares don’t enjoy the same benefit?

There needs to be some degree of harmonisation on these areas: a level playing field for competition. And establishing common rules and harmonising regulations will require compromises and, sometimes, uncomfortable trade-offs from nations.

Those rules also need to be enforceable by a legitimate legal authority. There needs to be a referee on this playing field. National governments cannot do what they like: they must adhere to the international agreements they have made.

Without those common rules, and without some legal enforcement to back them up, the system cannot function properly.

Those economic principles are a good starting point for thinking about the row over the Transatlantic Trade and Investment Partnership (TTIP), the grand commercial bargain between the European Union and the United States that is presently under negotiation.

The past two centuries of world history have demonstrated conclusively that international trade confers immense economic benefits and rising living standards.

Some civil society pressure groups, however, contend that the system being designed to underpin this new trade deal, a mechanism known as “Investor-State Dispute Settlement”, will privilege the interests of multinational companies and work counter to the broad interests of the people of Europe or America. They warn that if the deal is done, large firms will be able to seek damages from non-transparent offshore panels made up of corporate lawyers when decisions are passed that hurt their bottom line.

The practical upshot, according to campaign groups, will be the steady erosion of environmental and health product standards. They foresee a corporate subversion of democracy.

This is strong stuff. But is it hyperbolic fear-mongering? Not necessarily. It’s hard to say how these offshore tribunals would work, or the effect they would have. But there are sufficient grounds for treading cautiously. And given that the US and Europe already have respected and impartial legal systems that could, already, enforce a new international trade agreement, the onus should be firmly on the proponents of these new offshore panels to justify why they are needed.

Does making a fuss on this point risk letting a historic chance to liberalise trade with America slip away? That is unconvincing. While expanding trade has an economic value, so does preserving legal transparency and democratic legitimacy.

So yes, an expansion of trade will require new rules. And deciding on those rules will require some dilution of freedom of action on the part of national governments. Those who reject all compromise are effectively turning their back on the enormous gains from free trade.

But while freer trade is worth having – it is not worth having at any price. So three questions are crucial: what rules, who enforces them and how transparent will decisions be?ÿÿ