Even if the controversial international Trade in Services Agreement, TiSA, is currently on hold, the workshop held in Brussels in November 2017 showed that it is still a highly debated issue. The study that the workshop was based on has now been published.
In November 2017 AK Europa hosted the Workshop "ASSESS TiSA" where experts affiliated to the European Commission, the European Parliament, NGOs, trade unions and scientists discussed with great interest how to assess the official version of the economic benefit of TiSA. The study, whose preliminary findings were discussed during the workshop has now been published and is available for download.
Given the current suspension of the negotiations, the rather questionable methodological foundations of the economic impact assessments – the so-called “Sustainability Impact Assessment” (abbr.: SIA) of the European Commission – have become the focus of attention. The study produced by the Austrian Research Foundation for International Development (ÖFSE) takes a closer look at these methods and points to clear shortcomings.
Key results of the study
The official impact assessment of the European Commission concludes that even though the economic effects of TiSA are positive; they are nevertheless very small: EU GDP is expected to increase by 0.1 % and EU exports by 0.2 %. These results are economically rather disillusioning. Besides, the methodical bases of the official impact assessment needs to be questioned, too. For instance, the study shows that the applied econometric model is based on unrealistic assumptions and is unable to capture important economic effects concerning the services sector.
The model assumes that TiSA will close the gap between the current level services trade liberalisation and that of GATS, thereby eliminating uncertainties for companies. Hence, according to this core assumption, the “claimed benefit” of TiSA steams above all from reducing this uncertainty. However, this neglects to take into account that the TiSA countries, and in particular the EU, have already concluded a large number of bilateral trade and investment agreements over the past three decades, which in parts go far beyond the liberalisation level of GATS.
One-sided understanding of costs and benefits of regulations
The study highlights that the understanding of regulation underlying the official impact assessments of the European Commission is generally one-sided: Regulation is only conceptualised as cost factor and barrier to trade. In contrast, the potentially negative impact of far-reaching deregulation on employees and society as well as the positive, welfare-increasing effects of regulation are not taken into account. This risks misguiding trade negotiators or policymakers about the impacts of regulation, who potentially base their agreement to further trade liberalisation on a biased conception of regulation, which does not include any social and economic benefits of regulation.
Additionally, the model also assumes full employment and accordingly cannot directly show the potentially negative employment effect for employees in the services sector. Moreover, the impact assessment does not consider services, which concern commercial presence abroad. These services, however, account for almost 69 % (2013) of all EU service exports according to calculations of the Commission!
Key policy recommendations
Based on these findings, the study’s authors recommend introducing a balanced approach to regulatory impact assessment, which means the assessment of positive and negative aspects of regulatory alignment taking into account all actors concerned.
They also recommend to ensure sufficient policy space for regulation safeguarding public interests and policy objectives in EU trade agreements – above all TiSA – through the effective exclusion of sensible sectors, e.g. via a model clause for the exclusion of public services. The risks involved in new (de-)regulation obligations in trade agreements should always be disclosed – especially in view of the irreversibility of many obligations and the loss of regulatory flexibility. Finally, the authors also propose to include legal remedies for safeguarding public interests in EU trade agreements, such as the international suability of labour rights or by effective revision clauses, which enable the withdrawal of harmful liberalisations commitments.