While reports of a soon-approaching recession are making rounds amidst the news of big tech companies laying off their employees, many around the world are anxious about how to survive another economic dip. The impending question is whether the economy barely recovering from the effects of the global pandemic can survive another recession. With inflation rates highest in more than 40 years and the US Federal Reserve and European Central Bank aggressively increasing interest rates to combat it as well as the Ukraine-Russian armed conflict nearing a year of continued devastation, the future looks very grim. However, the impact of the recession can be cushioned if the international community can lobby the Government to take financially strong and robust decisions and agreements.
The US and European policymakers must actively engage in formulating free-trade agreements between the continents, which would contribute to strengthening the economic, political as well as military ties between the nations. Studies state that the 2008 financial crisis was three times more devasting on industries without trade agreements. The TTIP could be the key to reducing inflation by lifting pressure on global supply chains. But this could also be beneficial in strengthening the bloc against the Russian-Chinese alliance that is growing stronger amidst the inflation chaos. Reviving the Transatlantic Trade and Investment Partnership (TTIP)could be the solution to this.
Tackling Inflation
The TTIP also called the Trans-Atlantic Free Trade Agreement (TAFTA), formulated during the Obama Administration, envisioned to increase job opportunities and boost the economy of both regions. However, the Trump administration scuttled the negotiations in 2016. The Biden administration must leverage its current position to revive the agreements and put them into action before Trump tries to make a return through the 2024 Presidential Elections. The TTIP has huge economic implications for both the U.S and the European Union, with the elimination of tariff rates leading to an economic boom. However, the biggest advantage of pushing for the TTIP would be an increase in trade would result in a push in supply chains that can lower the inflation rates. This could also be key to cushioning the impact of the incoming recession by creating job markets across the nations.
Strengthening the Bloc
Fortunately, the TTIP could also have an added advantage other than the economic one. While Ukraine receives financial aid from the EU and the U.S and putting up a strong fight, Russia is implicitly backed by China, which has been bolstering its economy in recent years. Together, they form a strong opposition to the Western Bloc. While the U.S and the European Union have always been each other’s closest and strongest allies, the TTIP can convey both economic prosperity as well as strong diplomatic relations between the nations, which could be a much-needed symbolic representation to reassure other allies as well.
The Biden Administration has been facing a lot of backlash for their inability to tackle the growing inflation rates in the United States, especially increasing gasoline prices. This was also reflected in the 2022 Mid-term elections where the Democrats lost the House and could only retain the Senate by a narrow margin. Reviving the TTIP in time before the 2024 Presidential Elections can be greatly beneficial in retaining the Presidency as well. Similarly, the European Union is recovering from the impact of Brexit on its economy (with trouble still looming over the Northern Ireland Protocol). The TTIP can be beneficial in balancing the negative impact on British and European markets.
While renegotiating the TTIP, the two nations must also reevaluate the importance of entering and existing such agreements in haste and its future implications. Had the last President continued with the trade agreement, today’s inflation may not have been as brutal as it is. Similarly, loopholes in these trade agreements are often exploited. Therefore, the TTIP must be formulated quickly but with a robust framework, not only to tackle the economic hardship we face today but also to take into consideration the political climate that it would influence. While the conversations around TTIP are likely to bring in criticisms regarding the effect of free trade on health, climate regulation and inequitable trade practices, policymakers must prioritize the benefits that the agreement promises. At the end of the day, people rather have food than complain about health issues related to the food they cannot afford. At this crossroad, policymakers can write in provisions that reassure the critics of the Bloc’s commitment to climate change, labor rights and health. A ‘regulated’ free-trade agreement is better than no free-trade agreement. It is possible to balance out the TTIP to address the concerns of all stakeholders. The recession is coming, but Governments can carefully plan out strategies to cushion the blow. Free-trade agreements could be the way to achieve this solace.
By The European Institute for International Law and International Relations.
