The five things you need to know about TTIP

The Transatlantic Trade and Investment Partnership (TTIP) is a free trade agreement currently being negotiated between the EU and the US. I think it's a good idea. Here's what you should know about it: 1. Abolishing tariffs is only a small part of TTIP.

Tariffs are generally low between the EU and US, but for some sectors they are very high. The EU currently imposes a 10% duty on car imports from the US, and the US imposes tariffs as high as 40% on some clothes from the EU, like shoes. Getting rid of those high sectoral tariffs will allow for greater economic specialisation, and the EU and US economies are so large that even reducing small tariffs overall would boost wealth levels a bit.

2. The biggest costs to trade are from so-called ‘non-tariff barriers’, and getting rid of these could have a big effect.

Most of TTIP is designed to harmonise regulation where there is redundant double-regulation (or ‘regulatory incoherence’) of firms operating in both the EU and the US. For instance, cars may be just as safe in the US and the EU (or not – nobody's sure yet), but have to adhere to completely different safety requirements to achieve that. Harmonising car safety regulations could make it cheaper to build cars without reducing car safety at all. Because of different rules about egg washing that don't seem to make a difference to actual safety, US eggs couldn't legally be sold in the UK and vice versa. Some regulations are simply designed to make it more expensive for foreign firms to sell goods, to protect native firms. Harmonising some of these rules should reduce costs substantially.

Different regulatory regimes might allow for more experimentation, but the feedback mechanisms involved in regulation are so fuzzy that this kind of ‘discovery process’ rarely actually takes place.

3. The economic gains from TTIP could be pretty substantial.

The CEPR estimates that a successful TTIP that removed a lot of these ‘non-tariff barriers’ as well as all existing tariffs would cause an increase to EU GDP by €120bn (0.5% of GDP) and US GDP by €95bn (0.4% of GDP) in total. That’s modest, but would translate into an extra £400 annually for British households. 90% of those GDP gains would come from non-tariff measure cuts.

4. The only regulations that TTIP will prevent in the future are ones that discriminate against foreign firms.

This will include rules that mean that US and EU governments will have to consider foreign firms for public procurement in certain areas (but not publicly-funded healthcare, social services, education or water services). In general the EU is extremely restrictive about the impact TTIP can have on public services. EU governments can organise public services so that only one monopoly provider supplies it (eg, the NHS), and they can regulate whatever they deem to be ‘public services’ at any level of government. The only exception is where an EU government has already opened up a sector to foreign firms (ie, to avoid firms that have already invested from losing their money). This is a pity, I think – I’d like to see EU states sign up to an agreement that stopped them from discriminating against foreign firms in all areas. But TTIP is not that agreement.

5. The Investor-State Dispute Settlement (ISDS) mechanisms in TTIP – the so-called ‘secret courts’ – are nothing new.

Pretty much every free trade agreement signed around the world includes an ISDS provision, which allows firms to challenge states that renege on their part of the deal. Since 1975 the UK has signed 90 ISDS treaties, and 3,400 exist around the world. In that time the UK investors have brought 43 claims against other states. Only two have ever been brought against the UK and both were unsuccessful. What’s more, ISDSes cannot compel a state to change its laws, only to pay compensation to firms if it has broken its treaty obligations. It might seem pointless to have this – the UK and the US both have strong rules of law. But TTIP also includes countries like Greece, Hungary and Romania which have much less reliable judicial systems.

Where the US justice system is and isn't racially biased

In a timely post Scott Alexander investigates the evidence around the US justice system to see where, if at all, it is systematically biased against African-Americans. He looks at quite a lot of empirical evidence and concludes that:

There seems to be a strong racial bias in capital punishment and a moderate racial bias in sentence length and decision to jail.

There is ambiguity over the level of racial bias, depending on whose studies you want to believe and how strictly you define “racial bias”, in police stops, police shootings in certain jurisdictions, and arrests for minor drug offenses.

There seems to be little or no racial bias in arrests for serious violent crime, police shootings in most jurisdictions, prosecutions, or convictions.

This is important given the news coverage of the killing of Michael Brown, an 18-year old African-American in Ferguson, MI, by a white police officer. Although a lengthy grand jury investigation found that the police officer did not act unlawfully, many have rejected this verdict.

They may be motivated by a belief that the justice system is predisposed to exonerate white police officers who act wrongfully to racial minorities. This is a phenomenon I have written about in the past – one has to use one's existing beliefs to assess new information to make sense of the world at all. But Alexander's investigation of the evidence suggests that things may not be as clearly biased as they believe (or, indeed, as I did before reading the post myself).

Alexander makes an important point, however. Although law enforcement may be less biased in the US than we think, the laws themselves may still be very biased (even if that bias is unintended, which perhaps it is). Drug laws, which seem extremely unjust, will cause more injustice to African-Americans if they use drugs more regularly than other racial groups. And then there is the fact that African-Americans may be poorer on average than than white Americans, so they cannot access the same quality of legal defence.

The lesson from this may be that, though we can never escape the 'webs of belief' we construct to understand the world, we can try to be aware of the fact that we use these. If instead we decide to view disagreements about politics as existing because bad guys have incentives to fight good guys, we may end up in dark places where no amount of evidence will ever convince us that we may be mistaken.