WALES AND TRANS-ATLANTIC TRADE

On the 3rd December Plaid Cymru leader Leanne Wood led a debate in the National Assembly on the importance of increasing trade between Wales and the USA. Plaid believes that public services, including the National Health Service, should be exempt from the effects of the Transatlantic Trade and Investment Partnership (TTIP).

TTIP – RECENT DEVELOPMENTS

France has announced that it will not sign up to the TTIP in 2015, and will not agree to the inclusion of the highly controversial ISDS (Investor State Dispute Settlement). This is highly significant and follows Germany’s earlier indication that it could not agree to the inclusion of ISDS. Other European governments, including the UK, are pushing ahead.

ISDS is a secretive arbitration process whereby multinational corporations can sue democratically elected governments if they feel that the national law in a country not only reduces their actual profits but also prevents them from making potentially greater profits. This is something that Plaid strongly opposes, as it could lead to privatisation of our public services by the back door. 

The European Commission suspended the TTIP talks on the Investor State Dispute Settlement in January to carry out a public consultation. The influential Corporate Europe Observatory gives another example of what this means in practise. It revealed that oil and gas company Lone Pine is suing Canada for CAN$250 million after the province of Quebec imposed a moratorium on shale gas extraction (fracking) because of environmental concerns. 

The ISDS consultation recorded 150,000 responses, with the majority calling for it to be taken out of the agreement. 

There has also been analysis of the promise of millions of new jobs. The Centre for Economic Policy Research (CEPR) was asked by the UK government to analyse the impact on the economy. Their figure of £10 billion in gains by 2027 depended on scrapping three quarters of non-tariff barriers in the chemicals, automotive and business/ICT sector. This is not even being discussed in TTIP and is simply not credible.

The CEPR, in another report for the Commission, could not predict any general impact on employment from TTIP, but it did see a risk of EU and US jobs actually being lost! 

The European Parliament will adopt a report with recommendations to the Commission on TTIP. It will be wide-ranging and discussed by many committees, including the Culture and Transport committees on which Plaid’s Jill Evans MEP sits. The Conservative group, the ECR, opposed having this report. The timetable is expected to be short, with the vote possibly as early as March 2015. 

Some of the committees will hold public hearings to examine the detail of different aspects of TTIP.

Plaid Cymru adopted a strongly worded resolution opposing TTIP back in our October conference. Members of the RCN and Unison gave strong backing to our position. Plaid will continue to campaign against TTIP. 

CRISIS OR OPPORTUNITY?

Here in Wales, we have over the years suffered from the loss of jobs overseas, as unscrupulous employers have (chasing higher profits by squeezing wages) moved their business overseas in search of cheaper labour leaving some of our more vulnerable communities up against it after years of loyal service. One thing that may change this unhappy state of affairs is the fact that as oil prices rise distance costs money.

This simple fact could have a significant impact on our country's economy as increased fuel costs will impact on company profits and indirectly provide an opportunity to revitalise our economy. Trade patterns change constantly, they will be altered by increased transportation costs, which will bite deeply into profits made by finding cheap labour in distant lands.

It is worth sparing some thought as to how we got to where we are; between 1960 and 1973 the percentage of exports as a share of world GDP rose by over 50%. This can be partially put down to to a combination of relatively cheap fuel (oil was around $14 dollars a barrel during this period) and an aggressive effort by the West to reduce trade barriers around the world.

Even factoring the effects of the 1973 oil crisis and the (with retrospect) the somewhat heated final lingering spasm of the cold war in the late 1970's/1980's there was a spectacular growth in world trade and further removal of tariff barriers between 1987 and 2002, when the average price of oil remained around $25 dollars a barrel.

It is worth noting (largely unnoticed in Europe where where we had our our problems) that the oil crisis of 1973/74 increased five fold the cost of shipping goods across the Atlantic and the Pacific and led to a 6% drop in US non fuel related imports and a corresponding growth in imports from Latin America and the Caribbean. I mention this because we have all lived with the rise in fuel prices over the last few years, there has also been a corresponding rise in shipping costs, something that will make manufacturing in distant lands increasingly uneconomic.

Over the last twenty years container ships have got bigger, they spend more time at sea than in port (85% in 2009 as compared with 55% some 15 years previously). The average container ship has also grown considerably larger along with the amount of goods carried by container has also grown from 35% to 75%. They have also become considerably faster something that has led to greater fuel consumption, which when combined with rising fuel prices begins to eat into profit margins of companies and organisations that relocated their manufacturing enterprises to distant lands.

Any economist will tell you that there is a direct link between transport costs and the price of the goods that we buy. The increase in oil prices between 2002 and 2009 roughly from £30 dollars a barrel to over $100 dollars a barrel increased the shipping companies costs and reduced the profits of their customers. The daily fuel bill for an average cargo ship increased from $9,500 dollars to $32,000 dollars and import costs (for the USA) rose on a standard 40 foot container travelling across the Pacific from China to the USA from $455 dollars to $1,100 dollars (between January 2007 and the end of 2008).

Despite a relative drop in fuel prices since the recession triggered by the World banking crisis we face a result of the consequences of peak oil in the near future a radical change in the way the world trades. There is a distinct possibility that it may become cheaper to manufacture goods closer to the market place rather than in more distant lands - the future energy and food crisis's aside for the moment - the real question that needs to be asked and answered is how we in Wales can take advantage of this situation and reboot our manufacturing economy in a sustainable way?